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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q

 

x   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended September 30, 2003

o   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from            to           

For the Quarter Ended September 30, 2003          Commission file number 1-800

WM. WRIGLEY JR. COMPANY


(Exact name of registrant as specified in its charter)

Delaware

 

36-1988190

(State of other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

410 North Michigan Avenue
Chicago, Illinois

 


60611

(Address of principal executive office)

 

(Zip Code)

(312) 644-2121
(Registrant's telephone number, including area code)

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   o

 

Indicate by check mark whether the Registrant is an accelerated filer
(as defined under Rule 12b-2 of the Securities and Exchange Act of 1934).

YES   x         NO   o

183,671,467 shares of Common Stock and 41,085,459 shares of Class B Common Stock were
outstanding as of October 15, 2003.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

ITEM 1 FINANCIAL INFORMATION

CONSOLIDATED STATEMENT OF EARNINGS (CONDENSED) FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

CONSOLIDATED STATEMENT OF CASH FLOWS (CONDENSED) FOR NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

CONSOLIDATED BALANCE SHEET (CONDENSED) AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONDENSED)

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4 - CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

INDEX TO EXHIBITS

Certification of Disclosure Pursuant to 17 C.F.R. 240.13a-14(a) or 15d-14(a) - William Wrigley, Jr.

Certification of Disclosure Pursuant to 17 C.F.R. 240.13a-14(a) or 15d-14(a) - Ronald V. Waters

Certification Pursuant to Section 1350 of Chapter 63 of Title 8 of the United States Code - William Wrigley, Jr.

Certification Pursuant to Section 1350 of Chapter 63 of Title 8 of the United States Code - Ronald V. Waters III

Table of Contents



WM. WRIGLEY JR. COMPANY
INDEX TO FORM 10-Q

Page

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Consolidated Statement of Earnings (Condensed) for the Three and Nine Months Ended September 30, 2003 and 2002

2

Consolidated Statement of Cash Flows (Condensed) for the Nine Months Ended September 30, 2003 and 2002

3

Consolidated Balance Sheet (Condensed) as of September 30, 2003 and December 31, 2002

4

Notes to Consolidated Financial Statements (Condensed)

5 - 7

Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition

8 - 10

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

11

Item 4 - Controls and Procedures

11

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K

12

SIGNATURES

13

INDEX TO EXHIBITS

14

Rule 13a-14(a) or 15a-14(a) Certifications

15 - 16

Section 1350 Certifications

17 - 18

 

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF EARNINGS (CONDENSED)
(Unaudited)

 
 
   

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2003

 

2002

 

2003

 

2002

                 

Net Sales

$

782,877

 

699,511

 

2,247,884

 

2,007,004

                 

Cost of Sales

 

336,613

 

296,993

 

931,472

 

835,538

                 

Gross Profit

 

446,264

 

402,518

 

1,316,412

 

1,171,466

                 

Selling, General and Administrative Expense

 

278,803

 

261,014

 

826,567

 

742,899

                 

Operating Income

 

167,461

 

141,504

 

489,845

 

428,567

                 

Investment Income

 

1,953

 

2,326

 

6,354

 

6,163

                 

Other Expense

 

(3,138)

 

(876)

 

(2,057)

 

(6,668)

                 

Earnings before Income Taxes

 

166,276

 

142,954

 

494,142

 

428,062

                 

Income Taxes

 

53,208

 

44,490

 

158,125

 

134,299

                 

Net Earnings

$

113,068

 

98,464

 

336,017

 

293,763

                 

Net Earnings per average share

               
 

of Common Stock (basic and diluted)

$

0.50

 

0.44

 

1.49

 

1.30

                   
                   

Dividends declared per share

               

of Common Stock

$

0.22

0.205

0.66

0.615

                   
                   

Average number of shares

               
 

outstanding for the period

 

224,886

 

225,308

 

225,016

 

225,154

                   
                   

All amounts in thousands except for per share values.

