<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, no par value New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Class B Common Stock, no par value
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 .
<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
As of January 31, 1999, there were outstanding 92,920,488
shares of Common Stock, no par value, and the aggregate market
value of the Common Stock (based upon the closing price of the
stock on the New York Stock Exchange on January 29, 1999) held by
non-affiliates was approximately $6,247,650,552. As of January
31, 1999 there were outstanding 23,188,988 shares of Class B
Common Stock, no par value. Class B Common Stock is not traded
on the exchanges, is restricted as to transfer or other
disposition, and is convertible into Common Stock on a
share-for-share basis. Upon such conversion, the resulting
shares of Common Stock are freely transferable and publicly
traded. Assuming all shares of outstanding Class B Common Stock
were converted into Common Stock, the aggregate market value of
Common Stock held by non-affiliates on January 31, 1999 (based
upon the closing price of the stock on the New York Stock
Exchange on such date) would have been approximately
$6,932,325,683. Determination of stock ownership by
non-affiliates was made solely for the purpose of this
requirement, and the Registrant is not bound by these
determinations for any other purpose.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitive Proxy Statement,
dated February 4, 1999 for the March 4, 1999 Annual Meeting of
Stockholders, and of the 1998 Annual Report to Stockholders, are
incorporated by reference into portions of Parts I, II, III and
IV of this Report.
<PAGE>
PART I
Item 1. Business
(a) General Development of Business.
(1) General information. From 1891 to 1903, the Company
was operated as a partnership until its incorporation in Illinois
as Wm. Wrigley, Jr. & Co. in December 1903. In November 1910,
the Company was reincorporated under West Virginia law as Wm.
Wrigley Jr. Company, and in October 1927, was reincorporated
under the same name under Delaware law.
Throughout its history, the Company has concentrated on one
principal line of business: the manufacturing and marketing of
quality chewing gum products.
(2) Not applicable.
(b) Financial Information About Industry Segments.
The Company's principal business of manufacturing and
selling chewing gum constitutes more than 90% of its consolidated
worldwide sales and revenues. All other businesses constitute
less than 10% of its consolidated revenues, operating profit and
identifiable assets. Financial information on segments, as
defined under generally accepted accounting principles, is set
forth on pages 18 and 19 of the Company's Annual Report to
Stockholder's for the fiscal year ended 1998, under the caption
"Segment Information" which information is incorporated herein by
reference.
(c) Narrative Description of Business.
(1) Business conducted. The following is a description of
the business conducted and intended to be conducted by the
Company and its wholly-owned associated companies (the Company):
(i) Principal products, markets and methods of
distribution. The Company's principal business is the
manufacture and sale of chewing gum, both in the United
States and abroad.
The Company's brands manufactured and available in the
United States are: WRIGLEY'S SPEARMINT, DOUBLEMINT, JUICY
FRUIT, BIG RED and WINTERFRESH which account for a majority
of the Company's sales volume; FREEDENT, a specially
formulated chewing gum which does not stick to most types of
dental work, available in three flavors; and EXTRA sugarfree
chewing gum, available in four flavors and as bubble gum.
Except for BIG RED and WINTERFRESH, which have limited
availability overseas, the above Wrigley brands are also
commonly available in many international markets. Additional
brands manufactured and marketed abroad are: ORBIT, EXTRA
and FREEDENT sugarfree gums in both pellet and stick form in
various flavors, ARROWMINT, COOL CRUNCH, DULCE 16, EXCEL,
JUICY FRUIT and P.K chewing gums in sugar coated pellet
form, sugarfree WRIGLEY'S SPEARMINT, DOUBLEMINT, JUICY
FRUIT, AIRWAVES in sugarfree pellet form, ICEWHITE sugarfree
stick gum and bubble gums HUBBA BUBBA in various flavors,
BIG BOY and BIG G.
<PAGE>
The Company's ten largest markets, by shipments,
outside of the United States in 1998 were, in alphabetical
order, Australia, Canada, China, France, Germany,
Philippines, Poland, Russia, Taiwan and the United Kingdom.
Chewing gum is manufactured in three factories in the
United States and eleven factories in other countries with a
twelfth becoming operational in the first quarter of 1999.
Three domestic wholly owned associated companies also
manufacture products other than chewing gum. Amurol
Confections Company, in addition to manufacturing and
marketing children's bubble gum items including BUBBLE TAPE,
BIG LEAGUE CHEW and other uniquely packaged confections, and
two new adult chewing gum items, STAY ALERT caffeine gum and
EVEREST peppermint pellet gum, also has various non-gum
items, such as a line of suckers, dextrose candy, liquid gel
candy and hard roll candies as an important part of its
total business. Amurol is also developing export markets,
currently the largest being Canada, Brazil and Japan. The
principal business of the L.A. Dreyfus Company is the
production of chewing gum base, at one domestic and one
overseas factory, for the parent and wholly owned associated
companies, and for other manufacturers of chewing gum and
specialty gum products in the United States and abroad.
Northwestern Flavors, Inc. processes flavorings and
rectifies mint oil for the parent and associated companies.
In 1979, the Company organized its domestic converting
operations under the name of Wrico Packaging Division as a
separate operating unit of the Company. This division was
created to help further the Company's capability to produce
improved packaging materials. Currently, Wrico produces
about 47% of the Company's domestic printed and other
wrapping supplies.
The Company markets chewing gum primarily through
wholesalers, corporate chains and cooperative buying groups
that distribute the product through retail outlets.
Additional direct customers are vending distributors,
concessionaires and other established customers purchasing
in wholesale quantities. Customer orders are usually
received by mail, electronically, telephone or telefax and
are generally shipped by truck from factory warehouses or
leased warehousing facilities. Consumer purchases at the
retail level are generated primarily through the Company's
advertisements on television and radio, and in newspapers
and magazines.
(ii) New products. In Europe, EXTRA for Kids, ORBIT
for Kids, AIRWAVES and ICEWHITE were added to the product
line. Additional or improved flavors were also introduced
for some product lines in various markets.
(iii) Sources and availability of raw materials. Raw
materials blended to make chewing gum base are available
from private contractors and in the open market.
Sugar, corn syrup, flavoring oils, polyols and
aspartame are obtained in the open market, or under
contracts, from suppliers in various countries. All other
ingredients and necessary packaging materials are also
purchased and available on the open market.
(iv) Patents and trademarks. The Company holds
numerous patents relating to packaging, manufacturing
processes and product formulas. Approximately two dozen
patents relating to product formula and sweetener
encapsulation, primarily for sugarfree gum and continuous
chewing gum manufacturing, are deemed of material importance
to the Company. Most of these patents expire in the
countries in which they are registered at various times
through the year 2017.
<PAGE>
Trademarks are of material importance to the Company
and are registered and maintained for all brands of the
Company's chewing gum on a worldwide basis.
(v) Seasonality. On a consolidated basis, sales
normally are relatively consistent throughout the year,
although the combined second and third quarters generally
contribute more than half of the Company's sales.
(vi) Working capital items. Inventory requirements of
the Company are not materially affected by seasonal or other
factors. In general, the Company does not offer its
customers extended payment terms. The Company believes
these conditions are not materially different from those of
its competitors.
(vii) Customers. The Company's products are
distributed through more than 4,000 customers throughout the
United States alone. No single domestic or foreign customer
accounts for as much as 10% of consolidated sales or
revenues.
(viii) Orders. It is the general custom of the
wholesale trade to purchase chewing gum requirements at
intervals of approximately ten days to two weeks to assure
fresh stocks and good turnover. Therefore, an order backlog
is of no significance to the chewing gum business.
(ix) Government business. The Company has no material
portion of its business which may be subject to
renegotiation of profits or termination of contracts at the
election of the Government.
(x) Competitive conditions. The chewing gum market is
an intensely competitive one in the United States and in
most international markets. Though detailed figures are not
available, there are approximately 14 chewing gum
manufacturers in the United States. Outside sources
estimate that Wrigley brands account for approximately 50%
of the total chewing gum product unit sales in the United
States. The Company's principal competitors in the United
States are the Warner-Lambert Company and RJR Nabisco.
Wrigley brands are sold in over 140 countries and
territories, although in some cases these markets are
relatively small. In most international markets, there are
two or three major competitors and generally a half dozen or
more other companies competing for a share of the gum market
in each instance.
In all markets in which the Company distributes its
products, principal methods of competition are a combination
of competitive profit margins to the trade, superior
quality, brand recognition, product benefit and a fair
consumer price.
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(xi) Research and development. The Company has for
many years maintained an active in-house research and
development program, and has also contracted outside
services for developing and improving Wrigley products,
machinery and operations. In relation to the Company's
consolidated assets, revenues and aggregate operating
expenses, amounts expended in these areas during the last
three fiscal years have not been material.
(xii) Compliance with environmental laws. Compliance
with federal, state and local laws regulating the discharge
of materials into the environment, or otherwise relating to
the protection of the environment, has no material effect on
capital expenditures, earnings or the competitive position
of the Company.
(xiii) Employees. As of December 31, 1998, the Company
employed approximately 9,200 persons worldwide.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales.
Information concerning the Company's operations in
different geographic areas for the years ended December 31,
1998, 1997 and 1996 is hereby incorporated by reference from
the 1998 Annual Report to Stockholders, on page 18, under
the caption "Segment Information," and on page 22 under the
caption "Results of Operations."
<PAGE>
Item 2. Properties
The information below relates to the principal properties of
the Company which are primarily devoted to chewing gum production
or raw materials processing. The Company considers the
properties listed below to be in good condition, well maintained
and suitable to carry out the Company's business. All of the
chewing gum factories listed below operated at least one full
shift throughout the year, all but two operated a substantial
second shift and eight operated a third shift for much of the
year. All properties are owned by the Company unless otherwise
indicated. The figures given in the table are approximate.
<TABLE>
<S> <C> <C>
Floor Area
Property and Location (Square Feet)
CHEWING GUM FACTORIES
Chicago, Illinois..................................... 1,279,000
Gainesville, Georgia.................................. 460,300
Yorkville, Illinois................................... 225,000(a)
Asquith, N.S.W., Australia............................ 116,700
Salzburg, Austria..................................... 22,800
Don Mills, Ont., Canada............................... 135,200
Plymouth, England..................................... 282,000
Biesheim, France...................................... 417,100
Bangalore, India...................................... 40,100
Nairobi, Kenya........................................ 79,600
Guangzhou, China, P.R.C............................... 199,400(b)
Antipolo, Philippines................................. 105,700
Poznan, Poland........................................ 103,200
Taipei, Taiwan, R.O.C................................. 70,500
St. Petersburg, Russia................................ 111,000(c)
RAW MATERIALS PROCESSING FACTORIES
West Chicago, Illinois................................ 40,300
Edison, New Jersey.................................... 536,000
Biesheim, France...................................... 72,000
OFFICE BUILDING
Wrigley Building, Chicago, Illinois................... 453,400(d)
</TABLE>
(a) Does not include a 170,000 square foot leased warehouse
facility located in West Naperville, Illinois.
(b) In China, the Company has a 50 year lease with the
Guangzhou Economic Technological Development Zone for the land
upon which the factory is located.
(c) Scheduled for completion and beginning operations in
first quarter 1999.
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(d) This building is the Company's principal
non-manufacturing property and houses the offices of the
Company's corporate headquarters. In 1998, the Company's offices
occupied approximately 159,000 of the 453,400 square feet of
rentable space in the building.
In the case of each factory listed above, there are also
included some offices and warehouse facilities. Also, the
Company maintains primarily leased branch sales offices and
warehouse facilities in the United States and abroad.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
All officers are elected for a term which ordinarily expires
on the date of the meeting of the Board of Directors following
the Annual Meeting of Stockholders. The positions and ages
listed below are as of January 31, 1999. There were no
arrangements or understandings between any of the officers and
any other person(s) pursuant to which such officers were elected.
