<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, 1998
[ ] 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, 1998 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 .
92,746,656 shares of Common Stock and 23,467,723 shares of
Class B Common Stock were outstanding as of April 15, 1998.
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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,
1998 1997
<S> <C> <C>
Revenues:
Net sales $ 469,319 447,607
Investment and other income 3,904 3,556
Total revenues 473,223 451,163
Costs and expenses:
Cost of sales 200,393 196,066
Costs (gain) related to factory closure (10,404) 1,254
Selling, distribution, and
general administrative 169,999 159,168
Interest 185 319
Total costs and expenses 360,173 356,807
Earnings before income taxes 113,050 94,356
Income taxes 36,944 31,507
Net earnings $ 76,106 62,849
Net earnings per average share of
common stock (basic and diluted) $ .66 .54
Dividends declared per share of
common stock $ .20 .19
Average number of shares
outstanding for the period 115,933 115,975
</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.
<PAGE>
<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,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 76,106 62,849
Adjustments to reconcile net earnings to net
cash flows provided by operating activities:
Depreciation 12,900 11,573
Gain on sales of property, plant, and
equipment (71) (10)
Gain related to factory closure (10,404) 0
(Increase) decrease in:
Accounts receivable (27,564) (29,180)
Inventories (9,984) (22,814)
Other current assets (5,371) (15,124)
Other assets and deferred charges (7,812) 3,064
Increase (decrease) in:
Accounts payable 6,528 10,011
Accrued expenses 11,608 6,663
Income and other taxes payable 18,478 16,462
Deferred taxes 3,162 1,364
Other noncurrent liabilities 626 3,966
Net cash provided by operating activities 68,202 48,824
INVESTING ACTIVITIES
Additions to property, plant, and equipment (24,591) (17,584)
Proceeds from property retirements 7,884 307
Purchases of short-term investments (52,990) (442,008)
Maturities of short-term investments 44,775 446,934
Net cash used in investing activities (24,922) (12,351)
FINANCING ACTIVITIES
Dividends paid (22,034) (19,714)
Common stock purchased (7,150) (1,130)
Net cash used in financing activities (29,184) (20,844)
Effect of exchange rate changes on cash and
cash equivalents (202) (1,260)
Net increase in cash and cash equivalents 13,894 14,369
Cash and cash equivalents at beginning of period 206,627 181,233
Cash and cash equivalents at end of period $ 220,521 195,602
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 14,499 14,429
Interest paid $ 659 795
Interest and dividends received $ 4,432 3,308
</TABLE>
All amounts in thousands.
Notes to financial statements shown on page 5 are an integral
part of these statements.
<PAGE>
<TABLE>
FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
CONSOLIDATED BALANCE SHEET (CONDENSED)
March 31, December 31,
1998 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 220,521 206,627
Short-term investments, at amortized cost 128,934 120,728
Accounts receivable
(less allowance for doubtful accounts;
3/31/98- $7,565; 12/31/97-$7,524) 202,640 175,967
Inventories -
Finished goods 62,481 63,912
Raw materials and supplies 194,153 183,480
256,634 247,392
Other current assets 35,842 30,538
Deferred income taxes - current 12,911 16,421
Total current assets 857,482 797,673
Marketable equity securities at fair value 31,475 26,375
Other assets and deferred charges 70,315 59,566
Deferred income taxes - noncurrent 29,455 29,038
Property, plant and equipment, at cost 867,027 870,872
Less accumulated depreciation 430,633 440,398
Net property, plant, and equipment 436,394 430,474
Total assets $1,425,121 1,343,126
Current liabilities:
Accounts payable $ 77,153 71,001
Accrued expenses 81,971 78,378
Dividends payable 23,181 22,034
Income and other taxes payable 71,771 53,460
Deferred income taxes - current 560 943
Total current liabilities 254,636 225,816
Deferred income taxes - noncurrent 33,035 30,874
Other noncurrent liabilities 101,344 101,057
Stockholders' equity:
Preferred stock - no par value
Authorized - 20,000 shares
Issued - None
Common stock - no par value
Authorized - 400,000 shares
Issued - 92,741 shares at 3/31/98;
92,545 shares at 12/31/97 12,359 12,339
Class B Common Stock - convertible
Authorized - 80,000 shares
Issued and outstanding -
23,479 shares at 3/31/98;
23,676 shares at 12/31/97 3,137 3,157
Additional paid-in capital 272 226
Retained earnings 1,085,064 1,032,139
Foreign currency translation adjustment (66,517) (65,034)
Unrealized holding gain on marketable
equity securities 19,230 15,915
Common Stock in treasury, at cost -
(3/31/98-315 shares; 12/31/97 -
252 shares) (17,439) (13,363)
Total stockholders' equity 1,036,106 985,379
Total liabilities & stockholders'
equity $ 1,425,121 1,343,126
</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, 1998 and 1997, and the Consolidated Balance
Sheet (Condensed) at March 31, 1998 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 1997 audited consolidated financial
statements. These condensed financial statements should
be read in conjunction with the 1997 consolidated
financial statements and related notes which are an
integral part thereof.