 

Notes to financial statements beginning on page 5 are an integral part of these statements.

 
 
 

2

Table of Contents

FORM 10-Q

PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (CONDENSED)
(Unaudited)

 
 

Nine Months Ended
September 30,

 

2003

 

2002

OPERATING ACTIVITIES

   

Net Earnings

 

$

336,017

 

293,763

   

Adjustments to reconcile net earnings to net

         
     

cash provided by operating activities:

         
     

Depreciation

   

80,394

 

63,506

     

Loss on retirements of property, plant,

         
       

and equipment

   

6,291

 

564

     

(Increase) decrease in:

         
       

Accounts receivable

   

(3,460)

 

(20,396)

       

Inventories

   

(33,652)

 

(80,697)

       

Other current assets

   

(6,270)

 

(3,692)

       

Other assets and deferred charges

   

4,970

 

(1,320)

     

Increase (decrease) in:

         
       

Accounts payable

   

32,629

 

(13,092)

       

Accrued expenses

   

5,341

 

54,795

       

Income and other taxes payable

   

142

 

10,880

       

Deferred taxes

   

4,806

 

(1,322)

       

Other noncurrent liabilities

   

7,551

 

7,189

                   
   

Net cash provided by operating activities

 

$

434,759

 

310,178

               

INVESTING ACTIVITIES

         
   

Additions to property, plant, and equipment

 

$

(116,012)

 

(147,172)

   

Proceeds from retirements of property, plant and equipment

   

3,930

 

4,687

   

Purchases of short-term investments

   

(28,273)

 

(31,161)

   

Maturities of short-term investments

   

32,720

 

33,697

               
   

Net cash used in investing activities

   

(107,635)

 

(139,949)

               

FINANCING ACTIVITIES

         
   

Dividends paid

   

(145,186)

 

(135,064)

   

Net purchases of common stock

   

(28,126)

 

(5,649)

               
   

Net cash used in financing activities

   

(173,312)

 

(140,713)

Effect of exchange rate changes on cash and

         
 

cash equivalents

   

849

 

4,606

             

Net increase in cash and cash equivalents

   

154,661

 

34,122

Cash and cash equivalents at beginning of period

   

279,276

 

307,785

           

Cash and cash equivalents at end of period

 

$

433,937

 

341,907

           

SUPPLEMENTAL CASH FLOW INFORMATION

         
           

Income taxes paid

 

$

146,913

 

132,675

Interest paid

 

$

1,437

 

1,290

Interest and dividends received

 

$

6,347

 

6,011

           

All amounts in thousands.

         
           

Notes to financial statements beginning on page 5 are an integral part of these statements.

 

3

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
CONSOLIDATED BALANCE SHEET (CONDENSED)

 

(Unaudited)
September 30,
2003

 


December 31,
2002

Current assets:

     
 

Cash and cash equivalents

$

433,937

 

279,276

 

Short-term investments, at amortized cost

 

22,453

 

25,621

 

Accounts receivable

       
   

(less allowance for doubtful accounts;
9/30/03 - $7,866; 12/31/02 - $5,850)

 


330,149

 


312,919

 

Inventories -

       
   

Finished goods

 

117,863

 

88,583

   

Raw materials and supplies

 

246,908

 

232,613

       

364,771

 

321,196

 

Other current assets

 

55,816

 

47,720

 

Deferred incomes taxes - current

 

19,952

 

19,560

   

Total current assets

 

1,227,078

 

1,006,292

Marketable equity securities at fair value

 

14,731

 

19,411

Deferred charges and other assets

 

212,592

 

213,483

Deferred income taxes - noncurrent

 

34,717

 

33,000

Property, plant and equipment, at cost

 

1,622,103

 

1,491,749

Less accumulated depreciation

 

740,672

 

655,639

 

Net property, plant, and equipment

 

881,431

 

836,110

   

Total assets

$

2,370,549

 