<PAGE>
<TABLE>
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Effective
Name and Age Position(s) with Registrant Date(s)
William Wrigley, 66 President and Chief Executive Officer since 1961
Douglas S. Barrie, 65 President-International since 1999
Group Vice President 1996-1999
Group Vice President-International 1984-1995
Ronald O. Cox, 60 Group Vice President since 1996
Group Vice President-Marketing 1985-1995
John F. Bard, 57 Executive Vice President since 1999
Senior Vice President 1991-1999
Martin J. Geraghty, 62 Senior Vice President-Manufacturing since 1989
William Wrigley, Jr., 35 Vice President since 1991
Assistant to the President 1985-1992
Donald E. Balster, 54 Vice President-Production since 1994
Senior Director-U.S. Production 1991-1994
Gary R. Bebee, 52 Vice President-Customer Marketing since 1993
Assistant Vice President-Marketing 1989-1993
David E. Boxell, 57 Vice President-Personnel since 1992
Susan S. Fox, 40 Vice President-Consumer Marketing since 1993
Assistant Vice President-Marketing 1989-1993
Shaun Kim, 55 Vice President-Engineering since 1994
Senior Director-Engineering 1988-1994
Dennis R. Mally, 56 (a) Vice President-Information Services since 1995
Director-Information Services 1993-1994
Dushan Petrovich, 45 Vice President-Controller since 1996
Vice President-Treasurer 1993-1995
Treasurer 1992
Wm. M. Piet, 55 Vice President-Corporate Affairs since 1988
Corporate Secretary 1984-1998
Assistant to the President since 1995
John A. Schafer, 57 Vice President-Purchasing since 1991
Philip G. Schnell, 54 Vice President-Research & Development since 1994
Senior Director-Research &
Development 1988-1994
Christafor E. Sundstrom, 50 Vice President-Corporate Development since 1988
Philip G. Hamilton, 58 Vice President-International since 1993
Managing Director, The Wrigley
Company Limited, England since 1986
Jon Orving, 49 Vice President-International since 1993
Managing Director, Wrigley
Scandinavia AB, Sweden since 1983
Stefan Pfander, 55 Managing-Director-Europe since 1996
Vice President-International since 1992
Co-Managing Director of Wrigley
GmbH, Munich, Germany since 1981
Philip C. Johnson, 53 Senior Director, Benefits &
Compensation since 1995
Assistant Vice President-Personnel 1991-1995
Howard Malovany, 48 (b) Secretary and General Counsel since 1998
Alan J. Schneider, 53 (c) Treasurer since 1996
</TABLE>
<PAGE>
(a) Mr. Mally joined the Company in 1993 assuming
responsibility for the Company's worldwide information systems.
Before joining the Company, from 1989 to 1991 Mr. Mally was Vice
President Business Operations with The Cross Company in Fraser,
Michigan, a manufacturer of metal cutting and assembly machines.
Following the 1991 acquisition of The Cross Company by Giddings &
Lewis, Mr. Mally served as Vice President Systems and Quality of
its Integrated Automation Division in Fraser, Michigan.
(b) Mr. Malovany joined the Company in 1996 assuming
responsibility for the corporate legal function. Before joining
the Company, from 1993-1996 Mr. Malovany was Secretary and Senior
Counsel of Outboard Marine Corporation a manufacturer and
distributor of recreational marine products.
(c) Mr. Schneider joined the Company in August 1996 as
Treasurer with responsibility for treasury, tax and credit
functions. He previously served CBI Industries, Inc. of Oak
Brook, Illinois, an international manufacturer of industrial
gases and metal plate surfaces, as Vice President-Finance and
Chief Financial Officer, having joined that company in 1987 and
serving in various financial capacities over the years, including
Controller and Vice President.
At the meeting of the Board of Directors immediately
following the annual stockholders meeting of March 4, 1999, all
officers set forth in the schedule above were re-elected for a
one-year term to their positions in the Company.
PART II
Item 5. Market for Registrant's Common Stock, Dividend and
Stockholder Information
At December 31, 1998, the Company had two classes of stock
outstanding: Common Stock, listed on both the New York and
Chicago Stock Exchanges, and Class B Common Stock, for which
there is no trading market. Shares of the Class B Common Stock
were issued by the Company on April 11, 1986 to stockholders of
record on April 4, 1986. Class B Common Stock is entitled to ten
votes per share, is subject to restrictions on transfer or other
disposition and is at all times convertible, on a share-for-share
basis, into shares of Common Stock.
As of January 31, 1999, there were 36,697 stockholders of
record holding Common Stock and 3,831 stockholders of record
holding Class B Common Stock. Regular quarterly dividends and
any extra cash dividends as may be deemed appropriate, which are
identical on both Common Stock and Class B Common Stock, are
declared at scheduled meetings of the Board of Directors and
announced immediately upon declaration. Information regarding
the high and low quarterly sales prices for the Common Stock on
the New York Stock Exchange, and dividends declared per share on
a quarterly basis for both classes of stock, for the two-year
period ended December 31, 1998, is set forth in the Company's
1998 Annual Report to Stockholders, on page 25, under the
captions "Market Prices" and "Dividends" and is incorporated
herein by reference.
Item 6. Selected Financial Data
An eleven-year summary of selected financial data for the
Company is set forth in the Company's 1998 Annual Report to
Stockholders under the following captions and page numbers:
"Operating Data" and "Other Financial Data", on pages 26 and 27,
and is incorporated herein by reference.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's discussion and analysis of results of
operations and financial condition, including a discussion of
liquidity and capital resources, is set forth in the Company's
1998 Annual Report to Stockholders on pages 22 through 24 and is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Disclosure about market risk is set forth on page 24 of the
Company's 1998 Annual Report to Stockholders under the heading
"Market Risk" and is incorporated hereby by reference.
Item 8. Financial Statements and Supplementary Data
The Company's audited consolidated financial statements,
accounting policies and notes to consolidated financial
statements, with the report of independent auditors, at December
31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998 are set forth in the Company's 1998
Annual Report to Stockholders on pages 7 through 21 and selected
quarterly data-consolidated results, for the years ended December
31, 1998 and 1997 are set forth in the Company's 1998 Annual
Report to Stockholders on page 25, and all such pages are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors and nominees for
directorship is set forth in the Company's definitive Proxy
Statement, dated February 4, 1999, for the Annual Meeting of
Stockholders on March 4, 1999, on pages 2 through 4, under the
caption "Election of Directors" and is incorporated herein by
reference. For information concerning the Company's executive
officers, see "Executive Officers of the Registrant" set forth in
Part I hereof.
Item 11. Executive Compensation
Information regarding the compensation of directors and
executive officers is set forth in the Company's definitive Proxy
Statement, dated February 4, 1999, for the Annual Meeting of
Stockholders on March 4, 1999, on pages 7 and 8, and 10 through
16 under the general captions "Compensation of Directors" and
"Executive Compensation", respectively, and is incorporated
herein by reference.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain
beneficial owners, of all directors and nominees, of the named
executive officers, and of directors and executive officers as a
group, is set forth in the Company's definitive Proxy Statement,
dated February 4, 1999, for the Annual Meeting of Stockholders on
March 4, 1999, on pages 5 through 7 under the captions "Security
Ownership of Directors and Executive Officers" and "Security
Ownership of Certain Beneficial Owners" and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related
transactions is hereby incorporated by reference from the
Company's definitive Proxy Statement, dated February 4, 1999, for
the Annual Meeting of Stockholders on March 4, 1999 under the
following captions and page numbers: "Election of Directors", on
page 2, regarding Mr. William Wrigley and Mr. William Wrigley,
Jr. and "Security Ownership of Certain Beneficial Owners", on
page 6, regarding the Offield family and Mr. Wrigley.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on
Form 8-K
(a) 1,2. Financial Statements and Financial Statement
Schedule
The data listed in the accompanying Index to Financial
Statements and Financial Statement Schedule, on page F-1 hereof,
is filed as part of this Report.
3. Exhibits
The exhibits listed in the accompanying Index to Exhibits,
on page F-3 hereof, are filed as part of this Report or are
incorporated by reference herein as indicated thereon.
(b) Not Applicable.
(c) Exhibits are attached hereto.
(d) See (a) 1, 2 above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this Form 10-K Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: March 25, 1999 WM. WRIGLEY JR. COMPANY
(Registrant)
By: /s/ JOHN F. BARD
John F. Bard
Executive Vice President and Director
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, this Report on Form 10-K has been signed
below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Signature Title
* President, Chief
William Wrigley, Jr. Executive Officer,
Director
/s/ JOHN F. BARD Executive Vice President and Director
John F. Bard (Principal Financial Officer)
/s/ DUSHAN PETROVICH Vice President-Controller
Dushan Petrovich (Principal Accounting Officer)
* Director
Thomas A. Knowlton
* Director
Penny Pritzker
* Director
Melinda R. Rich
* Director *By/s/ HOWARD MALOVANY
Steven B. Sample Howard Malovany
Attorney-in-Fact
* Director
Alex Shumate Date: March 25, 1999
* Director
Richard K. Smucker
<PAGE>
Exhibit 23.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report on Form 10-K of Wm. Wrigley Jr. Company of our report
dated January 27, 1999, included in the 1998 Annual Report to
Stockholders of Wm. Wrigley Jr. Company.
Our audits also included the financial statement schedule of Wm.
Wrigley Jr. Company listed in Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion,
the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information
set forth therein.
We also consent to the incorporation by reference in the
Registration Statements pertaining to the Special Investment and
Savings Plan for Wrigley Employees (33-15061 (1987) and 33-43738
(1991)), the Wm. Wrigley Jr. Company Management Incentive Plan
(33-22788 (1988)) and the 1997 Management Incentive Plan, (333-
48715 (1998)) respectively, of our report dated January 27, 1999,
with respect to the consolidated financial statements and
consolidated financial statement schedule of Wm. Wrigley Jr.
Company included or incorporated by reference in this Annual
Report on Form 10-K for the year ended December 31, 1998.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Chicago, Illinois
March 24, 1999
<PAGE>
<TABLE>
WM. WRIGLEY JR. COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a))
Reference
Form Annual Report
10-K to
Report Stockholders
<S> <C> <C>
Data incorporated by reference from the 1998 Annual Report
to Stockholders of Wm. Wrigley Jr. Company:
Consolidated balance sheet at December 31, 1998 and 1997........ 8-9
For the years ended December 31, 1998, 1997 and 1996:
Consolidated statement of earnings.......................... 7
Consolidated statement of cash flows........................ 10
Consolidated statement of stockholders' equity
including comprehensive income.............................. 11
Accounting policies and notes to consolidated financial
statements.................................................. 12-19
Consolidated financial statement schedule for the years ended
December 31, 1998, 1997 and 1996:
Valuation and qualifying accounts.................................. F-2
</TABLE>
All other schedules are omitted since the required
information is not present or is not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial
statements or accounting policies and notes thereto.
With the exception of the pages listed in the above index
and the Items referred to in Items, 1,5,6,7, and 8 of this Form
10-K Report, the 1998 Annual Report to Stockholders
is not to be deemed filed as part of this report.
<PAGE>
<TABLE>
WM. WRIGLEY JR. COMPANY
Schedule II - Valuation and Qualifying Accounts
Years ended December 31, 1998, 1997 and 1996
(In Thousands)
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to
Beginning Costs and Other Accounts Deductions- Balance at
Description of Period Expenses Describe Describe(A) End of Period
1998:
Allowance for
doubtful accounts... $7,524 1,456 1,416 7,564
1997:
Allowance for
doubtful accounts... $8,538 1,434 2,448 7,524
1996:
Allowance for
doubtful accounts... $9,060 2,080 2,602 8,538
</TABLE>
(A) Uncollectable accounts written-off, net of recoveries.
<PAGE>
WM. WRIGLEY JR. COMPANY
AND WHOLLY OWNED ASSOCIATED COMPANIES
INDEX TO EXHIBITS
(Item 14(a))
Exhibit
Number Description of Exhibit
Proxy Statement of the Registrant, dated February 4,
1999, for the March 4, 1999 Annual Meeting of
Stockholders, is hereby incorporated by reference.
3. Articles of Incorporation and By-laws.
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). Wm. Wrigley Jr. Company 1997 Management Incentive Plan.
Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended
September 30, 1997.
13. 1998 Annual Report to Stockholders of the Registrant.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors. (See page 12)
24. Power of Attorney.
99. Forward-Looking Statements.
- --------------------
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.
<PAGE>
THE GLOBE AND SPEAR
WM. WRIGLEY JR. COMPANY ANNUAL REPORT 1998
The Wrigley Spear has been associated with the
established brands of Wrigley's chewing gum since
it was first used in 1893 and is recognized by
consumers worldwide as a symbol of quality.
Back in the early 1970's, to reflect the Company's
growing international presence, a Wrigley artist
first depicted the Spear encircling the globe. The
Globe and Spear is now a registered trademark of
the Wm. Wrigley Jr. Company. Wrigley brands are
produced in 13 factories around the world and sold
in over 140 countries. Wrigley's chewing gum
represents a truly American product known
throughout the world and enjoyed daily by millions.
