<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, 1999
[ ] 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, 1999 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 .
93,333,233 shares of Common Stock and 22,887,063 shares of
Class B Common Stock were outstanding as of April 15, 1999.
<PAGE>
<TABLE>
FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF EARNINGS (CONDENSED)
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Revenues:
Net sales $ 481,046 469,319
Investment and other income 3,901 3,904
Total revenues 484,947 473,223
Costs and expenses:
Cost of sales 199,724 200,393
Gain related to
factory closure - (10,404)
Selling, distribution, and
general administrative 180,548 169,999
Interest 173 185
Total costs and expenses 380,445 360,173
Earnings before income taxes 104,502 113,050
Income taxes 34,853 36,944
Net earnings $ 69,649 76,106
Net earnings per average share of
common stock (basic
and diluted) $ .60 .66
Dividends declared per share of
common stock $ .22 .20
Average number of shares
outstanding for the period 116,107 115,933
</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,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 69,649 76,106
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 13,722 12,900
(Gain) Loss on sales of property, plant,
and equipment 58 (71)
Gain related to factory closure 0 (10,404)
(Increase) decrease in:
Accounts receivable (36,418) (32,072)
Inventories (13,070) (9,679)
Other current assets 1,802 (743)
Other assets and deferred charges (12,447) (7,776)
Increase (decrease) in:
Accounts payable (455) 6,526
Accrued expenses 27,401 11,594
Income and other taxes payable 21,229 18,502
Deferred taxes (1,039) 3,170
Other noncurrent liabilities 8,145 626
Net cash provided by operating activities 78,577 68,679
INVESTING ACTIVITIES
Additions to property, plant, and equipment (24,206) (24,591)
Proceeds from property retirements 4,367 7,884
Purchases of short-term investments (14,322) (52,990)
Maturities of short-term investments 14,615 44,775
Net cash used in investing activities (19,546) (24,922)
FINANCING ACTIVITIES
Dividends paid (23,222) (22,034)
Common stock purchased (1,073) (7,150)
Net cash used in financing activities (24,295) (29,184)
Effect of exchange rate changes on cash and
cash equivalents (5,427) (679)
Net increase in cash and cash equivalents 29,309 13,894
Cash and cash equivalents at beginning of period 214,572 206,627
Cash and cash equivalents at end of period $243,881 220,521
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 11,941 14,471
Interest paid $ 90 659
Interest and dividends received $ 3,309 4,432
</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,
1999 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 243,881 214,572
Short-term investments, at amortized cost 136,720 137,112
Accounts receivable
(less allowance for doubtful accounts;
3/31/99- $7,281; 12/31/98-$7,564) 199,597 171,537
Inventories -
Finished goods 62,929 64,934
Raw materials and supplies 200,605 191,174
263,534 256,108
Other current assets 45,386 48,816
Deferred income taxes - current 13,083 15,027
Total current assets 902,201 843,172
Marketable equity securities at fair value 37,622 39,888
Deferred charges and other assets 103,062 92,183
Deferred income taxes - noncurrent 26,813 25,522
Property, plant, and equipment, at cost 982,776 988,781
Less accumulated depreciation 468,507 468,691
Net property, plant, and equipment 514,269 520,090
Total assets $ 1,583,967 1,520,855
Current liabilities:
Accounts payable $ 73,762 76,691
Accrued expenses 93,374 67,848
Dividends payable 25,542 23,222
Income and other taxes payable 69,089 49,491
Deferred income taxes - current 1,014 1,374
Total current liabilities 262,781 218,626
Deferred income taxes - noncurrent 37,909 40,312
Other noncurrent liabilities 111,098 104,885
Stockholders' equity:
Preferred stock - no par value
Authorized - 20,000 shares
Issued - None
Common stock - no par value
Authorized - 400,000 shares
Issued and outstanding -
93,297 shares at 3/31/99;
93,007 shares at 12/31/98 12,420 12,401
Class B common stock - convertible
Authorized - 80,000 shares
Issued and outstanding -
22,924 shares at 3/31/99;
23,214 shares at 12/31/98 3,076 3,095
Additional paid-in capital 240 272
Retained earnings 1,228,724 1,184,617
Common stock in treasury, at cost - (3/31/99-
132 shares; 12/31/98-111 shares) (8,238) (6,712)
Other Comprehensive Income:
Foreign currency translation adjustment (87,268) (61,339)
Unrealized holding gains on marketable
equity securities 23,225 24,698
(64,043) (36,641)
Total stockholders' equity 1,172,179 1,157,032
Total liabilities & stockholders' equity $ 1,583,967 1,520,855
</TABLE>
All amounts in thousands.
