Chicago, April 28 - The Wm. Wrigley Jr. Company today announced record first quarter sales of $1.45 billion, up 16 percent from the year-ago quarter. The sales increase reflected the positive impact of currency translation and price/mix, in combination with worldwide shipment growth.
Net earnings for the quarter of $0.61 per diluted share were up 17 percent or $0.09 from the year ago period. On a non-GAAP basis, excluding the negative impact of the supply chain restructuring and a one-time gain from the sale of a corporate asset in the year-ago period, first quarter earnings per share were up $0.11 or 22 percent from the same quarter last year.*
"In addition to delivering strong first quarter results, we are taking the necessary steps to strengthen our brands, our marketplace position, and some key financial metrics. Gross margins are up, operating expenses as a percentage of sales are down, and we continue to make strategic, incremental investments in brand support," noted President and Chief Executive Officer, Bill Perez. "We are focused on growth, particularly in the U.S., where we remain pleased with the continued strong performance of 5(TM) and are excited about the potential of our new product and packaging initiatives currently rolling out into the marketplace, both in the U.S. and around the world."
Bill Wrigley, Executive Chairman and Chairman of the Board, added, "The strong results this quarter are a reflection of our broad global base of operations, in particular, the vigor of our business operations in fast-growing marketplaces across the developing geographies of East Europe and Asia. The overall confectionery category remains strong despite the economic turbulence so far this year, and we continue to make significant investments in sales capabilities, innovation and brand building to take full advantage of long-term business opportunities."
Sales and Gross Margins
First quarter sales of $1.45 billion increased by $198 million, or 16 percent, over the same quarter last year. The positive impact of currency, due to translation of international sales into a relatively weaker U.S. dollar, accounted for approximately half of the increase. The balance of the gain was due to a combination of price/mix and a one percent growth in shipments.
The operating geographic regions discussed below have been revised as of the first quarter of 2008 to reflect the Company's current management and reporting structure. The Company moved the Pacific and Latin America regions from the Other Geographic Regions segment into Asia/Pacific and All Other, respectively.
In Asia/Pacific, sales increased by $63 million or 25 percent to $317 million on volume growth of over 13 percent. Currency benefit accounted for the vast majority of the remaining gain, which also included a two percent contribution from price/mix. Growth in the region was driven by strong double-digit gains in China, Australia and Vietnam. In China, Wrigley strengthened its position as the #1 confectioner, led by strong sales increases for Extra(R), Doublemint(R) and Tata(R) bubble gum; while in Australia, growth was driven by the combined success of Extra gum and Extra mints. Increased sales in Vietnam were fueled by the growing popularity of Cool Air(R).
In EMEAI, sales were $679 million, up $113 million or 20 percent on volume growth of 4 percent, including the incremental contribution from the A. Korkunov(R) chocolate acquisition in Russia. Of the remaining sales growth in the quarter, approximately a one-fourth is attributable to positive price/mix and the remainder to currency translation. Russia, Germany, Poland and India all recorded strong double-digit sales increases and helped drive growth in the region. Growth in Russia was fueled by its new chocolate business and a positive contribution from pricing, and India's growth reflected the continued expansion of the Boomer(R) brand. Poland benefited from the growth of Winterfresh(R) mints and bag packaging for gum, while sales of Airwaves(R) and Extra in Germany - especially in bottle packaging - led the growth there. Partially offsetting these gains were declines in the United Kingdom. The U.K. business remained solid in the face of increased competition, but the overall gum category declined in comparison to the year-ago quarter.
"The latest wave of competitive new product launches in the U.K. - and the accompanying advertising and promotional blitz - have already played out in the first quarter, with only a modest impact on our share," noted Bill Perez. "In the second quarter, we are looking to energize U.K. consumers and spark the category with the introduction of exciting new versions of Extra Ice(R) and Orbit Complete(R), supported by outstanding marketing campaigns."
