Chicago, July 28 - The Wm. Wrigley Jr. Company 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."
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.