2,108,296

Current liabilities:

       
 

Accounts payable

$

135,730

 

97,705

 

Accrued expenses

 

186,294

 

172,137

 

Dividends payable

 

49,450

 

46,137

 

Income and other taxes payable

 

65,392

 

66,893

 

Deferred income taxes - current

 

2,864

 

3,215

   

Total current liabilities

 

439,730

 

386,087

Deferred income taxes - noncurrent

 

77,373

 

70,589

Other noncurrent liabilities

 

140,493

 

129,044

Stockholders' equity:

       
 

Preferred stock (no par value)

       
   

Authorized - 20,000 shares

       
   

Issued - None

       
 

Common stock (no par value)

       
   

Authorized - 400,000 shares

       
   

Issued -

191,341 shares at 9/30/03

       
     

190,898 shares at 12/31/02

 

12,748

 

12,719

 

Class B common stock (convertible)

       
   

Authorized - 80,000 shares

       
   

Issued and outstanding -

       
     

41,100 shares at 9/30/03

       
     

41,543 shares at 12/31/02

 

2,748

 

2,777

 

Additional paid-in capital

 

7,587

 

4,209

 

Retained earnings

 

2,091,750

 

1,902,990

 

Common stock in treasury, at cost -

       
   

(9/30/03 - 7,719 shares; 12/31/02 - 7,385 shares)

 

(325,920)

 

(297,156)

 

Accumulated other comprehensive income:

       
   

Foreign currency translation adjustment

 

(82,749)

 

(112,303)

   

Loss on derivative contracts

 

(1,494)

 

(853)

   

Unrealized holding gains on marketable

       
     

equity securities

 

8,283

 

10,193

   

Total accumulated other comprehensive income

 

(75,960)

 

(102,963)

       

Total stockholders' equity

 

1,712,953

 

1,522,576

       

Total liabilities & stockholders' equity

$

2,370,549

 

2,108,296

         

All amounts in thousands.

       
 

Notes to financial statements beginning on page 5 are an integral part of these statements.

 

4

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONDENSED)
(Unaudited)

 

1.

The Consolidated Statement of Earnings (Condensed) for the three month and nine month periods ended September 30, 2003 and 2002, respectively, the Consolidated Statement of Cash Flows (Condensed) for the nine month periods ended September 30, 2003 and 2002, and the Consolidated Balance Sheet (Condensed) at September 30, 2003, are unaudited. In the Company's opinion, the accompanying financial statements reflect all normal and recurring adjustments necessary to present fairly the results for the periods and have been prepared on a basis consistent with the 2002 audited consolidated financial statements. These condensed financial statements should be read in conjunction with the 2002 consolidated financial statements and related notes which are an integral part thereof. Certain amounts recorded in 2002 have been reclassified to conform to the 2003 presentation.

 

2.

Conformity with generally accepted accounting principles requires management to make estimates and assumptions when preparing financial statements that affect assets, liabilities, revenues and expenses. Actual results may vary from those estimates.

   

3.

In September 2003, the Company renewed its $100 million unsecured line of credit. There were no borrowings outstanding under the line of credit at September 30, 2003. The line of credit expires in September 2004.

   

4.

As of December 31, 2002, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," which amends SFAS No. 123, "Accounting for Stock-Based Compensation." Under SFAS No. 148, the Company is required to disclose in the interim financial statements the method of accounting for stock-based employee compensation and the effect of the method used on reported results. In 2003, the Company continues to apply Accounting Principles Board Opinion (APB) No. 25 and related interpretations in accounting for stock-based compensation plans. APB No. 25 requires the use of the intrinsic value method, which measures compensation cost as the excess of the quoted market price of the stock at the date of grant over that amount an employee must pay to acquire the stock. As the exercise price equaled the fair market value on the date of grant, no compensation expense has been rec ognized for the Wrigley Stock Option program. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, to stock compensation plans.

