2008-07-28 07:37:00
Wrigley Reports 15 Percent Earnings Per Share Increase on Record Quarterly Sales
CHICAGO, July 28 /EMWNews/ -- The Wm. Wrigley Jr. Company (NYSE: WWY) today announced a 14 percent gain in second quarter sales versus a year ago to a record $1.57 billion, the Company's highest sales quarter ever. The sales increase primarily reflected the positive impact of currency translation and pricing, in combination with one percent growth in worldwide shipments. Net earnings for the quarter of $0.70 per diluted share were up 15 percent or $0.09 from the year ago period. On a non-GAAP basis, excluding the one-time charges related to the proposed merger with Mars, Incorporated ($0.04) and the negative impact of the supply chain restructuring program on the year-ago results ($0.01), second quarter earnings per share were up 19 percent from the same quarter last year -- $0.74 versus $0.62.* "All major regions contributed to our sales gain in the quarter, and we are looking to build on that going forward as we continue to ramp up our investment in brand support and roll out innovative new products and packaging to the marketplace. Growth in the gum category was solid, with Wrigley gaining share in key geographies, including the U.S., Russia and China," said President and Chief Executive Officer Bill Perez. "At the same time, we are maintaining our focus on operational efficiency, leading to improved financial metrics despite inflationary pressure, with only modest growth in operating expenses and continued improvement in gross margins." Bill Wrigley, Executive Chairman and Chairman of the Board added, "Despite increased competition and relatively tougher economic conditions, we continue to produce strong near-term results, which is testimony to the strength of both our team and our brands. More importantly, we are doing so while continuing to lay the groundwork for the long-term, generational growth of our business, with significant innovation and marketing investments in key geographies around the world." * Please see Attachment B for full GAAP to non-GAAP reconciliation. Sales and Gross Margins Second quarter sales increased by $194 million, or 14 percent, over the same quarter last year. Somewhat more than half of the sales gain reflects the positive impact of currency, due to translation of international sales into a relatively weaker U.S. dollar. The balance of the increase is primarily due to improved price/mix, mainly in the U.S. and Europe, with a small contribution from increased shipments, principally in Asia/Pacific. In EMEAI (principally Europe), sales were $783 million, up $111 million or 17 percent versus a year ago, with just under three-quarters of the gain attributable to favorable currency translation. Selected pricing actions, principally in Eastern Europe, accounted for most of the remaining sales gain, with a one percent overall increase in volume. Russia and Ukraine continued to lead the growth in the region with strong double-digit sales gains. Despite tough year-ago comparisons, Poland and Germany recorded solid gains, moderated by less vigorous results in Spain. In the U.K., Wrigley's share trends continued to be positive through the first half of 2008, although the overall category has softened relative to the high level of marketplace activity a year ago. Sales increased nearly $59 million or 25 percent in Asia/Pacific to $290 million, with about half the gain due to volume growth and the other half due to the positive impact of currency translation. China continued to drive the region's growth, with strong double-digit shipment and sales growth across its diverse product portfolio. Similar shipments and sales increases across the countries of South Asia -- including Vietnam, Indonesia, Malaysia and Thailand -- solidified the region's results. North America net sales were up five percent to $474 million, although volume was off about five percent, reflecting the impact of pricing changes that began during the last part of the year-ago quarter. In the U.S., gum sales and share trends in the quarter were positive, driven by the continued success of 5(TM). The summer launches of Extra(R) Fruit Sensations(TM) and Wrigley's new Slim Pack(TM) are on track and provided a limited boost to sales in the current quarter, but their impact is expected to be more pronounced in the second half of the year. Through the first six months of the year, worldwide sales grew by 15 percent, with somewhat more than half the gain attributable to the positive impact of currency translation. The remaining increase primarily reflects improved price/mix, with a one percent contribution from volume growth. Year-to-date regional sales gains for Asia/Pacific, EMEAI and North