<PAGE>
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 March 31, 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 March 31, 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 .
92,157,934 shares of Common Stock and 24,052,054 shares of
Class B Common Stock were outstanding as of April 15, 1997.
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<TABLE>
FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF EARNINGS (CONDENSED)
Three Months Ended
March 31
1997 1996
<S> <C> <C>
Revenues:
Net sales $ 447,607 426,674
Investment and other income 3,556 3,181
Total revenues 451,163 429,855
Costs and expenses:
Cost of sales 196,066 187,864
Factory closure and related costs 1,254 0
Selling, distribution, and
general administrative 159,168 150,966
Interest 319 251
Total costs and expenses 356,807 339,081
Earnings before income taxes 94,356 90,774
Income taxes 31,507 33,161
Net earnings $ 62,849 57,613
Net earnings per average share of
common stock $ .54 .50
Dividends declared per share of
common stock $ .19 .17
Average number of shares
outstanding for the period 115,975 115,987
</TABLE>
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)
Three Months Ended
March 31
1997 1996
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net earnings $ 62,849 57,613
Adjustments to reconcile net earnings to net
cash flows from operating activities:
Depreciation 11,573 10,720
Gain on sales of property, plant, and
equipment (10) (292)
(Increase) decrease in:
Accounts receivable (29,180) (17,565)
Inventories (22,814) (12,501)
Other current assets (15,124) (3,848)
Other assets and deferred charges 3,064 (3,621)
Increase (decrease) in
Accounts payable 10,011 (1,165)
Accrued expenses 6,663 4,573
Income and other taxes payable 16,462 21,248
Deferred taxes 1,364 (154)
Other noncurrent liabilities 3,966 10,589
Net cash flows - operating activities 48,824 65,597
CASH FLOWS - INVESTING ACTIVITIES
Additions to property, plant, and equipment (17,584) (17,671)
Proceeds from property retirements 307 639
Purchases of short-term investments (442,008) (113,434)
Maturities of short-term investments 446,934 107,060
Net cash flows - investing activities (12,351) (23,406)
CASH FLOWS - FINANCING ACTIVITIES
Dividends paid (19,714) (19,720)
Common stock purchased (1,130) (3,654)
Net cash flows - financing activities (20,844) (23,374)
Effect of exchange rate changes on cash and
cash equivalents (1,260) 1,019
Net increase in cash and cash equivalents 14,369 19,836
Cash and cash equivalents at beginning of period 181,233 125,725
Cash and cash equivalents at end of period $ 195,602 145,561
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 14,429 14,340
Interest paid $ 795 213
Interest and dividends received $ 3,308 3,114
</TABLE>
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)
March 31, December 31,
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 195,602 181,233
Short-term investments 114,026 119,330
Accounts receivable
(less allowance for doubtful accounts;
3/31/97- $8,529; 12/31/96-$8,538) 186,591 165,051
Inventories -
Finished goods 56,960 52,859
Raw materials and supplies 194,210 180,338
251,170 233,197
Other current assets 33,651 19,674
Deferred income taxes - current 10,101 10,939
Total current assets 791,141 729,424
Marketable equity securities at fair value 18,256 18,525
Other assets and deferred charges 67,231 69,461
Deferred income taxes - Noncurrent 27,925 27,984
Property, plant and equipment, at cost 806,396 808,046
Less accumulated depreciation 422,185 419,897
384,211 388,149
Total assets $1,288,764 1,233,543
Current liabilities:
Accounts payable $ 82,664 75,431
Accrued expenses 71,337 66,434
Dividends payable 22,038 19,715
Income and other taxes payable 70,290 55,756
Deferred income taxes - current 644 816
Total current liabilities 246,973 218,152
Deferred income taxes - noncurrent 24,685 24,390
Other noncurrent liabilities 96,074 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 - 92,151 shares at 3/31/97;
92,065 shares at 12/31/96 12,287 12,275
Class B Common Stock - convertible
Authorized - 80,000 shares
Issued and outstanding -
24,070 shares at 3/31/97;
24,155 shares at 12/31/96 3,209 3,221
Additional paid-in capital 368 238
Retained earnings 939,324 898,512
Foreign currency translation adjustment (32,623) (14,716)
Unrealized holding gain 10,637 10,812
Common Stock in treasury, at cost - (3/31/97-
230 shares; 12/31/96-251 shares) (12,170) (12,911)
Total stockholders' equity 921,032 897,431
Total liabilities & stockholders' equity $ 1,288,764 1,233,543
</TABLE>
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 Statements of Earnings (Condensed) and of
Cash Flows (Condensed) for the three month periods ended
March 31, 1997 and 1996, and the Consolidated Balance
Sheet (Condensed) at March 31, 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):
<TABLE>
Decrease (Increase) to
Stockholders' Equity
1997 1996
<S> <C> <C>
Balance at January 1 $ 14,716 8,038
Translation adjustment for
the first quarter 17,907 3,246
Balance at March 31 $ 32,623 11,284
</TABLE>
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 first quarter of 1997 reflects a $1.3
million charge for relocation and training costs related
to this plan. In addition to the $3.7 million of
relocation and training incurred to date, the Company
expects to incur another $1.6 million for transition
related costs during 1997.