   
   
   

Three Months Ended

 

Nine Months Ended

   

9/30/2003

 

9/30/2002

 

9/30/2003

 

9/30/2002

                 

Net earnings as reported

$

113,068

 

98,464

 

336,017

 

293,763

                 

Add:

Stock-based compensation expense included in net earnings, net of tax

 


1,928

 


1,812

 


6,117

 


4,524

                   

Deduct:

Total stock-based compensation expense under fair value method for all awards, net of tax

 



(5,776)

 



(5,087)

 



(16,846)

 



(12,674)

                   

Pro forma net earnings

$

109,220

95,189

325,288

285,613

                 

Basic and diluted earnings per share

               
 

As reported

$

0.50

 

0.44

 

1.49

 

1.30

 

Pro forma

$

0.49

 

0.42

 

1.45

 

1.27

                   

All amounts in thousands except per share values.

               
                 
                 

5

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONDENSED)
(Unaudited)

 
 

5.

An analysis of the cumulative foreign currency translation adjustment follows (in thousands of dollars).

   

(Increase) Decrease to
Stockholders' Equity

   

Third Quarter

   

2003

 

2002

 

                 
   

Balance at July 1

 

$

86,938

 

125,795

 
   

Translation adjustment for

           

the third quarter

(4,189)

9,395

                   
   

Balance at September 30

 

$

82,749

 

135,190

 

               
               
         

Increase to
Stockholders' Equity

 

   

Nine Months

   

2003

 

2002

 

                 
   

Balance at January 1

 

$

112,303

 

149,310

 
   

Translation adjustment for

         
     

the first nine months

   

(29,554)

 

(14,120)

 

                   
   

Balance at September 30

 

$

82,749

 

135,190

 

               
               

6.

An analysis of comprehensive income is provided below (in thousands of dollars).

   
   

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2003

 

2002

 

2003

 

2002

                 

Net earnings

$

113,068

 

98,464

 

336,017

 

293,763

Changes in other comprehensive income,

               
 

before tax:

               
 

Foreign currency

               
   

Translation adjustments

 

6,168

 

(8,324)

 

28,875

 

12,031

 

Unrealized holding losses on securities

 

(1,692)

 

(5,977)

 

(2,939)

 

(11,128)

 

Loss on derivative contracts

 

(92)

 

(1,880)

 

(867)

 

(2,869)

Changes in other comprehensive income,

               
 

before tax

 

4,384

 

(16,181)

 

25,069

 

(1,966)

Changes in income tax benefit (expense)

               
 

related to items of other comprehensive

               
 

income

 

(1,356)

 

1,610

 

1,934

 

6,884

Changes in other comprehensive income,

               
 

net of tax

 

3,028

 

(14,571)

 

27,003

 

4,918

                   

Total comprehensive income

$

116,096

 

83,893

 

363,020

 

298,681

                 

6

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONDENSED)
(Unaudited)

 
 

7.

Segment Information

   
 

Management organizes the Company's chewing gum and other confectionery business based on geographic regions. Information by geographic region is as follows (in thousands of dollars):

   
 

Net Sales

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

     

2003

 

2002

 

2003

 

2002

                   
 

Americas, principally U.S.

$

308,413

 

286,014

 

880,720

 

832,687

 

EMEAI, principally Europe

 

372,344

 

324,438

 

1,044,430

 

861,338

 

Asia

 

70,803

 

62,982

 

237,525

 

236,171

 

Pacific

 

26,985

 

20,007

 

72,796

 

61,326

 

All Other

 

4,332

 

6,070

 

12,413

 

15,482

                   
 

Net Sales

$

782,877

 

699,511

 

2,247,884

 

2,007,004

                   

"All Other" net sales consists primarily of sales of gum base to customers and sales for Wrigley Healthcare.

                   
                   
                   
 

Operating Income

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

     

2003

 

2002

 

2003

 

2002

                   
 

Americas, principally U.S.