Notes to financial statements shown on page 5 are an integral part
of these statements.
<PAGE>
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 month periods ended March 31, 1999 and 1998,
respectively, the Consolidated Statement of Cash Flows
(Condensed) for the three month periods ended March 31, 1999
and 1998, and the Consolidated Balance Sheet (Condensed) at
March 31, 1999, are unaudited. In the Company's opinion, the
accompanying financial statements reflect all adjustments
necessary to present fairly the results for the periods and
have been prepared on a basis consistent with the 1998 audited
consolidated financial statements. These condensed financial
statements should be read in conjunction with the 1998
consolidated financial statements and related notes which are
an integral part thereof. Certain amounts recorded in 1998
have been reclassified to conform to the 1999 presentation.
2. 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.
3. In the first quarter of 1998, the Company sold its real estate
holding in Santa Cruz, California and recorded a pre-tax gain
of approximately $10,404,000 and net earnings of approximately
$6,763,000 or $.06 per share. Proceeds from the sale of
$7,434,000 are included in proceeds from property retirements
in the Consolidated Statement of Cash Flows.
4. An analysis of the cumulative foreign currency translation
adjustment follows (in thousands of dollars).
<TABLE>
Decrease to
Stockholders' Equity
<S> <C> <C>
First Quarter 1999 1998
Balance at January 1 $ 61,339 65,034
Translation adjustment for
the first quarter 25,929 1,483
Balance at March 31 $ 87,268 66,517
</TABLE>
5. An analysis of comprehensive income is provided below (in
thousands of dollars).
<TABLE>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Net earnings $ 69,649 76,106
Other comprehensive income,
before tax:
Foreign currency
translation adjustments (25,929) (1,483)
Unrealized holding gains (losses)
on securities (2,266) 5,100
Other comprehensive income,
before tax (28,195) 3,617
Income tax (expense) benefit related
to items of other comprehensive
income 793 (1,785)
Other comprehensive income,
net of tax (27,402) 1,832
Total comprehensive income $ 42,247 77,938
</TABLE>
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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)
6. Segment Information
Management organizes the chewing-gum business based on
geographic regions. Intercompany suppliers of flavors,
gumbase, and wrapping materials are classified as "All Other".
For operating profits, "All Other" also includes costs
incurred at the corporate office, net of royalties received
from associated companies.
Information by geographic region is as follows:
<TABLE>
Net Sales Three Months Ended
March 31,
1999 1998
<S> <C> <C>
North America, principally U.S. $ 195,790 196,743
Europe 209,151 199,621
Asia/Pacific/Latin America 74,170 71,171
All Other 39,900 39,702
Gross Sales 519,011 507,237
Intersegment Sales (37,965) (37,918)
Net Sales $ 481,046 469,319
</TABLE>
Intersegment revenues are sales mainly from intercompany
suppliers of flavors and gumbase to the Company's chewing gum
production facilities worldwide. Such revenues are valued on
a cost-plus basis.