2. An analysis of the cumulative foreign currency translation
adjustment follows (in thousands of dollars):
<TABLE>
Decrease to
Stockholders' Equity
1998 1997
<S> <C> <C>
Balance at January 1 $ 65,034 14,716
Translation adjustment for
the quarter 1,483 17,907
Balance at March 31 $ 66,517 32,623
</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. In April 1996, as part of a plan to realign U.S.
production capacity, the Company announced its intent 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
$17,000,000 for related closure costs covering employee
severance and costs to maintain and sell the property.
On January 22, 1998, the Company sold its real estate
holding in Santa Cruz, California. In the first quarter
of 1998, the Company recorded a pretax gain of
approximately $10,404,000 and net earnings of
approximately $6,763,000 or $.06 per share related to the
sale of the property.
At March 31, 1998, all 311 employees have been
transferred, retired or terminated and $7,587,000 in
severance and closure costs have been incurred and charged
against the reserve.
5. In 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share." This statement, which
is effective for periods ending on or after December 15,
1997, changed the method for computing earnings per share.
Under this method, there is no difference between basic
and diluted earnings per share for the quarters ended
March 31, 1998 and March 31, 1997. SFAS No. 128 did not
affect current or previously reported earnings per share.
<PAGE>
FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONDENSED)
6. In 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income." This
statement is effective for periods beginning after
December 15, 1997.
An analysis of comprehensive income for the three months
ended March 31, 1998 and March 31, 1997 is provided below
(in thousands of dollars).
<TABLE>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net earnings $ 76,106 62,849
Other comprehensive income, before tax
Foreign currency translation
adjustments (1,483) (17,907)
Unrealized holding gains on
securities 5,100 (269)
Other comprehensive income, before tax 3,617 (18,176)
Income tax expense related to items of
other comprehensive income (1,785) 94
Other comprehensive income, net of tax 1,832 (18,082)
Total comprehensive income $ 77,938 44,767
</TABLE>
7. In 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." This statement is effective for
periods beginning after December 15, 1997. However, SFAS
No. 131 disclosure is not required for interim financial
statements in the initial year of application. The
Company will begin disclosing segment information in
accordance with SFAS No. 131 in its 1998 annual report.
<PAGE>
FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET SALES
Net sales for the first three months of 1998 increased by $21.7
million or 5%, compared with the same period last year. Higher
shipments increased net sales by 8% while selected selling
price increases and favorable mix increased sales by 2%.
Translation of sales from foreign currencies to U.S. dollars
reduced reported net sales by approximately 5%.
COST OF SALES AND GROSS PROFIT
Cost of sales for the first three months of 1998 increased by
$4.3 million or 2% compared with the same period last year.
Excluding the effect of foreign currency translation, cost of
sales in the first quarter of 1998 increased by about 9% from
the same period in 1997, mainly due to increased international
volume. Excluding the impacts of the closure and subsequent
sale of the Santa Cruz factory, consolidated gross profit in
the first quarter of 1998 was $268.9 million, an increase of
$17.4 million or nearly 7% from the first quarter of 1997. The
consolidated gross profit margin on net sales was 57.3% for
1998's first quarter, up from 56.2% in the first quarter of
1997. The improvement in gross profit percent reflects
favorable price/mix primarily in the international markets and
favorable cost/mix in the U.S. market.
SELLING, DISTRIBUTION, AND GENERAL ADMINISTRATIVE EXPENSES
Consolidated selling, distribution, and general administrative
expenses for the first three months increased by $10.8 million
or 7% compared to the same period last year. Excluding the
effects of foreign currency translation, the increase was about
13% in the first quarter of 1998, primarily due to higher
international selling and marketing expenditures.
INCOME TAXES
Income taxes in the first quarter increased $5.4 million or 17%
from 1997's first quarter. The effective tax rates for the
first three months of 1998 and 1997 are shown below.