$

78,272

 

72,215

 

219,200

 

210,198

 

EMEAI, principally Europe

 

105,738

 

91,399

 

290,611

 

248,570

 

Asia

 

17,989

 

12,775

 

67,708

 

60,455

 

Pacific

 

8,636

 

5,498

 

22,621

 

14,946

 

All Other

 

(43,174)

 

(40,383)

 

(110,295)

 

(105,602)

                   
 

Operating Income

$

167,461

 

141,504

 

489,845

 

428,567

                   
 

"All Other" operating income includes corporate expenses such as costs related to research and development, information systems, and certain administrative functions and operating results for Wrigley Healthcare. In the third quarter 2002, "All Other" operating income also included certain costs connected with the exploration of a business combination with Hershey Foods Corporation.

   
       

7

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 
 
 

RESULTS OF OPERATIONS

 

Net Sales

Net sales for the third quarter were $782.9 million, up $83.4 million or 12% versus the third quarter of 2002. Higher worldwide shipments increased sales revenue by 6%. Additionally, selected selling price increases, primarily in the International regions, increased sales by approximately 1%. Translation of stronger foreign currencies, primarily in Europe, to a weaker U.S. dollar increased sales by approximately 5%.

Net sales for the first nine months were $2,247.9 million, up $240.9 million or 12% versus the first nine months of 2002. Higher worldwide shipments increased sales revenue by approximately 5%. In addition, selected selling price increases, primarily in the International regions, increased sales by approximately 1%. Translation of foreign currencies to a weaker U.S. dollar increased sales by approximately 6%.

 
 

Cost of Sales and Gross Profit

Cost of sales for the third quarter were $336.6 million, up $39.6 million or 13% versus the third quarter of 2002. Higher shipments increased cost of sales by 6%. Additionally, higher product costs increased cost of sales by 2%. Translation of foreign currencies to a weaker U.S. dollar increased cost of sales by 5%.

Gross profit for the third quarter was $446.3 million, up $43.7 million or 11% from the same period last year. The gross profit margin was 57.0%, down slightly from 57.5% in the third quarter of 2002.

Cost of sales for the first nine months was $931.5 million, up $95.9 million or 11% versus the first nine months of 2002. Higher shipments increased cost of sales by 5%. In addition, unfavorable product mix increased cost of sales by 1%. Translation of foreign currencies to a weaker U.S. dollar increased cost of sales by approximately 5%.

Gross profit for the first nine months was $1,316.4 million, up $144.9 million or 12% from the same period last year. The gross profit margin was 58.6%, up from 58.4% in the first nine months of 2002.

 
 

Selling, General and Administrative Expenses

Consolidated selling and general administrative expenses (SG&A) for the third quarter were $278.8 million, up $17.8 million or 7% from the same period last year. Translation of stronger foreign currencies to a weaker U.S. dollar increased SG&A by 4%. Higher selling and other marketing expenses to support growth in key geographies increased SG&A by 3%. Brand support expenses were essentially unchanged compared to the prior period as increased merchandising and consumer sampling/promotion activity to support new product launches in the U.S. and higher worldwide brand research were offset by lower advertising spending in the U.S. General and administrative expenses were comparable to the prior period as higher investment in information technology and research and development were offset by the absence of costs connected with the third quarter 2002 exploration of a business combination with Hershey Foods Corporation.

For the first nine months of 2003, SG&A expenses were $826.6 million, up $83.7 million or 11% from the same period last year. Translation of stronger foreign currencies to a weaker U.S. dollar increased SG&A by 5%. Higher selling and other marketing expenses increased SG&A by 3% due primarily to investment in the U.S. and key geographies in Europe. Higher brand support, driven primarily by increased worldwide merchandising and consumer promotion spending in support of new products, increased SG&A by 2%. Finally, general and administrative expenses increased SG&A by 1%, driven primarily by investments in information technology and research and development spending in 2003, mostly offset by the absence of costs connected with the 2002 exploration of a business combination with Hershey Foods Corporation.