<TABLE>
<C> <S>
CONTENTS
2 Wrigley at a Glance
4 President's Letter
6 Highlights
7 Consolidated Statement
of Earnings
8 Consolidated Balance
Sheet
10 Consolidated Statement
of Cash Flows
11 Consolidated Statement
of Stockholders'
Equity Including
Comprehensive Income
12 Accounting Policies
and Notes to
Consolidated Financial
Statements
20 Report of Management
21 Report of Independent
Auditors
22 Management's
Discussion and
Analysis
25 Quarterly Data
26 Selected Financial
Data
28 Corporate Facilities
and Principal
Associated Companies
29 Elected Officers
30 Board of Directors
32 Stockholder
Information
</TABLE>
<PAGE>
ANNUAL REPORT 1998
---------------------------------
[LOGO]
---------------------------------
Wm. WRIGLEY Jr. Company
<PAGE>
TO THE STOCKHOLDERS AND EMPLOYEES OF THE WM. WRIGLEY JR. COMPANY
Over the past year, the Wrigley team worldwide combined hard work
and imagination to navigate through economic volatility in many of
our international markets. Through their efforts, your Company
achieved new highs in both sales and earnings in 1998. Net earnings
also received a boost from the first quarter sale of the land and
building in Santa Cruz, California, where Company operations ceased
toward the end of 1996.
Our international associated companies, once again, drove the
improvement in our overall results. The lion's share of our
overseas markets recorded volume gains over the prior year. As was
the case in 1997, the increased strength of the U.S. dollar
relative to the majority of international currencies reduced
consolidated sales and earnings gains for 1998. The dollar's
strength, however, did moderate later in the year; and for the
fourth quarter, there was essentially no translation impact on the
Company's financial results.
Europe's volume growth rate exceeded that of any other region in
1998. Especially strong performances were recorded by the
established markets of Western Europe, with gains in almost every
market from Austria to the United Kingdom.
The overall positive results across Europe reflect the combined
power of increased marketing investments and new product
innovations. Airwaves(R), the world's first "vapor release" chewing
gum, was a success during its first year in the United Kingdom, and
subsequently has been rolled out in several other markets, the most
significant of which is Germany. Supported by compelling
advertising that effectively communicates a unique, new consumer
benefit for chewing gum, Airwaves has added to your Company's
business growth. Also helping to raise per capita consumption
levels in the region were selective form and flavor introductions,
particularly in the sugarfree category.
Those same product innovations, along with increased brand support
and improved merchandising and distribution, led to significant
progress across the markets of Central and Eastern Europe, with the
notable exception of Russia. The decline of our business in Russia,
resulting from the ruble's dramatic devaluation and subsequent
economic difficulties, offset most of the solid volume increases
recorded by our associates in markets such as Poland, Hungary and
the Balkans. The net effect in 1998 was that Central and Eastern
Europe as a whole experienced only a modest gain in shipments.
Our customers and consumers in Russia are slowly recovering from
the economic turbulence. Throughout these trying times, we have
stayed the course in Russia, keeping our organization intact and
persisting with our advertising, merchandising and distribution
efforts. Progress continues on our production facility in St.
Petersburg; and consistent with our original schedule, the factory
is expected to be up and running by the second quarter of 1999.
Besides providing additional capacity, the plant will help shorten
the supply chain in the vast Russian market, improving distribution
efficiency and ensuring consumers can purchase the freshest
possible Wrigley's products.
In the Asia/Pacific region, volume was up, but not as sharply as in
recent years. As anticipated in last year's letter, growth in the
region was dampened by the decline in value of various Asian
currencies and subsequent instability in local economies. Selected
price increases helped to minimize the negative financial impact of
these devaluations, but contributed to significant volume declines
in Indonesia, Malaysia and the Philippines. On the plus side, China
and Hong Kong recorded large volume increases in 1998 due to strong
sales of our long-established sugar brands, complemented in Hong
Kong by the growth of our Extra(R) sugarfree brand. Higher sales of
Extra also contributed to solid gains in Australia.
For 1998, China was, by far, the biggest single contributor to your
Company's overall volume gain. Expansion of the Guangzhou factory
has provided us with the capacity to extend distribution further
into China; but penetrating the country's interior is a formidable
task, and much work remains to be done. In addition, the recent
completion of our replacement factory in the Philippines will
enable us to better service the markets of Southeast Asia as they
begin to emerge from their economic turmoil.
[WRIGLEY LETTERHEAD]
<PAGE>
In North America, 1998 results were mixed. Our U.S. business
matched 1997's volume, while Wrigley Canada's shipments improved
over the prior year.
Within the U.S. market, Extra and Winterfresh(R) turned in the best
brand performances in 1998. Building on its momentum from the
second half of 1997, Extra recorded strong volume gains as
consumers continued to respond positively to its improved,
longer-lasting flavor and new advertising. Winterfresh added to its
impressive track record. In 1998, just four years after its
introduction, Winterfresh passed Doublemint(R) to become the
top-selling, single flavor brand of chewing gum in the U.S.
Although the volume gains of Extra and Winterfresh were offset by
declines for our other U.S. brands, overall we continued to
outperform the total U.S. chewing gum market. Your Company gained
a full market share point in a tough retail environment that was
complicated by a variety of new chewing gum product introductions
from a wide range of competitors.
Increased brand support and the implementation of "Value Pricing"
helped advance our business in Canada. Price-marked at 35 cents
Canadian, our new 5-stick packages led to notable volume gains for
Wrigley's Spearmint(R), Doublemint, Juicy Fruit(R) and especially
Big Red(R). Another highlight for Wrigley Canada was the continued
strong performance of Excel(R), a sugarfree pellet product.
Although they remain among our smaller international markets,
Mexico, the Caribbean and the countries we serve in Central and
South America again recorded solid volume gains. By focusing on a
tighter range of product offerings and boosting advertising and
merchandising efforts, we were able to increase both the range and
depth of our distribution in Latin America over the past year.
During 1998, our associates at Amurol Confections continued the
practices that started to turn their business around at the end of
1997 -- tighter cost controls and more selective new product
introductions. As a result, Amurol posted higher earnings in 1998.
Sales, on the other hand, remained somewhat soft, as they did for
the entire novelty bubble gum and confectionery category. Amurol
is also placing greater emphasis on consumer advertising which has
helped improve awareness of and interest in their new product
offerings.
As we begin the new year, economic conditions remain unsettled in
a number of your Company's international markets. Greater
volatility is a risk we accepted, along with the potential rewards,
when we expanded into the emerging markets of Central and Eastern
Europe and Asia. To date, the benefits to the Company have far
outweighed the complexities encountered, and we remain committed to
building our business in these countries for the long haul.
To fully develop the potential of these markets, additional
investment will be required -- in people, equipment, advertising
and merchandising. Your Company's employee base will continue to
increase as we expand the infrastructure needed to produce, market
and distribute our high quality products in over 140 countries
around the world. The capital portion of our 1999 investment in the
business is expected to be in the same range as 1998's record
expenditure.
Over the past year, computer system testing and modifications to
address the Year 2000 challenge proceeded on time and on budget.
While we still have some work to do, by far the largest portion of
the spending on this project is now behind us. The Company remains
on track to have its critical systems Year 2000 ready by the end of
the first quarter, with some less sensitive applications to be
dealt with later in 1999.
As we are about to enter the 21st Century, it is worth a look back
to see how far our Company has come since it stood on the threshold
of the 20th Century. In its best year prior to 1900, the Wrigley
Company recorded about $40,000 in sales each month. Today, we
record that much in sales every 10 minutes, around the clock. This
striking comparison reflects the vast business improvement made
possible by the efforts of our dedicated, hard-working employees,
both past and present. Also appreciated is the loyalty through the
years of our stockholders who have valued the Company's long-term
perspective on investment and growth. With all of your support, we
look forward to continuing to build our business
through 1999 and into the next century.
Sincerely,
[WRIGLEY SIGNATURE]
William Wrigley
<PAGE>
<TABLE>
<CAPTION>
WRIGLEY at a glance
- --------------------------------------------------------------------------------
PRODUCTS COMPANIES PRODUCTION FACILITIES
--------------------------------------------------------------------------
<S> <C> <C> <C>
CHEWING GUM/
BUBBLE GUM WRIGLEY UNITED STATES Chicago, Illinois
Over 140 countries Gainesville, Georgia
served
CANADA Don Mills, Ontario
-----------------------------------
[LOGO]
ENGLAND Plymouth
FRANCE Biesheim
AUSTRIA Salzburg
POLAND Poznan
KENYA Nairobi
RUSSIA St. Petersburg (1999)
-----------------------------------
AUSTRALIA Sydney
PHILIPPINES Antipolo City
TAIWAN Taipei
CHINA Guangzhou
INDIA Bangalore
-------------------------------------------------------------------------
BUBBLE GUM/
CONFECTIONS AMUROL CONFECTIONS UNITED STATES Yorkville, Illinois
Over 50 countries
served
-------------------------------------------------------------------------
GUM BASE L.A. DREYFUS UNITED STATES Edison, New Jersey
FRANCE Biesheim
-------------------------------------------------------------------------
FLAVORING NORTHWESTERN FLAVORS UNITED STATES West Chicago,
Illinois
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
REGIONS SERVED MAJOR BRANDS
- -----------------------------------------------------------------------------
<S> <C> <C>
- North America [WRIGLEY'S LOGO] [P.K LOGO]
- Latin America
[DOUBLEMINT LOGO] [HUBBABUBBA LOGO]
- -------------------------
- Europe
- Middle East [JUICY FRUIT LOGO] [ORBIT LOGO]
- Africa
- ------------------------- [EXTRA LOGO] [BIG RED LOGO]
- Asia
- Pacific
[FREEDENT LOGO] [WINTERFRESH LOGO]
- -----------------------------------------------------------------------------
North America [BUBBLE TAPE LOGO] [BUBBLEJUG LOGO] [CHECKBOOK LOGO]
Latin America
Europe [OUCH! LOGO] [BUBBLE [SQUEEZEPOP LOGO]
BEEPER LOGO]
Middle East
Africa
Asia
Pacific
- -----------------------------------------------------------------------------
All Wrigley production facilities
(and some outside customers)
- -----------------------------------------------------------------------------
All Wrigley production facilities
(and some outside customers)
</TABLE>
<PAGE>
HIGHLIGHTS OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997
In thousands of U.S. dollars except for per share amounts
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $2,004,719 1,937,021
EARNINGS BEFORE FACTORY CLOSURE AND SALE $ 297,738 273,771
- --Per Share of Common Stock (basic and diluted) $ 2.57 2.36
NET EARNINGS $ 304,501 271,626
- --Per Share of Common Stock (basic and diluted) $ 2.63 2.34
DIVIDENDS PAID $ 150,835 135,680
- --Per Share of Common Stock $ 1.30 1.17
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT $ 148,027 126,509
STOCKHOLDERS' EQUITY $1,157,032 985,379
RETURN ON AVERAGE EQUITY 28.4% 28.9%
STOCKHOLDERS AT CLOSE OF YEAR 38,052 36,587
AVERAGE SHARES OUTSTANDING (000) 115,964 115,964
</TABLE>
For additional historical financial data see page 26.
6
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
1998 1997 1996
In thousands of U.S. dollars except for per share amounts
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNINGS
REVENUES:
Net sales $2,004,719 1,937,021 1,835,987
Investment and other income 18,636 17,153 14,614
---------- --------- ---------
Total revenues 2,023,355 1,954,174 1,850,601
---------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 848,363 847,366 814,483
Costs (Gains) related to factory closure and sale (10,404) 3,300 19,436
Selling, distribution and general administrative 743,902 708,310 656,473
Interest 615 958 1,097
---------- --------- ---------
Total costs and expenses 1,582,476 1,559,934 1,491,489
---------- --------- ---------
EARNINGS BEFORE INCOME TAXES 440,879 394,240 359,112
INCOME TAXES 136,378 122,614 128,840
---------- --------- ---------
NET EARNINGS $ 304,501 271,626 230,272
========== ========= =========
- -------------------------------------------------------------------------------------------------------
PER SHARE AMOUNTS
NET EARNINGS PER SHARE OF COMMON STOCK
(BASIC AND DILUTED) $ 2.63 2.34 1.99
========== ========= =========
DIVIDENDS PAID PER SHARE OF COMMON STOCK $ 1.30 1.17 1.02
========== ========= =========
</TABLE>
See accompanying accounting policies and notes.
