Business News

Wrigley Reports 17% Earnings Per Share Increase on Double-Digit Sales Gain to New First Quarter Record

Tuesday 29. April 2008 - The Wm. Wrigley Jr. Company (NYSE:WWY) 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.