North America net sales were $433 million, up $19 million or five percent, despite an overall 10 percent decline in volume. The positive impact of price/mix accounted for the lion's share of the differential, with currency translation contributing about two percent in the quarter. Gum sales showed strength, led by the record-setting growth of the 5(TM) brand, along with continuing sales gains for Orbit and Eclipse(R) in the quarter. Those gains were more than offset by declines for Altoids(R) and Lifesavers(R), which faced difficult comparisons versus new product launches in the year-ago period.
Consolidated gross margins for the first quarter were 53.1 percent versus 52.1 percent the same quarter last year. Excluding the impact from restructuring in the year-ago period, the gross margin differential would have been 40 basis points - 53.1 percent versus 52.7 percent.
Selling, general and administrative (SG&A) expenses climbed 13 percent in the quarter versus the year-ago period, with approximately half of the increase resulting from currency translation. Within SG&A, operating expenses declined by 130 basis points as a percent of sales versus the comparable quarter in 2008, while investment in brand support increased by 50 basis points over the same time frame.
"With the cost environment every bit as challenging in 2008 as it was a year ago, we are pleased with our ability to show improvement in our gross margin," said Senior Vice President and Chief Financial Officer Reuben Gamoran. "Even more encouraging is our management of operating expenses, which increased at only half the rate of sales growth in the quarter, consistent with our commitment to continue leveraging our sales and innovation investments."
Operating Profits and Net Earnings
Consolidated operating profits in the period were $270 million, up 28 percent from the same quarter in the prior year. The increase was primarily driven by improved pricing and product mix, lower expense growth and slightly higher shipment volume, partially offset by increased investment in brand support. Favorable translation of foreign currencies to the weaker U.S. dollar accounted for approximately half the gain.
Consolidated net earnings of $169 million were up by nearly 18 percent or $26 million from the first quarter of 2007. On a diluted per share basis, earnings were $0.61, up 17 percent versus the prior year, with positive currency translation adding about seven cents to the gain. On a non-GAAP basis, excluding the impact of restructuring and the one-time asset sale gain in the year-ago period, earnings per share increased 22 percent versus the first quarter of 2007.
New Product Activity
U.S. 2008 launches unveiled at the March Annual Meeting included product improvements and new Slim Pack envelope packaging for Wrigley's Spearmint(R), Doublemint, Juicy Fruit(R), Big Red(R), Winterfresh and Extra, in addition to the roll-out of the new Extra Fruit Sensations(TM) line, two new fruit flavors for Orbit and the new Altoids Creme de Menthe mints - both regular and chocolate-dipped. Other new offerings that will begin shipments later in the second quarter include Eclipse Fresh and Cool pellet gum and Life Savers Gummies(R) Tangy Fruits. Also coming to market will be the first fruit versions of the fast-growing 5(TM) brand - Lush and Elixir.
PLEASE NOTE: In a separate release, also issued this morning, the Wrigley Company announced that it had reached an agreement to merge with Mars, Incorporated in an historic combination that values Wrigley at $80 per share.
* Please see Attachment B for full GAAP to non-GAAP reconciliation.
ATTACHMENT A
WM. WRIGLEY JR. COMPANY
STATEMENT OF CONSOLIDATED EARNINGS
Amounts in thousands except for per share values
Three Months Ended
March 31,
2008 2007
Net sales $1,451,550 $1,254,046
Cost of sales 681,003 592,895
Restructuring charges - 8,149
Gross profit 770,547 653,002
Selling, general and administrative
expense 500,975 442,798
Operating income 269,572 210,204
Interest expense (15,221) (16,602)
Investment income 3,389 1,890
Other income (expense), net (9,800) 16,703
Earnings before income taxes 247,940 212,195
Income taxes 79,341 69,494
Net earnings $168,599 $142,701
Net earnings per average share
of common stock (basic)(a) $0.62 $0.52
Net earnings per average share
of common stock (diluted)(a) $0.61 $0.52
Average number of basic shares
outstanding for the period 273,219 276,024
Average number of diluted shares
outstanding for the period 275,489 277,037
(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
March 31, 2008 March 31, 2007
Net Diluted Net Diluted
Earnings Earnings Per Earnings Earnings Per
Share* Share*
Net earnings, as
reported under U.S.