7
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
1998 1997
In thousands of U.S. dollars
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 214,572 206,627
Short-term investments, at amortized cost 137,112 120,728
Accounts receivable
(less allowance for doubtful accounts:
1998--$7,564; 1997--$7,524) 194,977 175,967
Inventories--
Finished goods 64,934 63,912
Raw materials and supplies 191,174 183,480
---------- ---------
256,108 247,392
Other current assets 25,376 30,538
Deferred income taxes--current 15,027 16,421
---------- ---------
Total current assets 843,172 797,673
MARKETABLE EQUITY SECURITIES, AT FAIR VALUE 39,888 26,375
DEFERRED CHARGES AND OTHER ASSETS 92,183 59,566
DEFERRED INCOME TAXES--NONCURRENT 25,522 29,038
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 36,013 26,298
Buildings and building equipment 310,212 277,808
Machinery and equipment 642,556 566,766
---------- ---------
988,781 870,872
Less accumulated depreciation 468,691 440,398
---------- ---------
Net property, plant and equipment 520,090 430,474
---------- ---------
TOTAL ASSETS $1,520,855 1,343,126
========== =========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
1998 1997
In thousands of U.S. dollars and shares
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 76,691 71,001
Accrued expenses 67,848 78,378
Dividends payable 23,222 22,034
Income and other taxes payable 49,491 53,460
Deferred income taxes--current 1,374 943
---------- ---------
Total current liabilities 218,626 225,816
DEFERRED INCOME TAXES--NONCURRENT 40,312 30,874
OTHER NONCURRENT LIABILITIES 104,885 101,057
STOCKHOLDERS' EQUITY:
Preferred Stock--no par value
Authorized: 20,000 shares
Issued: None
Common Stock--no par value
Common Stock
Authorized: 400,000 shares
Issued: 1998--93,007 SHARES; 1997--92,545 shares 12,401 12,339
Class B Common Stock--convertible
Authorized: 80,000 shares
Issued and outstanding:
1998--23,214 SHARES; 1997--23,676 shares 3,095 3,157
Additional paid-in capital 272 226
Retained earnings 1,184,617 1,032,139
Common Stock in treasury, at cost
(1998--111 SHARES; 1997--252 shares) (6,712) (13,363)
Other comprehensive income--
Foreign currency translation adjustment (61,339) (65,034)
Unrealized holding gains on marketable equity
securities 24,698 15,915
---------- ---------
(36,641) (49,119)
---------- ---------
Total stockholders' equity 1,157,032 985,379
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,520,855 1,343,126
========== ==========
</TABLE>
See accompanying accounting policies and notes.
9
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
In thousands of U.S. dollars
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 304,501 271,626 230,272
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 55,774 50,439 47,288
(Gain) Loss on sales of property, plant and
equipment 168 (1,141) (1,771)
Gain related to factory sale (10,404) -- --
(Increase) Decrease in:
Accounts receivable (16,319) (26,318) 2,154
Inventories (6,299) (26,916) 973
Other current assets 5,332 (12,712) 3,777
Other assets and deferred charges (17,350) 11,123 (24,075)
Increase (Decrease) in:
Accounts payable 4,499 1,549 474
Accrued expenses (3,869) 16,182 3
Income and other taxes payable (4,445) 1,779 6,095
Deferred income taxes 9,826 (2,608) (4,496)
Other noncurrent liabilities 2,433 11,475 25,149
--------- -------- --------
Net cash provided by operating activities 323,847 294,478 285,843
INVESTING ACTIVITIES
Additions to property, plant and equipment (148,027) (126,509) (101,977)
Proceeds from property retirements 10,662 6,888 10,785
Purchases of short-term investments (109,292) (156,553) (78,549)
Maturities of short-term investments 92,676 153,550 61,157
--------- -------- --------
Net cash used in investing activities (153,981) (122,624) (108,584)
FINANCING ACTIVITIES
Dividends paid (150,835) (135,680) (118,308)
Common Stock purchased (7,679) (3,676) (6,779)
--------- -------- --------
Net cash used in financing activities (158,514) (139,356) (125,087)
Effect of exchange rate changes on cash and cash
equivalents (3,407) (7,104) 3,336
--------- -------- --------
Net increase in cash and cash equivalents 7,945 25,394 55,508
Cash and cash equivalents at beginning of year 206,627 181,233 125,725
--------- -------- --------
Cash and cash equivalents at end of year $ 214,572 206,627 181,233
========= ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 133,530 126,925 130,499
========= ======== ========
Interest paid $ 1,164 900 631
========= ======== ========
Interest and dividends received $ 19,458 16,598 14,477
========= ======== ========
</TABLE>
See accompanying accounting policies and notes.
10
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
INCLUDING COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
CLASS COMMON TOTAL
COMMON B ADDITIONAL STOCK OTHER STOCK-
SHARES COMMON COMMON PAID-IN RETAINED IN COMPREHENSIVE HOLDERS'
OUTSTANDING STOCK STOCK CAPITAL EARNINGS TREASURY INCOME EQUITY
In thousands of U.S. dollars and shares
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1995 91,322 $12,205 3,291 1,625 786,543 (10,178) 3,366 796,852
------ ------- ----- ------ --------- ------- ------- ---------
Net earnings 230,272 230,272
Other comprehensive income:
Currency translation (6,678) (6,678)
Unrealized holding loss on
marketable equity securities,
net of $319 tax credit (592) (592)
---------
Total comprehensive income 223,002
Dividends to shareholders (118,303) (118,303)
Treasury share purchases (115) (6,779) (6,779)
Options exercised and
stock awards granted 83 (1,387) 4,046 2,659
Conversion from Class B Common
to Common 525 70 (70) --
------ ------- ----- ------ --------- ------- ------- ---------
BALANCE DECEMBER 31, 1996 91,815 12,275 3,221 238 898,512 (12,911) (3,904) 897,431
------ ------- ----- ------ --------- ------- ------- ---------
Net earnings 271,626 271,626
Other comprehensive income:
Currency translation (50,318) (50,318)
Unrealized holding gain on
marketable equity securities,
net of $2,748 tax 5,103 5,103
---------
Total comprehensive income 226,411
Dividends to shareholders (137,999) (137,999)
Treasury share purchases (56) (3,676) (3,676)
Options exercised and
stock awards granted 55 (12) 3,224 3,212
Conversion from Class B Common
to Common 479 64 (64) --
------ ------- ----- ------ --------- ------- ------- ---------
BALANCE DECEMBER 31, 1997 92,293 12,339 3,157 226 1,032,139 (13,363) (49,119) 985,379
------ ------- ----- ------ --------- ------- ------- ---------
Net earnings 304,501 304,501
Other comprehensive income:
Currency translation 3,695 3,695
Unrealized holding gain on
marketable equity securities,
net of $4,729 tax 8,783 8,783
---------
Total comprehensive income 316,979
Dividends to shareholders (152,023) (152,023)
Treasury share sales,
net of purchases 104 4,078 4,078
Options exercised and
stock awards granted 37 46 2,573 2,619
Conversion from Class B Common
to Common 462 62 (62) --
------ ------- ----- ------ --------- ------- ------- ---------
BALANCE DECEMBER 31, 1998 92,896 $12,401 3,095 272 1,184,617 (6,712) (36,641) 1,157,032
====== ======= ===== ====== ========= ======= ======= =========
</TABLE>
See accompanying accounting policies and notes.
11
<PAGE>
ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------
CONSOLIDATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of the
Wm. Wrigley Jr. Company and its associated companies (the Company).
The Company's principal business is manufacturing and selling
chewing gum. All other businesses constitute less than 10% of
combined revenues, operating profit and identifiable assets.
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect assets, liabilities, revenues
and expenses. Actual results may vary from those estimates. Certain
amounts reported in 1996 and 1997 have been reclassified to conform
to the 1998 presentation.
- --------------------------------------------------------
FACTORY CLOSURE AND SALE
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 and
incurred $2,436,000 for employee relocation, training and other
transition costs related to this plan for a total charge of
$19,436,000. In 1997, the Company incurred $3,300,000 for employee
relocation, training and other transition costs. As a result of
these charges, net earnings per share are reduced by $.02 and $.11
per share in 1997 and 1996, respectively.
In the first quarter of 1998, the Company sold its real estate
holding in Santa Cruz, California and recorded a pretax 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.
With the sale of its real estate holding in Santa Cruz, California,
the Company's 1996 plan to realign U.S. production capacity is
substantially complete.
- --------------------------------------------------------
CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid investments with original
maturity of three months or less to be cash equivalents.
- --------------------------------------------------------
ADVERTISING
The Company expenses all advertising costs in the year incurred.
Advertising expense was $291,344,000 in 1998, $279,689,000 in 1997
and $247,571,000 in 1996.
- --------------------------------------------------------
INVESTMENTS IN DEBT & EQUITY SECURITIES
The Company's investments in debt securities, which typically
mature in one year or less, are held to maturity and valued at
amortized cost, which approximates fair value. The aggregate fair
values at December 31, 1998 and December 31, 1997 were,
respectively, $124,645,000 and $104,684,000 for municipal
securities, and $12,467,000 and $16,044,000 for other debt
securities. The average yield of municipal securities held at
December 31, 1998 and December 31, 1997 is 4.03% and 4.28%
respectively.
The Company's investments in marketable equity securities are held
for an indefinite period. Application of Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," resulted in unrealized
holding gains of $37,997,000 at December 31, 1998 and $24,484,000
at December 31, 1997. Unrealized holding gains, net of the related
tax effect, of $24,698,000 and $15,915,000 at December 31, 1998 and
1997, respectively, are included as components of accumulated other
comprehensive income in stockholders' equity.
12
<PAGE>
- --------------------------------------------------------
INVENTORIES
Inventories are valued at cost on a last-in, first-out (LIFO) basis
for U.S. companies and at the lower of cost (principally first-in,
first-out basis) or market for international associated companies.
Inventories totaled $256,108,000 and $247,392,000 at December 31,
1998 and 1997, respectively, including $106,750,000 and
$104,801,000, respectively, valued at cost on a LIFO basis. If
current costs had been used, such inventories would have been
$37,330,000 and $40,674,000 higher than reported at December 31,
1998 and 1997, respectively.
- --------------------------------------------------------
DEPRECIATION
Depreciation is provided over the estimated useful life of the
respective asset: buildings and building equipment -- 12 to 50
years; machinery and equipment -- 3 to 20 years. Depreciation is
provided primarily by the straight-line method for international
associated companies and by the accelerated method, with a change
to straight-line in the latter years of useful life, for the U.S.
companies. The amounts were:
<TABLE>
<CAPTION>
1998 1997 1996
In thousands of U.S. dollars
- ---------------------------------------------------------
<S> <C> <C> <C>
Straight-line $35,602 32,485 30,489
Accelerated $20,172 17,954 16,799
</TABLE>
- --------------------------------------------------------
ACCRUED EXPENSES
Accrued expenses at December 31, 1998 and 1997 included $27,606,000
and $29,667,000 of payroll expenses, respectively.
- --------------------------------------------------------
OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities at December 31, 1998, included
liabilities for approximately $49,100,000 of deferred compensation
and $17,600,000 for postretirement benefits. At December 31, 1997,
they included liabilities for approximately $39,400,000 of deferred
compensation and $18,000,000 for postretirement benefits.
- --------------------------------------------------------
FOREIGN CURRENCY TRANSLATION
AND EXCHANGE CONTRACTS
The Company has determined that the functional currency for each
associated company except for selected Eastern European entities is
its local currency. As some Eastern European entities operate in
economies which are considered to be highly inflationary, their
functional currency is the U.S. dollar.
Certain foreign associated companies enter into forward exchange
contracts and purchase currency options as nonspeculative hedges
against future purchase commitments with other associated companies
and outside vendors. In addition, the Parent Company enters into
forward exchange contracts and purchases currency options as
non-speculative hedges regarding known future royalty payments
from, and net investments in, associated companies as well as known
foreign currency commitments. Market value gains and losses,
recognized at expiration of the contracts, offset foreign exchange
gains or losses on the related transactions being hedged. At
December 31, 1998, foreign exchange contracts for a number of
currencies, primarily British pounds, French francs, German marks,
and U.S. dollars, maturing at various dates through December 31,
1999, aggregated $163,765,000. Open foreign exchange contracts at
December 31, 1997 aggregated $222,209,000. Unrealized gains or
losses on these contracts were not significant as of either
December 31, 1998 or 1997.