America were 25 percent, 18 percent and five percent, respectively. Consolidated gross margins for the second quarter, excluding restructuring, were 54.9 percent versus 53.2 percent in the same quarter last year. The 170 basis-point improvement was driven largely by higher pricing, with a modest overall increase in costs being offset by other efficiencies. Year-to-date consolidated gross margins, excluding restructuring, improved by 100 basis points -- 54.0 percent versus 53.0 percent a year ago, also attributable to favorable pricing, partially offset by slight cost increases. Operating Profits and Net Earnings Consolidated operating profits in the quarter were $298 million, up 13 percent from the same period in the prior year. The growth was primarily driven by improved price/mix and the benefit of currency translation, offset by additional investment in brand support, which climbed by 29 percent in the quarter and is expected to continue at a strong pace for the balance of the year. On a non-GAAP basis, excluding the $17 million in one-time charges related to the proposed merger with Mars, and the negative impact of $4 million in year-ago restructuring charges, second quarter operating profits were up 18 percent versus the same period in 2007. Consolidated net earnings of $194 million were up 14 percent or $24 million from the second quarter of 2007. On a diluted per share basis, earnings were $0.70, up 15 percent or $0.09 versus the prior year. On a non-GAAP basis, excluding the impact of merger expenses and year-ago restructuring charges, earnings per share increased 19 percent or $0.12 versus the year-ago quarter, with about $0.08 due to the positive impact of currency translation. For the first six months of 2008, operating profits climbed by 20 percent, even with a 24 percent increase in brand support. About two-thirds of the gain resulted from the positive impact of currency translation and most of the remainder came from higher pricing and a small increase in volume. Year-to-date diluted earnings per share of $1.31 were up 16 percent or $0.18 from the first six months of 2007. On a non-GAAP basis, excluding one-time charges related to the proposed merger, as well as restructuring costs and the one-time asset sale gain from the first half of 2007, earnings per share of $1.36 increased 21 percent or $0.24 from the same period a year ago, including a $0.15 benefit from currency translation.
About Wrigley
The Wm. Wrigley Jr. Company is a recognized leader in confections with
a wide range of product offerings including gum, mints, hard and chewy
candies, lollipops, and chocolate. The Company has global sales of $5.4
billion and distributes its world-famous brands in more than 180 countries.
Three of these brands -- Wrigley's Spearmint(R), Juicy Fruit(R), and
Altoids(R) -- have heritages stretching back more than a century. Other
well-loved brands include Doublemint(R), Life Savers(R), Big Red(R),
Boomer(R), Pim Pom(R), Winterfresh(R), Extra(R), Freedent(R), Hubba
Bubba(R), Orbit(R), Excel(R), Creme Savers(R), Eclipse(R), Airwaves(R),
Solano(R), Sugus(R), P.K.(R), Cool Air(R) and 5(TM).
Additional Information and Where to Find It
In connection with the above-described transactions, the Company will
file with the U.S. Securities and Exchange Commission a preliminary proxy
statement and a definitive proxy statement. The proxy statement will be
sent to the Company's stockholders, who are urged to read the proxy
statement and other relevant materials when they become available, because
they will contain important information about the above-described
transactions. Wrigley investors and security holders may obtain free copies
of these documents (when they are available) and other documents filed with
the SEC at its web site at http://www.sec.gov. In addition, investors and security
holders may obtain free copies of the documents filed with the SEC by the
Company by going to the Company's Investors page on its corporate website
at http://www.wrigley.com or by directing a request to Wm. Wrigley Jr. Company,
410 North Michigan Avenue, Chicago, Illinois 60611 - Attention: Investor
Relations.
The Company and its directors and executive officers may be deemed to
be participants in the solicitation of proxies from the stockholders of the
Company in connection with the above-described transactions. Information
about the Company and its directors and officers can be found in the
Company's Proxy Statements and Annual Reports on Form 10-K filed with the
SEC, as well as on the Company's Investors page on its corporate website at
http://www.wrigley.com. Additional information regarding the interests of
those persons may be obtained by reading the proxy statement when it
becomes available.