GAAP $168,599 $0.61 $142,701 $0.52
Restructuring expense,
net of tax (A) - - 5,480 0.02
Gain on sale of assets,
net of tax (B) - - (9,415) (0.03)
Non-GAAP earnings,
excluding restructuring
expense and gain on sale
of assets $168,599 $0.61 $138,766 $0.50
* May not total due to rounding
(A) Management has excluded restructuring expense 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.
ATTACHMENT C
WM. WRIGLEY JR. COMPANY
NET SALES AND OPERATING INCOME BY SEGMENT
Amounts in thousands
Three Months Ended
March 31,
2008 2007
NET SALES
North America 433,191 413,987
EMEAI 679,088 565,707
Asia/Pacific 317,447 254,065
All Other 21,824 20,287
Total Net Sales 1,451,550 1,254,046
OPERATING INCOME
North America 85,943 76,114
EMEAI 155,192 139,875
Asia/Pacific 95,952 73,626
All Other (67,515) (79,411)
Total Operating Income 269,572 210,204
ATTACHMENT D
WM. WRIGLEY JR. COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
Amounts in thousands
March 31, 2008 December 31, 2007
Assets
Current assets:
Cash and cash equivalents $336,386 278,843
Short-term investments, at
amortized cost 625 635
Accounts receivable, net 523,486 469,221
Inventories 638,358 620,082
Other current assets 203,923 180,997
Total current assets 1,702,778 1,549,778
Deferred charges and other assets 213,927 214,457
Goodwill 1,433,310 1,422,957
Other intangibles 486,129 484,256
Net property, plant and equipment 1,563,828 1,560,064
Total assets $5,399,972 5,231,512
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt $170,000 -
Accounts payable and accrued
expenses 902,860 871,901
Dividends payable 91,275 79,965
Income and other taxes payable 167,606 149,254
Total current liabilities 1,331,741 1,101,120
Other noncurrent liabilities 318,874 312,912
Long term debt 1,000,000 1,000,000
Total liabilities 2,650,615 2,414,032
Stockholders' equity 2,749,357 2,817,480
Total liabilities and
stockholders' equity $5,399,972 5,231,512
ATTACHMENT E
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Amounts in thousands
Three Months Ended
March 31,
2008 2007
OPERATING ACTIVITIES
Net earnings $168,599 $142,701
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 57,326 48,794
Net loss (gain) on retirements of property,
plant and equipment 5,117 (15,796)
Non-cash share-based compensation 11,090 11,890
Deferred income taxes (1,876) 1,390
(Increase) decrease in:
Accounts receivable (35,649) (31,656)
Inventories (7,294) 2,177
Other current assets (22,942) (28,417)
Deferred charges and other assets (1,455) (1,678)
Increase (decrease) in:
Accounts payable and accrued expenses 7,011 (14,091)
Income and other taxes payable 15,480 17,749
Other noncurrent liabilities 1,738 (1,479)
Net cash provided by operating activities 197,145 131,584
INVESTING ACTIVITIES
Additions to property, plant and equipment (25,381) (35,546)
Proceeds from retirements of property,
plant and equipment 1,781 21,091
Proceeds from sale of investments - 485
Acquisition, net of cash acquired - (250,134)
Net cash used in investing activities (23,600) (264,104)
FINANCING ACTIVITIES
Dividends paid (79,451) (70,691)
Common Stock purchased and issued, net (229,191) (104,365)
Issuances of short-term debt, net 170,000 255,919
Net cash (used in) provided by financing
activities (138,642) 80,863
Effect of exchange rate changes on cash and
cash equivalents 22,640 2,471
Net increase (decrease) in cash and cash
equivalents 57,543 (49,186)
Cash and cash equivalents at beginning of
period 278,843 253,666
Cash and cash equivalents at end of period $336,386 $204,480