- --------------------------------------------------------
DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES
In 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging
Activities." This statement, which is effective for periods
beginning after June 15, 1999, establishes accounting and reporting
standards which require derivatives to be measured at fair value
and recognized as assets or liabilities in the balance sheet. The
Company's balance sheet and statements of earnings and cash flows
will not be materially impacted by this statement, upon adoption.
13
<PAGE>
ACCOUNTING POLICIES AND NOTES (CONTINUED)
- --------------------------------------------------------
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED
FOR INTERNAL USE
In 1998, the Accounting Standards Executive Committee of the AICPA
(AcSEC) issued Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal
Use." SOP 98-1 which is effective for periods beginning after
December 15, 1998, establishes guidelines on accounting for costs
incurred related to internal-use software. The Company's balance
sheet and statements of earnings and cash flows will not be
materially
impacted by this statement.
- --------------------------------------------------------
COMMON STOCK
On March 5, 1997, stockholders approved the Company's Management
Incentive Plan (1997 MIP). The 1997 MIP authorizes the granting of
up to 5,000,000 shares of the Company's new or reissued Common
Stock. The 1997 MIP was designed to provide key employees the
opportunity to participate in the long-term growth and
profitability of the Company through equity-based incentives. In
accordance with the 1997 MIP, shares of Wrigley stock or deferral
share units may be awarded under the Long-Term Stock Grant and
Stock Award programs. Deferral share units are also awarded to
non-employee directors. Neither the cost to provide share and share
units nor the number of shares which may be issued is material.
Each share of Class B Common Stock has ten votes, is restricted as
to transfer or other disposition and is convertible at any time
into one share of Common Stock.
Additional paid-in capital primarily represents the excess of fair
market value of Common Stock issued from treasury on the date the
shares of stock were awarded over the average acquisition cost of
the shares.
Treasury Stock may be acquired for the 1997 MIP plan or under a
resolution the Board of Directors adopted at its meeting of August
18, 1993, authorizing the Company to purchase from time to time
shares of the Company's Common Stock not to exceed $100,000,000 in
aggregate price.
- --------------------------------------------------------
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Components of net deferred tax balances are as
follows:
<TABLE>
<CAPTION>
1998 1997
In thousands of U.S. dollars
- -------------------------------------------------------
<S> <C> <C>
Accrued Compensation, Pension
and Postretirement Benefits $ 25,592 24,506
Depreciation (14,300) (13,465)
Unrealized Holding Gains (13,297) (8,569)
Factory Closure and Related
Costs 239 3,709
All Other--Net 629 7,461
-------- -------
Net Deferred Tax (Liability)
Asset $ (1,137) 13,642
======== =======
</TABLE>
Balance sheet classifications of deferred taxes are as follows:
<TABLE>
<CAPTION>
1998 1997
In thousands of U.S. dollars
- -------------------------------------------------------
<S> <C> <C>
Deferred Tax Asset--
Current $ 15,027 16,421
Noncurrent 25,522 29,038
Deferred Tax Liability--
Current (1,374) (943)
Noncurrent (40,312) (30,874)
========= =======
Net Deferred Tax (Liability)
Asset $ (1,137) 13,642
========= =======
</TABLE>
Applicable U.S. income and foreign withholding taxes have not been
provided on approximately $437,106,000 of undistributed earnings of
international associated companies at December 31, 1998. These
earnings are considered to be permanently invested and, under the
tax laws, are not subject to such taxes until distributed as
dividends. If the earnings were not considered permanently
invested, approximately $30,151,000 of deferred income taxes would
have been provided.
14
<PAGE>
Income taxes are based on pre-tax earnings which are distributed
geographically as follows:
<TABLE>
<CAPTION>
1998 1997 1996
In thousands of U.S. dollars
- ---------------------------------------------------------
<S> <C> <C> <C>
Domestic $188,472 172,391 161,510
Foreign 252,407 221,849 197,602
-------- ------- -------
$440,879 394,240 359,112
======== ======= =======
</TABLE>
Reconciliation of the provision for income taxes computed at the
U.S. Federal statutory rate of 35% for 1998, 1997, and 1996 to the
reported provision for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
In thousands of U.S. dollars
- ---------------------------------------------------------
<S> <C> <C> <C>
Provision at U.S.
Federal Statutory Rate $154,276 137,984 125,690
State Taxes--Net 5,588 8,133 8,284
Foreign Tax Rates (13,634) (1,178) 34
Tax Credits
(principally foreign) (3,575) (16,638) (376)
Other--Net (6,277) (5,687) (4,792)
-------- ------- -------
$136,378 122,614 128,840
======== ======= =======
</TABLE>
The components of the provision for income taxes for 1998, 1997,
and 1996 are:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
In thousands of U.S. dollars
- -------------------------------------------------------
<S> <C> <C> <C>
1998
FEDERAL $ 34,083 5,116 39,199
FOREIGN 83,623 4,710 88,333
STATE 8,846 -- 8,846
-------- ----- -------
$126,552 9,826 136,378
======== ======= =======
1997
Federal $ 28,054 (3,590) 24,464
Foreign 84,168 982 85,150
State 13,000 -- 13,000
-------- ----- -------
$125,222 (2,608) 122,614
======== ======= =======
1996
Federal $ 47,890 (6,205) 41,685
Foreign 72,702 1,709 74,411
State 12,744 -- 12,744
-------- ----- -------
$ 133,336 (4,496) 128,840
======== ======= =======
</TABLE>
- --------------------------------------------------------
RETIREMENT AND POSTRETIREMENT PLANS
In 1997, the Financial Accounting Standards Board issued SFAS No.
132, "Employer's Disclosures about Pensions and Other
Postretirement Benefits." This statement, which is effective for
periods beginning after December 15, 1997, modifies previous
disclosure requirements. The Company's balance sheet and statement
of earnings, and cash flows are not impacted by this statement.
The Company maintains noncontributory defined benefit plans
covering substantially all of its employees in the U.S. and at
certain international associated companies. Retirement benefits are
a function of years of service and the level of compensation
generally for the highest three consecutive salary years occurring
within ten years prior to an employee's retirement date depending
on the plan. The Company's policy is to fund within ERISA or other
statutory limits to provide benefits earned to date and expected to
be earned in the future.
To the extent that an individual's annual retirement benefit under
the plan exceeds the limitations imposed by the Internal Revenue
Code of 1986, as amended, and the regulations thereunder, such
excess benefits may be paid from the Company's non-qualified,
unfunded, noncontributory supplemental retirement plan.
Domestic plan assets consist primarily of high quality marketable
fixed income and equity securities. Foreign plan assets consist
primarily of contracts with insurance companies.
In addition, the Company maintains certain postretirement plans
which provide limited health care benefits on a contributory basis
and life insurance benefits in the U.S. and at certain
international associated companies. The cost of postretirement
benefits is provided during the employee's active working career.
15
<PAGE>
ACCOUNTING POLICIES AND NOTES (CONTINUED)
The funded status of the defined benefit plans and postretirement
benefit plans were as follows:
<TABLE>
<CAPTION>
DEFINED POSTRETIREMENT
BENEFIT PLANS BENEFIT PLANS
1998 1997 1998 1997
In thousands of U.S. dollars
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit Obligation at Beginning of Year $309,800 266,600 $ 27,900 25,400
Service Cost 11,400 10,900 900 1,000
Interest Cost 22,200 21,000 1,700 2,000
Plan Participants' Contributions 300 300 -- --
Plan Amendments -- 4,800 -- --
Actuarial Loss (Gain) 16,100 22,000 (3,100) 400
Other (700) (3,400) -- --
Benefits Paid (13,500) (12,400) (700) (900)
-------- ------- -------- -------
Benefit Obligation at End of Year $345,600 309,800 $ 26,700 27,900
-------- ------- -------- -------
CHANGE IN PLAN ASSETS
Fair Value at Beginning of Year $343,000 302,600 $ 8,200 8,000
Actual Return on Plan Assets 34,300 47,500 1,100 1,000
Employer Contribution 8,300 1,900 2,900 100
Plan Participants' Contributions 1,800 1,700 -- --
Other (200) 1,700 -- --
Benefits Paid (13,500) (12,400) (700) (900)
-------- ------- -------- -------
Fair Value at End of Year $373,700 343,000 $ 11,500 8,200
-------- ------- -------- -------
Funded (Underfunded) Status of the Plan $ 28,100 33,200 (15,200) (19,700)
Unrecognized Net Actuarial (Gain) Loss (31,100) (44,700) (2,400) 1,700
Unrecognized Prior Service Costs 10,800 12,500 -- --
Unrecognized Transition Asset (3,900) (4,800) -- --
-------- ------- -------- -------
Prepaid (Accrued) Benefit Cost $ 3,900 (3,800) $(17,600) (18,000)
======== ======= ======== =======
</TABLE>
The following table provides amounts recognized in the balance
sheet as of December 31:
<TABLE>
<CAPTION>
DEFINED POSTRETIREMENT BENEFIT
BENEFIT PLANS PLANS
1998 1997 1998 1997
In thousands of U.S. dollars
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid Benefit Cost $ 8,900 2,800 $ -- --
Accrued Benefit Liability (5,000) (6,600) (17,600) (18,000)
------- ------- -------- -------
Net Amount Recognized $ 3,900 (3,800) $(17,600) (18,000)
======= ======= ======== =======
</TABLE>
The Company's non-qualified, unfunded, noncontributory supplemental
retirement plan has an accumulated benefit obligation in the amount
of $5,800,000 and $4,900,000 at December 31, 1998 and 1997,
respectively.
16
<PAGE>
The components of net pension and net periodic postretirement
benefit costs are as follows:
<TABLE>
<CAPTION>
DEFINED POSTRETIREMENT
BENEFIT PLANS BENEFIT PLANS
1998 1997 1996 1998 1997 1996
In thousands of U.S. dollars
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service Cost $ 11,400 10,900 10,200 $ 900 1,000 1,000
Interest Cost 22,200 21,000 18,900 1,700 2,000 1,800
Expected Return on Plan Assets (30,400) (25,600) (23,100) (300) (300) (200)
Amortization of Unrecognized Transition
Assets (900) (800) (800) -- -- --
Prior Service Costs Recognized 1,500 1,400 (100) -- -- --
Recognized Net Actuarial Loss (1,200) (800) -- (100) -- --
Other Pension Plans 3,400 3,900 4,800 -- -- --
-------- ------- ------- ------ ----- -----
Net Periodic Benefit Cost $ 6,000 10,000 9,900 $2,200 2,700 2,600
======== ======= ======= ====== ===== =====
</TABLE>
Assumptions used to determine net pension and net periodic
postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
DEFINED POSTRETIREMENT
BENEFIT PLANS BENEFIT PLANS
1998 1997 1996 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DISCOUNT RATE
Domestic 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Foreign 6.0-8.0% 6.8-8.0% 7.5-9.0% 6.75% 7.25% 7.50%
LONG-TERM RATES OF RETURN ON PLAN ASSETS
Domestic 9.00% 8.50% 8.50% 5.50% 5.50% 5.50%
Foreign 7.0-8.0% 4.0-8.5% 7.0-9.0% -- -- --
RATES OF INCREASE IN COMPENSATION LEVELS
Domestic 4.75% 4.75% 4.75% -- -- --
Foreign 3.3-6.0% 0.0-5.0% 5.0-6.0% -- -- --
</TABLE>
A 7.5% annual rate of increase in the per capita cost of covered
postretirement benefits was assumed for 1999. The rate was assumed
to decrease gradually to 5.0% for 2002 and remain at that level
thereafter.
Increasing or decreasing the health care trend rates by one
percentage point in each year would have the following effect:
<TABLE>
<CAPTION>
1% INCREASE 1% DECREASE
<S> <C> <C>
Effect on Postretirement Benefit Obligation $ 2,400 (2,100)
Effect on Total of Service and Interest Cost Components $ 300 (300)
</TABLE>
In addition to the defined benefit plans and postretirement benefit
plans described above, the Company also sponsors defined
contribution plans within the U.S. and at certain international
associated companies. The plans cover full time employees and
provide for contributions between 3% and 5% of salary. The
Company's expense for the defined contribution plans totaled
$4,100,000, $4,719,000, and $4,700,000 in 1998, 1997, and 1996
respectively.