At March 31, 1997 a total of 235 employees have been
transferred, retired or terminated and $.4 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, 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 earnings per share. The impact
of FAS No. 128 on the primary and diluted earnings per
share for the first quarter ended March 31, 1997 and
March 31, 1996 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
The 1997 first quarter net sales were $447.6 million, an
increase of 5% from the prior year. Higher overseas volume
partially offset by foreign currency translation to a stronger
U.S. dollar and lower domestic volume account for the increase.
Costs and Expenses
Cost of Sales
Cost of sales for the first quarter of 1997 increased $8.2
million or 4% compared to the same period 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 consolidated gross profit percentage for the first quarter
of 1997 was 56.2%, compared to 56.0% for the first quarter of
1996, up primarily due to selected selling price increases
implemented since the first quarter of last year.
Factory Closure and Related Costs
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 first quarter of 1997 reflects a $1.3 million
charge for relocation and training costs related to this plan.
In addition to the $3.7 million of relocation and training
incurred to date, the Company expects to incur another $1.6
million for transition related costs during 1997.
At March 31, 1997 a total of 235 employees have been
transferred, retired or terminated and $.4 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 first quarter of 1997 increased by $8.2 million or 5%
when compared with the same period 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 somewhat stronger U.S. dollar
in the first quarter of 1997.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Cont'd)
Income Taxes
The consolidated effective tax rate was 33.4% for the first
quarter of 1997 compared to 36.5% for the same quarter last
year. 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 first quarter of 1997 totaled
$62.8 million or $.54 per share, an 8% increase on an earnings
per share basis compared to last year's results of $57.6
million or $.50 per share. Excluding the Santa Cruz factory
closure costs, consolidated net earnings totaled $63.7 million
or $.55 per share for the first quarter of 1997, an increase of
$6.1 million, or 11%, and $.05 per share.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company's cash and cash equivalents and
short-term investments totaled $309.6 million compared to
$300.6 million at December 31, 1996 - an increase of $9
million. The ratio of current assets to current liabilities
(current ratio) at March 31, 1997 was 3.2 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.
<PAGE>
FORM 10-Q
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to Vote of Security Holders
The Annual Meeting of Stockholders of the Wm. Wrigley Jr.
Company was held on March 5, 1997 to consider the following
proposals: (1) the election of nine directors to serve for the
ensuing year; (2) to approve the 1997 Management Incentive
Plan; and (3) ratification of the appointment of Ernst & Young
LLP as the Company's independent auditors for 1997. The
results of the voting on each matter, as determined by the
independent inspectors of election, are as follows:
Proposal 1. Election of nine directors. With each class
of stock voting together, a total of 333,475,458 votes
were eligible to be cast and a total of 299,998,299 were
submitted with respect to each nominee as follows:
<TABLE>
Nominee For % For Withheld
<S> <C> <C> <C> <C>
Charles F. Allison III 299,185,657 99.73 812,642
Douglas S. Barrie 299,341,838 99.78 656,461
Lee Phillip Bell 299,248,191 99.75 750,108
Robert P. Billingsley 299,291,586 99.76 706,713
Thomas A. Knowlton 299,264,647 99.76 733,652
Penny Pritzker 299,213,490 99.74 784,809
Richard K. Smucker 299,308,758 99.77 689,541
William Wrigley 299,336,052 99.78 662,247
William Wrigley, Jr. 299,326,703 99.78 671,596
</TABLE>
Prososal 2. Adoption of 1997 Management Incentive Plan.