<TABLE>
Operating Profits Three Months Ended
March 31,
1999 1998
<S> <C> <C>
North America, principally U.S. $ 49,034 50,368
Europe 42,689 40,411
Asia/Pacific/Latin America 14,461 10,927
All Other (5,810) (3,215)
Operating Profits 100,374 98,491
Other Income 4,128 4,155
Earnings Before Income Taxes and
Factory Sale 104,502 102,646
Gain related to Factory Sale 0 10,404
Earnings Before Income Taxes $ 104,502 113,050
</TABLE>
Management separates non-operating items such as foreign
currency transaction gains and losses, investment income, and
miscellaneous income and expense from operating profits. The
non-operating items are classified as "Other Income".
<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 1999 increased by $11.7
million or 2% compared with the same period last year. Selected
selling price increases and favorable mix increased sales by
roughly 2%. Lower shipments and translation of foreign currency
sales to the U.S. dollar had essentially no net impact.
Costs of Sales and Gross Profit
Cost of sales for the first three months of 1999 decreased by
approximately $700 thousand, essentially flat compared with the
same period last year. Higher product costs and unfavorable mix
increased cost of sales by 1%, offset by lower shipments which
reduced cost of sales by 1%. Translation of foreign currency cost
of sales to U.S. dollars had essentially no impact compared to the
prior year.
Excluding the impact of the sale of the Santa Cruz factory, gross
profit in the first three months of 1999 increased $12.4 million or
5% compared with the same period last year. The increase in gross
profit is mainly due to selected selling price increases and
favorable mix in the International markets.
Selling, Distribution, and General Administrative Expenses
Consolidated selling, distribution, and general administrative
expenses for the first three months increased by $10.5 million or
6% compared to the same period last year, primarily due to higher
worldwide marketing and advertising expenditures.
Income Taxes
Including the impact of the sale of the Santa Cruz factory, income
taxes in the first three months decreased $2.1 million or 6% from
1998's first quarter. Pre-tax earnings decreased by $8.5 million
or 8% from 1998's first quarter. The consolidated effective tax
rates for the first three months of 1999 and 1998 are shown below:
1999 1998
First three months 33.4% 32.7%
Net Earnings
Excluding the impact of the sale of the Santa Cruz factory,
consolidated net earnings for the first three months of 1999
totaled $69.6 million or $.60 per share compared to last year's net
earnings of $69.3 million or $.60 per share for the same period.
Consolidated net earnings for the first three months of 1999
totaled $69.6 million or $.60 per share, a decrease of 9% on an
earnings per share basis compared to last year's earnings of $76.1
million or $.66 per share for the same period which included the
impact of the gain on the sale of Santa Cruz of approximately $6.8
million or $.06 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, 1999 and December 31,
1998.
Additions to Property, Plant, and Equipment
Capital expenditures for 1999 are expected to approximate 1998
expenditures of $148 million and are expected to be funded from the
Company's cash flow from operations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Cont'd)
OTHER MATTERS
Year 2000
The Company recognizes the potential business impacts related to
the Year 2000 issue. The issue is one where computer systems and
microprocessors (embedded chips) may recognize the designation "00"
as 1900 when it means 2000, resulting in processing failures or
errors. The Company began to address this issue in 1995 and
believes it has an effective program in place to resolve Year 2000
issues in a timely manner.
The Company has completed the assessment of its business critical
systems and processes, and is essentially finished with the
remediation of these business critical systems, including those
involving suppliers, customers and other business partners. Work
continues on the remaining systems and processes, both internal and
external.
Most internal systems in our principal business units are Year 2000
ready. Testing will continue throughout the year. Work will move
forward on some low-risk equipment and minor issues. Implementing
our plan, as it now stands, will allow us to be fully ready by
December 31, 1999.
The Company has certain pre-existing contingency arrangements and
has established processes for creating other business critical
contingency plans so that operations are not impeded by the
millennium change. Appropriate contingency plans to deal with
issues created by third parties, those over whom the Company has
little or no control, are being developed. This is being done on
an "as needed" basis due to the difficulty of assessing third-party
progress toward resolution of their Year 2000 issues.