<TABLE>
1998 1997
<S> <C> <C>
First three months 32.7% 33.4%
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Cont'd)
NET EARNINGS
Consolidated net earnings for the first three months of 1998
totaled $76.1 million or $.66 per share, an increase of 22% on
an earnings per share basis compared to last year's earnings of
$62.8 million or $.54 per share. Excluding Santa Cruz,
consolidated net earnings for the first three months of 1998
totaled $69.3 million or $.60 per share, an increase of 9% on
an earnings per share basis compared to last year's earnings of
$63.7 million or $.55 per share.
LIQUIDITY AND CAPITAL RESOURCES
CURRENT RATIO
The Company has a current ratio (current assets divided by
current liabilities) in excess of 3 to 1 at March 31, 1998 and
December 31, 1997.
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for 1998 are expected to be above 1997
expenditures of $127 million and are expected to be funded from
the Company's operations and internal sources.
OTHER MATTERS
SALE OF THE SANTA CRUZ FACTORY
In April 1996, as part of a plan to realign U.S. production
capacity, the Company announced its intent 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.
On January 22, 1998, the Company sold its real estate holding
in Santa Cruz, California. In the first quarter of 1998, the
Company recorded a pretax gain of approximately $10.4
million and net earnings of approximately $6.8 million or $.06
per share related to the sale of the property.
At March 31, 1998, all 311 employees have been transferred,
retired or terminated and $7.6 million in severance and closure
costs have been incurred and charged against the reserve.
MARKET RISK
Inherent in the Company's operations are certain risks related
to foreign currency, interest rates, and the equity markets.
The Company identifies these risks and mitigates their
financial impact through its corporate policies and hedging
activities. The Company has determined that movements in
market values of financial instruments used to mitigate
identified risks are not expected to have a material impact on
future earnings, cash flows, or reported fair values.
<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 3, 1998 to consider the following
proposals: (1) the election of directors to serve for the
ensuing year; and (2) ratification of the appointment of Ernst
& Young LLP as the Company's independent auditors for 1998.
The results of the voting on each matter, as determined by the
independent inspectors of election, are as follows:
Proposal 1. Election of directors. With each class of
stock voting together, a total of 329,187,033 votes were
eligible to be cast and a total of 295,372,863 were
submitted with respect to each nominee as follows:
<TABLE>
Nominee For % For Withheld
<S> <C> <C> <C> <C>
Charles F. Allison III 294,910,960 99.84 461,903
Douglas S. Barrie 295,046,644 99.89 326,219
Lee Phillip Bell 294,972,532 99.86 400,331
Thomas A. Knowlton 294,886,869 99.84 485,994
Penny Pritzker 294,879,986 99.83 492,877
Steven B. Sample 294,904,805 99.84 468,058
Alex Shumate 294,834,693 99.82 538,170
Richard K. Smucker 294,965,926 99.86 406,937
William Wrigley 295,035,783 99.89 337,080
William Wrigley, Jr. 295,044,571 99.89 328,292
</TABLE>
Proposal 2. Ratification of Auditors. With each class of
stock voting together, a total of 329,187,033 votes were
eligible to be cast and a total of 295,372,863 were
submitted as follows:
<TABLE>
For Against Abstain
<S> <C> <C> <C>
294,549,075 443,909 379,879
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits reference is made to the Exhibit Index on page 11.
(b) The Company has not filed a Form 8-K for the three month
period ended March 31, 1998.
<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
Senior Vice President
Authorized Signatory and
Chief Financial Officer
Date May 14, 1998
<PAGE>
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). Stock Deferral Plan for Non-Employee Directors.
The Stock Deferral Plan for Non-Employee Directors
(formerly the Non-Employee Director's 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(g). Wm. Wrigley Jr. Company 1997 Management Incentive
Plan is incorporated by reference from Exhibit
10(g) of the Company's Quarterly report on
Form 10-Q for the quarter ended September
30, 1997.
27. Financial Data Schedules.
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, 1997.
<PAGE>
- --------------------
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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 220,521
<SECURITIES> 160,409
<RECEIVABLES> 210,205
<ALLOWANCES> 7,565
<INVENTORY> 256,634
<CURRENT-ASSETS> 857,482
<PP&E> 867,027
<DEPRECIATION> 430,633
<TOTAL-ASSETS> 1,425,121
<CURRENT-LIABILITIES> 254,636
<BONDS> 0
0
0
<COMMON> 15,496
<OTHER-SE> 1,020,610
<TOTAL-LIABILITY-AND-EQUITY> 1,425,121
<SALES> 469,319
<TOTAL-REVENUES> 473,223
<CGS> 189,989
<TOTAL-COSTS> 360,173
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185
<INCOME-PRETAX> 113,050
<INCOME-TAX> 36,944
<INCOME-CONTINUING> 76,106
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,106
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