17
<PAGE>
ACCOUNTING POLICIES AND NOTES (CONTINUED)
- -----------------------------------------------------------------
- ---------------
SEGMENT INFORMATION
In 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 requires disclosure of revenues and
other information based on the way management organizes the
segments of the business for making operating decisions and
assessing performance.
Management organizes the Company's 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 at December 31, 1998, 1997, and
1996 and for the years then ended is as follows:
<TABLE>
<CAPTION>
NET SALES 1998 1997 1996
In thousands of U.S. dollars
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America, principally U.S. $ 826,817 837,781 835,972
Europe 900,794 830,300 773,049
Asia/Pacific/Latin America 269,481 262,532 218,079
All Other 152,524 165,897 145,891
---------- --------- ---------
Gross Sales 2,149,616 2,096,510 1,972,991
Intersegment Sales (144,897) (159,489) (137,004)
---------- --------- ---------
Net Sales $2,004,719 1,937,021 1,835,987
========== ========= =========
</TABLE>
Intersegment revenues are sales 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>
<CAPTION>
OPERATING PROFITS 1998 1997 1996
In thousands of U.S. dollars
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America, principally U.S. $ 217,888 208,471 218,108
Europe 185,693 164,833 145,993
Asia/Pacific/Latin America 40,333 35,381 34,723
All Other (21,930) (22,046) (25,644)
---------- --------- ---------
Operating Profits 421,984 386,639 373,180
Other Income 8,491 10,901 5,368
---------- --------- ---------
Earnings Before Income Taxes, Factory Closure and
Sale 430,475 397,540 378,548
Gains (Costs) Related to Factory Closure and Sale 10,404 (3,300) (19,436)
---------- --------- ---------
Earnings Before Income Taxes $ 440,879 394,240 359,112
========== ========= =========
</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".
18
<PAGE>
<TABLE>
<CAPTION>
ASSETS 1998 1997 1996
In thousands of U.S. dollars
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America, principally U.S. $ 448,565 439,098 405,737
Europe 562,356 466,120 426,058
Asia/Pacific/Latin America 188,041 172,340 153,732
All Other 87,223 69,049 80,585
---------- --------- ---------
Assets Used in Operating Activities 1,286,185 1,146,607 1,066,112
Corporate 234,670 196,519 167,431
---------- --------- ---------
Total Assets $1,520,855 1,343,126 1,233,543
========== ========= =========
</TABLE>
Assets are categorized based upon the geographic segment where they
reside. Assets in "Corporate" consist principally of short-term
investments and marketable equity securities which are held at the
corporate office, as well as certain fixed assets.
<TABLE>
<CAPTION>
DEPRECIATION EXPENSE 1998 1997 1996
In thousands of U.S. dollars
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America, principally U.S. $ 15,961 16,077 16,437
Europe 19,886 17,098 15,287
Asia/Pacific/Latin America 6,784 5,464 4,810
All Other 3,415 3,046 2,112
---------- --------- ---------
Depreciation Expense Related to Operating Activities 46,046 41,685 38,646
Corporate 9,728 8,754 8,642
---------- --------- ---------
Total Depreciation Expense $ 55,774 50,439 47,288
========== ========= =========
</TABLE>
Depreciation expense is categorized consistent with the geographic
region where the asset resides.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES 1998 1997 1996
In thousands of U.S. dollars
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America, principally U.S. $ 32,870 22,899 23,829
Europe 86,761 49,965 52,205
Asia/Pacific/Latin America 19,074 31,872 17,118
All Other 6,825 3,370 3,590
---------- --------- ---------
Capital Expenditures for Operating Activities 145,530 108,106 96,742
Corporate 2,938 20,065 5,585
---------- --------- ---------
Gross Capital Expenditures 148,468 128,171 102,327
Intersegment Asset Transfers (441) (1,662) (350)
---------- --------- ---------
Net Capital Expenditures $ 148,027 126,509 101,977
========== ========= =========
</TABLE>
Capital expenditures are categorized based upon the geographic
segment where the expenditure occurred. Intersegment asset
transfers are primarily due to sales between production facilities
worldwide. Asset sales are typically transferred at net book value.
19
<PAGE>
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
Management of the Wm. Wrigley Jr. Company is responsible for the
preparation and integrity of the financial statements and related
information presented in this Annual Report. This responsibility is
carried out through a system of internal controls to ensure that
assets are safeguarded, transactions are properly authorized and
financial records are accurate.
These controls include a comprehensive internal audit program,
written financial policies and procedures, appropriate division of
responsibility, and careful selection and training of personnel.
Written policies include a Code of Business Conduct prescribing
that all employees maintain the highest ethical and business
standards.
Ernst & Young LLP have conducted an independent audit of the
financial statements, and their report appears on the facing page.
The Board of Directors exercises its control responsibility through
an Audit Committee composed entirely of outside directors. The
Audit Committee meets regularly to review accounting and control
matters. Both Ernst & Young LLP and the internal auditors have
direct access to the Audit Committee and periodically meet
privately with them.
WM. WRIGLEY JR. COMPANY
Chicago, Illinois
January 27, 1999
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF THE WM. WRIGLEY JR.
COMPANY
We have audited the accompanying consolidated balance sheet of the
Wm. Wrigley Jr. Company and associated companies at December 31,
1998 and 1997 and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of the Wm. Wrigley Jr. Company and associated companies at
December 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 27, 1999
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- --------------------------------------------------------
NET SALES
Consolidated net sales for 1998 increased $67,698,000 or over 3%
from 1997. Net sales for 1998 were favorably affected by higher
international unit volume and selected selling price increases.
Higher shipments increased net sales by 4%, while selected selling
price changes increased net sales by 2%. Translation of foreign
currency sales to a stronger U.S. dollar reduced reported net sales
by approximately 3%.
North American 1998 net sales decreased approximately 1% compared
to 1997. The U.S. and Canadian markets maintained volume and net
sales levels consistent with the prior year. At Amurol Confections,
lower unit shipments reduced North American volume by about 1%.
International 1998 net sales increased by 11%, excluding the
effects of foreign currency translation. Unit volume increased over
6%, with higher customer shipments to emerging markets such as
Central and Eastern Europe and China offsetting lower volume in
Russia and the Philippines.
Consolidated net sales for 1997 increased $101,034,000 or 6% from
1996. Net sales for 1997 were favorably impacted by higher unit
volume and selected selling price increases in international
markets, mainly in Europe, and the full year impact of 1996 price
increases in North America, primarily the U.S. and Canada. Higher
shipments increased net sales 8%, while selected selling price
changes increased net sales about 3%. Translation of foreign
currency sales to a stronger U.S. dollar reduced reported net sales
by 5%.
North American 1997 net sales were essentially unchanged from 1996,
as the full year impact of 1996 price increases in the U.S. and
Canada offset lower shipments. In total, North American shipments
decreased by 2% from the previous year's level mainly due to lower
unit shipments at Amurol Confections and lower U.S. shipments of
Wrigley brands.
International 1997 net sales increased by 20%, excluding the
effects of foreign currency translation. Unit volume increased 17%
in 1997, with customer shipments to emerging markets such as China
and Eastern Europe accounting for most of the volume gain.
- --------------------------------------------------------
INVESTMENT AND OTHER INCOME
In 1998, consolidated investment and other income increased
$1,483,000 or 9% from 1997. In 1997, consolidated investment and
other income increased $2,539,000 or 17% from 1996. In both years,
the increase is mainly due to higher average investment balances
worldwide.
- --------------------------------------------------------
COST OF SALES AND GROSS PROFIT
In 1998, consolidated cost of sales increased $997,000 essentially
constant with 1997. Excluding the effect of foreign currency
translation, the cost of sales increase was about 3% from 1997.
Excluding the effects of the Santa Cruz closure and sale,
consolidated gross profit in 1998 was $1,156,356,000, an increase
of $66,701,000 or 6% from 1997. The consolidated gross profit
margin on net sales was 57.7% for 1998, up over 1% from the 1997
gross margin of 56.3%, mainly reflecting lower product costs.
Consolidated cost of sales for 1997 increased $32,883,000 or 4%
from 1996. Excluding the effect of foreign currency translation,
1997 cost of sales increased by about 9% from 1996 mainly due to
increased international volume. Excluding the Santa Cruz factory
closure costs, consolidated gross profit in 1997 was
$1,089,655,000, an increase of $68,151,000 or nearly 7% from 1996.
The consolidated gross profit margin on net sales was 56.3% for
1997, up nearly 1% from the 1996 gross margin of 55.6%, reflecting
lower international product costs and savings from the above
mentioned realignment.
- --------------------------------------------------------
SELLING, DISTRIBUTION, AND GENERAL ADMINISTRATIVE EXPENSES
Consolidated 1998 selling, distribution, and general administrative
expenses increased $35,592,000 or 5% from 1997. Excluding the
effects of foreign currency translation, the increase was about 8%
in 1998, mainly due to higher international selling and marketing
expenditures.
In 1997, consolidated selling, distribution and general
administrative expenses increased $51,837,000 or 8% from 1996.
Excluding the effects of foreign currency translation, the increase
was about 13% in 1997, mainly due to higher international selling
and marketing expenditures.
22
<PAGE>
As a percentage of consolidated net sales, the expenses were:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Selling and Marketing 26.9% 26.5% 25.5%
Distribution and General
Administration 10.2% 10.1% 10.3%
----- ----- -----
37.1% 36.6% 35.8%
===== ===== =====
</TABLE>
- --------------------------------------------------------
INCOME TAXES
Income taxes in 1998 increased $13,764,000 or 11% from 1997. The
effective consolidated income tax rate was 30.9% in 1998 and 31.1%
in 1997.
Income taxes in 1997 decreased $6,226,000 or 5% from 1996. The
effective consolidated income tax rate was 31.1% in 1997 and 35.9%
in 1996. The lower effective tax rate in 1997 was mainly from tax
credits.
- --------------------------------------------------------
NET EARNINGS
Consolidated net earnings in 1998, including the gain related to
the Santa Cruz transaction, increased $32,875,000 and $.29 per
share or 12% from 1997. Excluding the effects of the Santa Cruz
closure and sale, 1998 net earnings increased $23,967,000, and $.21
per share or 9%.
Consolidated net earnings in 1997, including costs related to the
Santa Cruz factory closure, increased $41,354,000 and $.35 per
share or 18% from 1996. Excluding factory closure costs, 1997 net
earnings increased $30,509,000, and $.26 per share or 12%.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for 1998 were $148,027,000, an increase of
$21,518,000 from 1997 capital expenditures of $126,509,000. The
1997 capital expenditures represented an increase of $24,532,000
from the 1996 capital expenditures of $101,977,000. All of the
capital expenditures for 1998 and 1997 were funded from the
Company's cash flow from operations. Additions to property, plant,
and equipment in 1999 are expected to approximate 1998 capital
expenditures and are also planned to be funded from the Company's
cash flow from operations.
- --------------------------------------------------------
CURRENT RATIO
The Company has a current ratio (current assets divided by current
liabilities) in excess of 3.5 to 1 at December 31, 1998 and 1997.
OTHER MATTERS
- --------------------------------------------------------
SALE OF THE SANTA CRUZ FACTORY
In the first quarter of 1998, the Company sold its real estate
holding in Santa Cruz, California and recorded a pretax gain of
approximately $10,404,000 and net earnings of approximately
$6,763,000 or $.06 per share.
- --------------------------------------------------------
YEAR 2000 READINESS DISCLOSURE
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 systems should be Year 2000 tested and ready by March 31,
1999, with work continuing on some low-risk equipment and minor
issues throughout the year. Implementing our plan, as it now
stands, will allow the Company 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, will also be developed. This will be done on
an "as needed" basis due to the difficulty of assessing third-party
progress toward resolution of their Year 2000 issues.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
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.
- --------------------------------------------------------
EURO CONVERSION
On January 1, 1999, the exchange rates of eleven countries
(Germany, France, the Netherlands, Austria, Italy, Spain, Finland,
Ireland, Belgium, Portugal, and Luxembourg) were fixed amongst one
another and became the currencies of the EURO. The currencies of
the eleven countries will remain in circulation until mid-2002. The
EURO currency will be introduced on January 1, 2002. The Company
does not expect future balance sheets and statements of earnings
and cash flows to be materially impacted by the EURO conversion.
- --------------------------------------------------------
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.
- --------------------------------------------------------
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.