Given the complexity of the Year 2000 issue, failure by the Company
or its external business partners to achieve readiness could
adversely affect the Company's operations. The Company believes
that its readiness program, including the contingency plans, will
minimize the effect of any temporary disruptions in the Company's
operations that may occur.
The Company expects to incur approximately $15,000,000, including
approximately $2,000,000 of capital spending, on all of its Year
2000 efforts. Approximately $5,000,000 was incurred in 1997 and
$7,500,000 in 1998, with the remaining $2,500,000 expected to be
incurred in 1999.
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
believes 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.
Forward-Looking Statements
Statements contained in this report may be considered to be forward
looking statements. The Private Securities Litigation Reform Act
of 1995 provides a safe harbor for forward looking statements. The
Company wishes to ensure that such statements are accompanied by
meaningful cautionary statements to comply with the safe harbor
under the Act. The Company notes that a variety of factors could
cause actual results to differ materially from the anticipated
results or expectations expressed in these forward looking
statements.
Important factors that may influence the operations, performance,
development and results of the Company's business include global
and local business and economic conditions; currency exchange and
interest rates; ingredients, labor, and other operating costs;
insufficient or underutilization of manufacturing capacity;
political or economic instability in local markets; competition;
retention of preferred retail space; effective marketing campaigns
or new product introductions; consumer preferences, spending
patterns, and demographic trends; legislation and governmental
regulation; accounting policies and practices; and failure of the
Company's suppliers, customers or business partners to be Year 2000
ready.
We caution the reader that the list of factors may not be
exhaustive. The Company undertakes no obligation to update any
forward looking statement, whether as a result of new information,
future events, or otherwise.
<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 4, 1999 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 1999. 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 324,961,954 votes were eligible to
be cast and a total of 296,239,086 votes were submitted for
each nominee
as follows:
<TABLE>
<S> <C> <C> <C> <C>
Nominee For % For Withheld
John F. Bard 295,428,662 99.73 810,424
Thomas A. Knowlton 295,455,066 99.74 784,020
Penny Pritzker 295,439,694 99.73 799,392
Melinda R. Rich 295,439,846 99.73 799,240
Steven B. Sample 295,458,908 99.74 780,178
Alex Shumate 295,430,765 99.73 808,321
Richard J. Smucker 295,468,047 99.74 771,039
William Wrigley 295,469,198 99.74 769,888
William Wrigley, Jr. 295,446,871 99.73 792,215
</TABLE>
Proposal 2. Ratification of Auditors. With each class of
stock voting together, a total of 324,961,954 votes were
eligible to be cast and a total of 296,239,086 were submitted
as follows:
For Against Abstain
295,404,919 285,716 548,451
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits reference is made to the Exhibit Index on page 11.
(b) A Form 8-K was filed on March 24, 1999, announcing the election
of Mr. William Wrigley, Jr. as President and Chief Executive
Officer of the Wm. Wrigley Jr. Company.
<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/ DUSHAN PETROVICH
Dushan Petrovich
Vice President - Controller
Authorized Signatory and Chief
Accounting Officer
Date May 14, 1999
<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 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.
- --------------------
For copies of Exhibits not attached hereto, 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 243,881
<SECURITIES> 174,342
<RECEIVABLES> 206,878
<ALLOWANCES> 7,281
<INVENTORY> 263,534
<CURRENT-ASSETS> 902,201
<PP&E> 982,776
<DEPRECIATION> 468,507
<TOTAL-ASSETS> 1,583,967
<CURRENT-LIABILITIES> 262,781
<BONDS> 0
0
0
<COMMON> 15,496
<OTHER-SE> 1,156,683
<TOTAL-LIABILITY-AND-EQUITY> 1,583,967
<SALES> 481,046
<TOTAL-REVENUES> 484,947
<CGS> 199,724
<TOTAL-COSTS> 380,445
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173
<INCOME-PRETAX> 104,502
<INCOME-TAX> 34,853
<INCOME-CONTINUING> 69,649
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,649
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
</TABLE>