With each class of stock voting together, a total of
333,475,458 votes were eligible to be cast and a total of
299,998,299 were submitted as follows:
<TABLE>
For Against Abstain Uninstructed
<S> <C> <C> <C> <C>
277,138,497 11,277,902 1,566,196 10,015,704
</TABLE>
Proposal 3. Ratification of Auditors. With each class of
stock voting together, a total of 333,475,458 votes were
eligible to be cast and a total of 299,998,299 were
submitted as follows:
<TABLE>
For Against Abstain
<S> <C> <C> <C>
299,057,900 391,814 548,585
</TABLE>
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 March 31, 1997.
<PAGE>
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 May 13, 1997
<PAGE>
WM. WRIGLEY JR. COMPANY
AND WHOLLY OWNED ASSOCIATED COMPANIES
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
3. Articles of Incorporation and By-laws. Incorporated
by reference to Exhibit 3 of the Company's Annual
Report and Form 10-K filed for the fiscal year ended
December 31, 1992.
3(a). Restated Certificate of Incorporation of the
Registrant. Incorporated by reference to Exhibit
3(a) of the Company's Annual Report and Form 10-K
filed for the fiscal year ended December 31, 1992.
3(b). By-laws of the Registrant. Incorporated by
reference to Exhibit 3(a) of the Company's Form 10-K
filed for the fiscal year ended December 31, 1992.
10. Material Contracts
10(a). Non-Employee Directors' Death Benefit Plan.
Incorporated by reference to the Company's Form 10-K
filed for the fiscal year ended December 31, 1994.
10(b). Senior Executive Insurance Plan. Incorporated by
reference to the Company's Form 10-K filed for the
fiscal year ended December 31, 1995.
10(c). Supplemental Retirement Plan. Incorporated by
reference to the Company's Form 10-K filed for the
fiscal year ended December 31, 1994.
10(d). Deferred Compensation Plan for Non-Employee
Directors. Incorporated by reference to the
Company's Form 10-K filed for the fiscal year ended
December 31, 1995.
10(e). Non-Employee Directors' Stock Retirement Plan.
Incorporated by reference to the Company's Form 10-K
filed for the fiscal year ended December 31, 1995.
10(f). 1996 Executive Incentive Compensation Plan.
Incorporated by reference to the Company's Form 10-K
filed for the fiscal year ended December 31, 1996.
10(g). Wm. Wrigley Jr. Company Management Incentive Plan
and the various programs thereunder. Incorporated
by reference to the Company's Form 10-K filed for
the fiscal year ended December 31, 1994, except for
sub-item (i) to the Exhibit 10(g) which is
incorporated by reference to the Company's 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 Investment and Savings Program
(v) 1988 Stock Option Program
13. 1996 Annual Report to Stockholders of the
Registrant. Incorporated by reference to the
Company's Form 10-K filed for the fiscal year
ended December 31, 1996.
23. Consent of Independent Auditors. Incorporated by
reference to the Company's Form 10-K filed for the
fiscal year ended December 31, 1996.
24. Power of Attorney. Incorporated by reference to
the Company's Form 10-K filed for the fiscal year
ended December 31, 1996.
99. Forward-Looking Statements. Incorporated by
reference to the Company's Form 10-K filed for the
fiscal year ended December 31, 1996.
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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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 195,602
<SECURITIES> 132,282
<RECEIVABLES> 195,120
<ALLOWANCES> 8,529
<INVENTORY> 251,170
<CURRENT-ASSETS> 791,141
<PP&E> 806,396
<DEPRECIATION> 422,185
<TOTAL-ASSETS> 1,288,764
<CURRENT-LIABILITIES> 246,973
<BONDS> 0
0
0
<COMMON> 15,496
<OTHER-SE> 905,536
<TOTAL-LIABILITY-AND-EQUITY> 1,288,764
<SALES> 447,607
<TOTAL-REVENUES> 451,163
<CGS> 197,320
<TOTAL-COSTS> 356,807
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319
<INCOME-PRETAX> 94,356
<INCOME-TAX> 31,507
<INCOME-CONTINUING> 62,849
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,849
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