24
<PAGE>
QUARTERLY DATA
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NET SALES COST OF SALES NET EARNINGS
<CAPTION>
AMOUNT PER SHARE
In thousands of U.S. dollars except for per share amounts
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
FIRST QUARTER(1) $ 469,319 200,393 76,106 .66
SECOND QUARTER 541,162 226,854 84,542 .73
THIRD QUARTER 493,955 207,140 73,095 .63
FOURTH QUARTER 500,283 213,976 70,758 .61
------------ -------- -------- -----
TOTAL $ 2,004,719 848,363 304,501 2.63
============ ======== ======== =====
1997
First Quarter $ 447,607 196,066 62,849 .54
Second Quarter 521,272 225,348 76,647 .66
Third Quarter 481,938 208,931 69,526 .60
Fourth Quarter 486,204 217,021 62,604 .54
------------ -------- -------- -----
Total $ 1,937,021 847,366 271,626 2.34
============ ======== ======== =====
</TABLE>
(1) Net earnings and earnings per share for the 1st quarter 1998
included gains of $6,763,000 and $.06 related to the sale of
the Santa Cruz factory.
MARKET PRICES
Although there is no established public trading market for the
Class B Common Stock, these shares are at all times convertible
into shares of Common Stock on a one-for-one basis and are entitled
to identical dividend payments.
The Common Stock of the Company is listed and traded on the New
York and Chicago Stock Exchanges. The table below presents the high
and low sales prices for the two most recent years on the New York
Stock Exchange.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997
<CAPTION>
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $ 83 1/2 73 1/2 62 1/2 54 9/16
Second Quarter 104 5/16 78 11/16 71 3/8 55 3/4
Third Quarter 102 72 15/16 77 5/16 67 1/8
Fourth Quarter 91 3/8 70 15/16 82 1/16 64 7/8
</TABLE>
DIVIDENDS
The following table indicates the quarterly breakdown of aggregate dividends
declared per share of Common Stock and Class B Common Stock for the two most
recent years.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1998 1997
<CAPTION>
REGULAR EXTRA TOTAL REGULAR EXTRA TOTAL
<S> <C> <C> <C> <C> <C> <C>
First Quarter $.20 .20 .19 .19
Second Quarter .20 .20 .19 .19
Third Quarter .20 .20 .19 .19
Fourth Quarter .20 .51 .71 .19 .43 .62
---- --- ---- --- --- ----
Total $.80 .51 1.31 .76 .43 1.19
==== === ==== === === ====
</TABLE>
25
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Net Sales $2,004,719 1,937,021 1,835,987 1,754,931
Cost of Sales 848,363 847,366 814,483 778,019
Income Taxes 136,378 122,614 128,840 126,492
Earnings before factory closure and sale
in 1998-96, nonrecurring gain on
sale of Singapore property in 1994,
and cumulative effect of
accounting changes in 1992 297,738 273,771 243,262 223,739
--Per Share of Common Stock
(basic and diluted) 2.57 2.36 2.10 1.93
Net Earnings 304,501 271,626 230,272 223,739
--Per Share of Common Stock
(basic and diluted) 2.63 2.34 1.99 1.93
Dividends Paid 150,835 135,680 118,308 111,401
--Per Share of Common Stock 1.30 1.17 1.02 .96
--As a Percent of Net Earnings 50% 50% 51% 50%
Dividends Declared
--Per Share of Common Stock 1.31 1.19 1.02 .99
Average Shares Outstanding 115,964 115,964 115,983 116,066
- -----------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Net Property, Plant and Equipment $ 520,090 430,474 388,149 347,491
Total Assets $1,520,855 1,343,126 1,233,543 1,099,219
Working Capital $ 624,546 571,857 511,272 458,683
Stockholders' Equity $1,157,032 985,379 897,431 796,852
Return on Average Equity 28.4% 28.9% 27.2% 30.1%
Stockholders at Close of Year 38,052 36,587 34,951 28,959
Employees at Close of Year 9,200 8,200 7,800 7,300
Market Price of Stock--High $ 104.313 82.063 62.875 54.000
--Low $ 70.938 54.563 48.375 42.875
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988
In thousands of U.S. dollars and shares except for per share amounts
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1,596,551 1,428,504 1,286,921 1,148,875 1,110,639 992,853 891,392
697,442 617,156 572,468 507,795 508,957 451,773 392,460
122,746 103,944 83,730 79,362 70,897 64,277 53,491
205,767 174,891 148,573 128,652 117,362 106,149 87,236
1.77 1.50 1.27 1.09 1.00 .90 .73
230,533 174,891 141,295 128,652 117,362 106,149 87,236
1.98 1.50 1.21 1.09 1.00 .90 .73
104,694 87,344 72,511 64,609 58,060 53,506 43,591
.90 .75 .62 .55 .49 .45 .36
45% 50% 51% 50% 49% 50% 50%
.94 .75 .63 .55 .51 .47 .37
116,358 116,511 117,055 117,517 117,743 118,035 120,308
- --------------------------------------------------------------------------------------
289,420 239,868 222,137 201,386 188,959 171,951 155,260
978,834 815,324 711,372 625,074 563,665 498,624 440,400
413,414 343,132 299,149 276,047 229,735 186,588 165,430
688,470 575,182 498,935 463,399 401,386 342,994 308,538
36.5% 32.6% 29.4% 29.8% 31.5% 32.6% 29.2%
24,078 18,567 14,546 11,086 10,497 10,218 9,440
7,000 6,700 6,400 6,250 5,850 5,750 5,500
53.875 46.125 39.875 27.000 19.750 17.917 13.750
38.125 29.500 22.125 16.375 14.583 11.833 10.667
</TABLE>
27
<PAGE>
CORPORATE FACILITIES AND PRINCIPAL ASSOCIATED COMPANIES -- 1998
CORPORATE FACILITIES PRINCIPAL ASSOCIATED COMPANIES
HEADQUARTERS
Wrigley Building
410 North Michigan Avenue
Chicago, Illinois 60611
PRODUCTION FACILITIES
Chicago, Illinois
Gainesville, Georgia
DOMESTIC
AMUROL CONFECTIONS COMPANY*
Yorkville, Illinois 60560
FOUR-TEN CORPORATION
Chicago, Illinois 60611
L. A. DREYFUS COMPANY*
Edison, New Jersey 08820
NORTHWESTERN FLAVORS, INC.*
West Chicago, Illinois 60185
INTERNATIONAL
THE WRIGLEY COMPANY PTY. LIMITED*
Sydney, Australia
WRIGLEY AUSTRIA GES.M.B.H.*
Salzburg, Austria
WRIGLEY BULGARIA EOOD
Sofia, Bulgaria
WRIGLEY CANADA*
Don Mills, Ontario, Canada
WRIGLEY CHEWING GUM COMPANY LTD.*
Guangzhou, Guangdong,
People's Republic of China
WRIGLEY S.R.O.
Prague, Czech Republic
THE WRIGLEY COMPANY LIMITED*
Plymouth, England, U.K.
OY WRIGLEY SCANDINAVIA AB
Turku, Finland
WRIGLEY FRANCE S.N.C.*
Biesheim, France
WRIGLEY G.M.B.H.
Munich, Germany
WRIGLEY N.V.
Amsterdam, Holland
THE WRIGLEY COMPANY (H.K.) LIMITED
Hong Kong
WRIGLEY HUNGARIA, KFT.
Budapest, Hungary
WRIGLEY INDIA LIMITED*
Bangalore, Karnataka, India
WRIGLEY ISRAEL LTD.
Herzeliya-Pituach, Israel
WRIGLEY & COMPANY LTD., JAPAN
Tokyo, Japan
THE WRIGLEY COMPANY (EAST AFRICA)
Limited*
Nairobi, Kenya
THE WRIGLEY COMPANY (MALAYSIA)
Sdn. Bhd.
Kuala Lumpur, Malaysia
THE WRIGLEY COMPANY (N.Z.) LIMITED
Auckland, New Zealand
WRIGLEY SCANDINAVIA AS
Oslo, Norway
THE WRIGLEY COMPANY (P.N.G.) LTD.
Port Moresby, Papua New Guinea
WRIGLEY PHILIPPINES, INC.*
Antipolo City, Philippines
<PAGE>
WRIGLEY POLAND SP. ZO.O.*
Poznan, Poland
WRIGLEY ROMANIA PRODUSE
Zaharoase SRL
Bucharest, Romania
OOO WRIGLEY
Moscow, Russia
St. Petersburg, Russia**
WRIGLEY SLOVAKIA S.R.O.
Banska Bystrica, Slovakia
WRIGLEY D.O.O.
Ljubljana, Slovenia
WRIGLEY CO., S.A.
Santa Cruz de Tenerife
Canary Islands, Spain
WRIGLEY SCANDINAVIA AB
Stockholm, Sweden
WRIGLEY TAIWAN LIMITED*
Taipei, Taiwan, R.O.C.
* Denotes production facility.
** Under construction.
28
<PAGE>
ELECTED OFFICERS -- 1998
WILLIAM WRIGLEY
President & Chief Executive Officer
DOUGLAS S. BARRIE
Group Vice President
(elected President -- International on January 27, 1999)
RONALD O. COX
Group Vice President
JOHN F. BARD
Senior Vice President
(elected Executive Vice President on January 27, 1999)
MARTIN J. GERAGHTY
Senior Vice President -- Manufacturing
WILLIAM WRIGLEY, JR.
Vice President
DONALD E. BALSTER
Vice President -- Production
GARY R. BEBEE
Vice President -- Customer Marketing
DAVID E. BOXELL
Vice President -- Personnel
SUSAN S. FOX
Vice President -- Consumer Marketing
PHILIP G. HAMILTON
Vice President -- International
SHAUN KIM
Vice President -- Engineering
DENNIS R. MALLY
Vice President -- Information Services
JON ORVING
Vice President -- International
DUSHAN PETROVICH
Vice President -- Controller
STEFAN PFANDER
Vice President -- International and
Managing Director -- Europe
WM. M. PIET
Vice President -- Corporate Affairs and
Assistant to the President
JOHN A. SCHAFER
Vice President -- Purchasing
PHILIP G. SCHNELL
Vice President -- Research & Development
CHRISTAFOR E. SUNDSTROM
Vice President -- Corporate Development
PHILIP C. JOHNSON
Senior Director -- Benefits and Compensation
HOWARD MALOVANY
Secretary and General Counsel
ALAN J. SCHNEIDER
Treasurer
JOHN H. SUTTON
General Manager -- Converting Division
(retired as of January 1, 1999)
29
<PAGE>
BOARD OF DIRECTORS -- 1998
LOGO
- -------------------------------------------------
WILLIAM WRIGLEY
Director of the Company since 1960
Joined the Wm. Wrigley Jr. Company in 1956
President & Chief Executive Officer since 1961
Director, Texaco, Inc., since 1974
Director, American Home Products Corp., since 1981
Director, Grocery Manufacturers of America, since 1983
COMMITTEES OF THE
BOARD OF DIRECTORS
- -------------------------------------------------
AUDIT
CHARLES F. ALLISON III chairman
THOMAS A. KNOWLTON
STEVEN B. SAMPLE
ALEX SHUMATE
RICHARD K. SMUCKER
- -------------------------------------------------
COMPENSATION
THOMAS A. KNOWLTON chairman
CHARLES F. ALLISON III
LEE PHILLIP BELL
PENNY PRITZKER
- -------------------------------------------------
NOMINATING
RICHARD K. SMUCKER chairman
LEE PHILLIP BELL
PENNY PRITZKER
STEVEN B. SAMPLE
LOGO
- -------------------------------------------------
CHARLES F. ALLISON III
Director of the Company since 1980
Joined Booz-Allen & Hamilton in 1958
Partner of Counsel since 1996
Senior Vice President (1977-96)
(retiring on March 4, 1999)
LOGO
- -------------------------------------------------
JOHN F. BARD
Director of the Company since 1999
Joined the Wm. Wrigley Jr. Company in 1991
Senior Vice President (1991-99)
(elected Executive Vice President and Director on
January 27, 1999)
LOGO
- -------------------------------------------------
DOUGLAS S. BARRIE
Director of the Company since 1996
Joined the Wm. Wrigley Jr. Company in 1983
Group Vice President (1984-99)
(elected President-International on January 27, 1999
and retiring as Director on March 4, 1999)
LOGO
- -------------------------------------------------
LEE PHILLIP BELL
Director of the Company since 1981
Director, Bell Phillip TV Productions, since 1980
Co-Creator, The Bold and the Beautiful and
The Young and the Restless
(retiring on March 4, 1999)
30
<PAGE>
LOGO
- -------------------------------------------------
THOMAS A. KNOWLTON
Director of the Company since 1996
Joined the Kellogg Company in 1980
Executive Vice President (1992-1998)
President, Kellogg North America (1994-1998)
President, Kellogg Europe (1992-94)
LOGO
- -------------------------------------------------
PENNY PRITZKER
Director of the Company since 1994
President, Classic Residence by Hyatt, since 1987
Partner, Pritzker & Pritzker, since 1985
President, Penguin Group L.P., since 1989
Director, Coast-to-Coast Financial Corporation, since 1990
LOGO
- -------------------------------------------------
MELINDA R. RICH
Director of the Company since 1999
Joined Rich Products Corp. in 1986
Executive Vice President of Innovation since 1997
and Director since 1998
President, Rich Entertainment Group, since 1994
Director, M & T Bank Corp. (Buffalo, NY), since 1994
(elected January 27, 1999)
LOGO
- -------------------------------------------------
STEVEN B. SAMPLE
Director of the Company since 1997
President, University of Southern California, since 1991
President, State University of New York, Buffalo (1982-91)
Director, Presley Companies, since 1991
Director, Unova, Inc., since 1997
LOGO
- -------------------------------------------------
ALEX SHUMATE
Director of the Company since 1998
Joined law firm of Squire, Sanders & Dempsey in 1988
Managing Partner of the Columbus Office since 1991
Chief Counsel and Deputy Chief of Staff
to Governor of Ohio (1985-88)
Director, Banc One Corporation, since 1993
Director, Intimate Brands, Inc., since 1996
LOGO
- -------------------------------------------------
RICHARD K. SMUCKER
Director of the Company since 1988
Joined The J. M. Smucker Company in 1972
President since 1987 and Director since 1975
Director, Sherwin-Williams Company, since 1991
Director, International Multifoods, Inc., since 1997
LOGO
- -------------------------------------------------
WILLIAM WRIGLEY, JR.