Cautionary Statement Regarding Forward-Looking Information
This press release contains statements which may be considered
forward-looking statements within the meaning of the Securities Exchange
Act of 1934, including, without limitation, statements regarding operating
strategies, future plans and financial results. Forward-looking statements
may be accompanied by words such as "anticipate", "believe", "could",
"estimate", "expect", "forecast", "intend", "may", "possible", "predict",
"project" or similar words, phrases or expressions. The Company does not
undertake any obligation to update the information contained herein, which
speaks only as of the date of this press release. A variety of factors
could cause actual results to differ materially from the anticipated
results or expectations expressed including, without limitation, the
occurrence of any event, change or circumstance that could give rise to the
termination of the merger agreement and the possibility that the Company
would be required to pay any termination fee in connection therewith; the
outcome of any legal proceedings that may be instituted against the Company
and others following the announcement of the merger agreement; risks that
the required regulatory approvals will not be obtained in a timely manner,
if at all; inability to complete the merger due to the failure to obtain
stockholder approval or failure to satisfy the other conditions to the
completion of the merger; risks that the proposed transaction disrupts
current plans and operations; the availability or retention of retail
space; the availability of raw materials; changes in demographics and
consumer preferences; changes in foreign currency and market conditions;
increased competition and discounting and other competitive actions;
underutilization of or inadequate manufacturing capacity and labor
stoppages; governmental regulations; and the outcome of integrating
acquired businesses. These factors, and other important factors that could
affect these outcomes are set forth in the Company's most recently filed
Annual Report on Form 10-K and the Company's other SEC filings, in each
case under the heading "Forward-Looking Statements" and/or "Risk Factors".
Such discussions regarding risk factors and forward-looking statements are
incorporated herein by reference.
ATTACHMENT A
WM. WRIGLEY JR. COMPANY
STATEMENT OF CONSOLIDATED EARNINGS
Amounts in thousands except for per share values
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Net sales $1,571,291 $1,377,780 $3,022,841 $2,631,826
Cost of sales 708,402 644,547 1,389,405 1,237,442
Restructuring charges - 4,486 - 12,635
Gross profit 862,889 728,747 1,633,436 1,381,749
Selling, general and
administrative expense 564,976 465,819 1,065,951 908,617
Operating income 297,913 262,928 567,485 473,132
Interest expense (16,072) (17,123) (31,293) (33,725)
Investment income 5,393 2,537 8,782 4,427
Other income (expense),
net (2,277) 1,421 (12,077) 18,124
Earnings before income
taxes 284,957 249,763 532,897 461,958
Income taxes 91,186 79,950 170,527 149,444
Net earnings $193,771 $169,813 $362,370 $312,514
Net earnings per average
share of common stock
(basic)(a) $0.71 $0.62 $1.33 $1.13
Net earnings per average
share of common stock
(diluted)(a) $0.70 $0.61 $1.31 $1.13
Average number of basic
shares outstanding for
the period 272,010 274,961 272,612 275,490
Average number of diluted
shares outstanding for
the period 275,875 277,008 275,679 277,299
(a) Per share calculations based on the average number of shares
outstanding for the period.
ATTACHMENT B
WM. WRIGLEY JR. COMPANY
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
Amounts in thousands except for per share values
Three Months Ended
June 30, 2008 June 30, 2007
Diluted Diluted
Net Earnings Net Earnings
Earnings Per Share* Earnings Per Share*
Net Earnings, as reported
under U.S. GAAP $193,771 $0.70 $169,813 $0.61
Restructuring cost,
net of tax (A) - - 3,050 0.01
Merger expense,
net of tax (C) 11,416 0.04 - -
Non-GAAP earnings, excluding
restructuring cost and
merger expense $205,187 $0.74 $172,863 $0.62
Six Months Ended
June 30, 2008 June 30, 2007
Diluted Diluted
Net Earnings Net Earnings
Earnings Per Share* Earnings Per Share*
Net Earnings, as reported
under U.S. GAAP $362,370 $1.31 $312,514 $1.13
Restructuring cost,
net of tax (A) - - 8,548 0.03
Gain on sale of assets,
net of tax (B) - - (9,415) (0.03)
Merger expense,
net of tax (C) 11,416 0.04 - -
Non-GAAP earnings, excluding
restructuring cost, gain on
sale of assets and merger
expense $373,786 $1.36 $311,647 $1.12
* May not total due to rounding
(A) Management has excluded restructuring cost as it is viewed as
nonrecurring costs incurred to improve production operations.
(B) Management has excluded the gain on the sale of certain assets as it
is viewed as nonrecurring income.
(C) Management has excluded expense related to the potential merger with
Mars as it is viewed as nonrecurring.
ATTACHMENT C
WM. WRIGLEY JR. COMPANY
NET SALES AND OPERATING INCOME BY SEGMENT
Amounts in thousands
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
NET SALES
North America 474,475 452,110 907,666 866,097
EMEAI 782,578 671,451 1,461,666 1,237,158
Asia/Pacific 290,238 231,601 607,685 485,666
All Other 24,000 22,618 45,824 42,905
Total Net Sales 1,571,291 1,377,780 3,022,841 2,631,826
OPERATING INCOME
North America 114,506 95,520 200,449 171,634
EMEAI 206,930 189,177 362,122 329,052
Asia/Pacific 79,170 63,466 175,122 137,091
All Other (102,693) (85,235) (170,208) (164,645)
Total Operating Income 297,913 262,928 567,485 473,132
ATTACHMENT D
WM. WRIGLEY JR. COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
Amounts in thousands
June 30, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $383,351 278,843
Short-term investments, at amortized cost - 635
Accounts receivable, net 530,142 469,221
Inventories 625,813 620,082
Other current assets 200,201 180,997
Total current assets 1,739,507 1,549,778
Deferred charges and other assets 222,293 214,457
Goodwill 1,487,106 1,422,957
Other intangibles 493,742 484,256
Net property, plant and equipment 1,574,778 1,560,064
Total assets $5,517,426 5,231,512
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt $130,000 -
Accounts payable and accrued expenses 903,714 871,901
Dividends payable 91,109 79,965
Income and other taxes payable 155,155 149,254
Total current liabilities 1,279,978 1,101,120
Other noncurrent liabilities 334,022 312,912
Long term debt 1,000,000 1,000,000
Total liabilities 2,614,000 2,414,032
Stockholders' equity 2,903,426 2,817,480
Total liabilities and stockholders' equity $5,517,426 5,231,512
ATTACHMENT E
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Amounts in thousands
Six Months Ended
June 30,
2008 2007
OPERATING ACTIVITIES
Net earnings $362,370 $312,514
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 116,260 101,868
Net loss (gain) on retirements of property,
plant and equipment 8,450 (13,735)
Non-cash share-based compensation 27,899 30,801
Deferred income taxes 6,157 1,112
(Increase) decrease in:
Accounts receivable (39,085) (22,222)
Inventories 7,077 43,575
Other current assets (30,754) (23,324)
Deferred charges and other assets (9,101) (14,386)
Increase (decrease) in:
Accounts payable and accrued expenses 26,821 (8,369)
Income and other taxes payable 3,875 18,083
Other noncurrent liabilities 24,081 11,333
Net cash provided by operating activities 504,050 437,250
INVESTING ACTIVITIES
Additions to property, plant and equipment (86,206) (97,759)
Proceeds from retirements of property,
plant and equipment 3,261 23,165
Proceeds from sale of investments 635 685
Acquisition, net of cash acquired (95,726) (293,912)
Net cash used in investing activities (178,036) (367,821)
FINANCING ACTIVITIES
Dividends paid (170,486) (150,371)
Common Stock purchased and issued, net (191,090) (147,905)
Issuances of short-term debt, net 130,000 266,444
Net cash (used in) provided by
financing activities (231,576) (31,832)
Effect of exchange rate changes on
cash and cash equivalents 10,070 3,440
Net increase (decrease) in cash and
cash equivalents 104,508 41,037
Cash and cash equivalents at
beginning of period 278,843 253,666
Cash and cash equivalents at end of period $383,351 $294,703
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