Director of the Company since 1988
Joined the Wm. Wrigley Jr. Company in 1985
Vice President since 1991
Assistant to the President (1985-92)
Director, The J. M. Smucker Company, since 1991
31
<PAGE>
STOCKHOLDER INFORMATION
- --------------------------------------------------------
STOCKHOLDER INQUIRIES
Any inquiries about your Wrigley stockholdings should be directed
to:
Stockholder Relations
Wm. Wrigley Jr. Company
410 North Michigan Avenue
Chicago, Illinois 60611
1-800-824-9681
Additional information about the Wrigley Company can be found on
our Internet home page at the following address --
http://www.wrigley.com.
- --------------------------------------------------------
CAPITAL STOCK
Common Stock of the Wm. Wrigley Jr. Company is traded on the New
York Stock Exchange. The Company's symbol is WWY.
Class B Common Stock, issued to stockholders of record on April 4,
1986, has restricted transferability and is not traded on the New
York Stock Exchange. It is at all times convertible, on a
share-for-share basis, into Common Stock and once converted is
freely transferable and publicly traded. Class B Common Stock also
has the same rights as Common Stock with respect to cash dividends
and treatment upon liquidation.
- --------------------------------------------------------
DIVIDENDS
Regular quarterly dividends are paid in advance on the first
business day of February, May, August, and November with the record
date for each payment falling on or about the 15th of the prior
month. The Company also has a long history of paying "extra"
dividends. In recent years, a single "extra" dividend has been paid
in December.
- --------------------------------------------------------
DIRECT DIVIDEND DEPOSIT SERVICE
The Direct Dividend Deposit Service allows stockholders to receive
cash dividends through electronic deposits into their checking or
savings account.
- --------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan (DRP) is open to all stockholders of
record. The Plan is administered by First Chicago Trust Company (a
division of Equiserve) and uses cash dividends on both Common Stock
and Class B Common Stock, along with voluntary cash contributions,
to purchase additional shares of Common Stock. Cash contributions
can be made monthly for a minimum of $50 and a maximum of $5,000.
All shares purchased through the Plan are retained in a DRP
account, so there are no certificates that could be lost,
misplaced, or stolen. Additionally, once a DRP account is
established, a participant can deposit any Wrigley stock
certificates held outside the Plan into the account for
safekeeping. The Company pays all brokerage and administrative
costs associated with the DRP.
Over 28,000 or 75% of the Company's stockholders of record
currently participate in the DRP. A brochure fully describing the
Plan and its enrollment procedure is available upon request.
- --------------------------------------------------------
STOCK CERTIFICATES
For security and tax purposes, stockholders should keep a record of
all of their stock certificates. The record should be kept in a
separate place from the certificates themselves and should contain
the following information for each certificate: exact registration,
number of shares, certificate number, date of certificate and the
original cost of the shares.
If a stock certificate is lost or stolen, notification should be
sent to the Company immediately. The transfer agent has two
requirements to be met before a new certificate will be issued --
a completed affidavit and payment for an indemnity bond based on
the current market value of the lost or stolen stock. The
replacement of a certificate will take about seven to ten days.
Even if a certificate is lost or stolen, the stockholder will
continue to receive dividends on those shares while the new
certificate is being issued.
32
<PAGE>
A transfer of stock is required when the shares are sold or when
there is any change in name or ownership of the stock. To be
accepted for transfer, the stockholder's signature on the
certificate or stock power must receive a Medallion Signature
Guarantee by a qualified financial institution that participates in
the Medallion Guarantee program. A verification by a notary public
is not sufficient. Anytime a certificate is mailed, it should be
sent registered mail, return receipt requested.
- --------------------------------------------------------
CONSOLIDATION OF MULTIPLE ACCOUNTS
To avoid receiving duplicate mailings, stockholders with more than
one Wrigley account may want to consolidate their shares. For more
information, please contact the Company.
- --------------------------------------------------------
COMPANY PUBLICATIONS
The Company's 1998 annual report to the Securities and Exchange
Commission on Form 10-K is expected to be available on or about
April 5, 1999.
Other publications that are currently available include:
The Wrigley Way: Continuing our Legacy of
Social Responsibility
The Story of Chewing Gum and the
Wm. Wrigley Jr. Company
A Historical Look at the Wrigley Building
Requests for these publications should be addressed to Corporate
Communications at the main office of the Company. They are also
available for review at our Internet home page
(http://www.wrigley.com).
- --------------------------------------------------------
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company,
a division of Equiserve
P. O. Box 2500
Jersey City, New Jersey 07303-2500
1-800-446-2617
Internet: http://www.equiserve.com
E-Mail: [email protected]
<PAGE>
<TABLE>
Parents and Subsidiaries of Registrant
<S> <C>
State or Country
Name of Company of Corporation
Wm. Wrigley Jr. Company.............................. Delaware
Companies included in consolidation -- all 100%
owned by Parent Company:
Northwestern Flavors, Inc. .......................... Illinois
L.A. Dreyfus Company ................................ Delaware
Four-Ten Corporation ................................ Illinois
Amurol Confections Company .......................... Illinois
Wrigley Enterprises, Inc. ........................... Delaware
The Wrigley Company Pty. Limited .................... Australia
Wrigley Austria Ges.m.b.H. .......................... Austria
Wrigley Bulgaria EOOD ............................... Bulgaria
Wrigley Canada ...................................... Canada
Wrigley (Cayman) Ltd. ............................... Cayman Islands
Wrigley Chewing Gum Co. Ltd. ........................ People's Republic of China
Wrigley Taiwan, Limited ............................. Republic of China
Wrigley s.r.o. ...................................... Czech Republic
The Wrigley Company Limited ......................... England
Wrigley France SNC .................................. France
Wrigley GmbH ........................................ Germany
Wrigley N.V. ........................................ Holland
The Wrigley Company (H.K.) Limited .................. Hong Kong
Wrigley Hungaria, Kft ............................... Hungary
Wrigley India Limited ............................... India
Wrigley Israel Ltd. ................................. Israel
Wrigley & Company Ltd., Japan ....................... Japan
The Wrigley Company (E.A.) Ltd. ..................... Kenya
The Wrigley Company (Malaysia) Sdn. Bhd. ............ Malaysia
The Wrigley Company (N.Z.) Limited .................. New Zealand
Wrigley Philippines, Inc. ........................... Philippines
Wrigley Poland Sp. zo.o. ............................ Poland
Wrigley Romania Produse Zaharoase SRL ............... Romania
OOO Wrigley ......................................... Russia
Wrigley Slovakia, s.r.o. ............................ Slovakia
Wrigley d.o.o. ...................................... Slovenia
Wrigley Co., S.A. ................................... Spain
Companies included in consolidation which are owned
by wholly-owned associated companies of the Parent
Company:
100% owned by The Wrigley Company Limited, England-
Wrigley Scandinavia AB.......................... Sweden
100% owned by Wrigley Scandinavia, AB Sweden-
OY Wrigley Scandinavia Ab....................... Finland
Wrigley Scandinavia AS.......................... Norway
100% owned by The Wrigley Company Pty.
Limited, Australia-
The Wrigley Company (P.N.G.) Ltd................ Papua, New Guinea
</TABLE>
NOTE: The list above excludes 100% owned subsidiaries which
are primarily inactive and taken singly, or as a group, do not
constitute significant subsidiaries.
<PAGE>
I understand that the information I am furnishing to you herein
will be used by the Company in the preparation of its 1999 Proxy
Statement or its Annual Report to the SEC on Form 10-K for the
year ended December 31, 1998, or both.
If I am a nominee for director, I shall be deemed to have
consented, by virtue of executing this questionnaire, to being
named as such in the Proxy Statement and to serve if elected. I
also understand that should I discontinue my principal position,
association or other identification that existed outside of the
Company at the time of my most recent election to the Board of
the Company, other than by reason of disability or retirement in
accordance with the policies relative to that position, I shall
tender my resignation as a director for consideration by the
Nominating Committee and the full Board promptly following the
date of my discontinuance of such position, association or
identification. Further, should I consider any new or additional
association or affiliation, such as directorships or similar
positions by whatever title, with public or privately-held
commercial enterprises, or should any preexisting association or
affiliation substantially alter the nature of its activities or
purposes, I shall advise the Chairman of the Board, and if there
is no Chairman, the Chief Executive Officer of the Company, so
that any potential conflict of interest or obligation, potential
embarrassment to the Company, or possible inconsistency with
Company policies, values or standards may be identified and
assessed.
In addition, by signing this Questionnaire, I hereby appoint
William M. Piet, Howard Malovany and each of them as my full and
lawful Power of Attorney to sign on my behalf, after my review,
the Annual Report on Form 10-K to be prepared and filed with the
Securities and Exchange Commission for the year ended December
31, 1998.
Date Signature
<PAGE>
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish forward-looking
statements relating to such matters as anticipated financial
performance, business prospects and operations, capital
expenditures, technological developments, new products, research
and development activities and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of
the safe harbor, the Company notes that a variety of important
factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements.
The important factors that may influence the operations,
performance, development and results of the Company's business
include the following:
- - In those markets where the Company maintains market
leadership, it will most likely retain preferred retail space
allocation which enhance results.
- - Availability, pricing and sourcing of raw materials has been
relatively stable and a competitive advantage but the
inability to maintain this stability could modify results.
- - The Company has historically been successful marketing to
different segments of the population. Failure to adequately
anticipate and react to changing demographics and product
preferences could negatively affect results.
- - Both manufacturing and sales of a significant portion of the
Company's products are outside the United States and could be
disadvantaged by volatile foreign currencies and markets.
- - The Company competes worldwide with other well established
manufacturers of chewing gum. The Company's results may be
adversely affected by a failure of new or existing products to
be favorably received, by ineffective advertising, or by
failure to sufficiently counter aggressive competitive
actions.
- - Underutilization of or inadequate manufacturing capacity due
to unanticipated movements in consumer demands could
materially affect manufacturing efficiencies and costs.
- - Discounting and other competitive actions may make it more
difficult for the Company to maintain its historically strong
operating margins.
- - Governmental regulations with respect to import duties,
tariffs and environmental controls, both in and outside the
U.S., could negatively impact the Company's costs and ability
to compete in domestic or foreign markets.
- - The Company has not had any material labor stoppages,
nevertheless, such disputes or strikes could unfavorably
affect shipments from suppliers or shipment of finished
product.
- - The failure of basic infrastructure (i.e., utilities) could
impede the ability of the Company's factories to continue
operating.
- - The failure of the Company's suppliers, customers or business
partners to be Year 2000 ready could interrupt the Company's
ability to continue to operate unimpeded into the Year 2000
and beyond.
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