 

8

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 2 (Cont'd)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

As a percentage of consolidated net sales, the expenses were as follows:

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2003

 

2002

 

2003

 

2002

 

Advertising

11.8%

 

13.3%

 

12.2%

 

13.6%

 

Merchandising and Promotion/Other

5.3%

 

5.0%

 

6.1%

 

5.0%

 

 

Total Brand Support

17.1%

 

18.3%

 

18.3%

 

18.6%

 

Selling and Other Marketing

10.1%

 

9.6%

 

10.1%

 

9.7%

 

General and Administrative

8.4%

 

9.4%

 

8.4%

 

8.7%

 

 

Total

35.6%

 

37.3%

 

36.8%

 

37.0%

 

"Other" expenses reported in merchandising and promotion include brand research spending and royalty fees paid to third parties.

                   

Investment Income

Investment income for the third quarter was $2.0 million, down $0.4 million or 16% versus the third quarter of last year. The decrease was primarily due to lower worldwide yields on cash and short-term investments.

Investment income for the first nine months of 2003 was $6.4 million, up $0.2 million or 3% versus the first nine months last year. The increase for the first nine months of 2003 reflect gains from the sale of marketable equity securities, which were partially offset by lower worldwide yields on cash and short-term investments.

 

Other Expense

Other expense for the third quarter was $3.1 million, compared to other expense of $0.9 million for the third quarter last year. The increase was primarily due to foreign currency transaction losses, mostly caused by a weaker U.S. dollar.

Other expense for the first nine months of 2003 was $2.1 million, compared to other expense of $6.7 million for the first nine months of last year. The improved results were driven primarily by market driven portfolio gains in 2003, compared with losses in 2002, associated with the cash surrender value of company-owned life insurance, and other non-recurring gains.

 

Income Taxes

Income taxes for the third quarter were $53.2 million, up $8.7 million or 20% from the third quarter of 2002. Pretax earnings were $166.3 million, an increase of $23.3 million or 16%. The consolidated effective tax rate was 32.0% compared to 31.1% for the third quarter last year. Income taxes for the first nine months were $158.1 million, up $23.8 million or 18% from the first nine months 2002. Pretax earnings were $494.1 million, an increase of $66.1 million or 15%. The consolidated effective tax rate was 32.0%, compared to 31.4% for the same period last year. The increase in the effective tax rate, for both the quarter and the first nine months, was mainly due to the mix of pretax earnings and higher U.S. taxes on repatriation of foreign earnings.

 

Net Earnings

Consolidated net earnings for the third quarter of 2003 totaled $113.1 million or $0.50 per share compared to last year's net earnings of $98.5 million or $0.44 per share for the same period.

Consolidated net earnings for the first nine months of 2003 totaled $336.0 million or $1.49 per share compared to last year's net earnings of $293.8 million or $1.30 per share for the same period.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Operating Cash Flow and Current Ratio

Net cash provided by operating activities for the first nine months of 2003 was $434.8 million compared with $310.2 million for the same period in 2002. The change in net cash provided by operating activities is due to increased net earnings and reduced levels of working capital investment in 2003 versus 2002. The Company had a current ratio (current assets divided by current liabilities) in excess of 2.7 to 1 on September 30, 2003 and 2.6 on December 31, 2002.

 

9

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 2 (Cont'd)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 
 

Additions to Property, Plant and Equipment

Capital expenditures for the first nine months of 2003 were $116.0 million compared to $147.2 million in 2002. The decrease in 2003 versus 2002 was due to lower spending on worldwide manufacturing capacity and investments in information technology. For the full year 2003, capital expenditures are expected to be slightly below 2002 levels and also planned to be funded from the Company's cash flow from operations.

 
 

10

Table of Contents

FORM 10-Q
PART I - FINANCIAL INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 
 

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

 

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 believes 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 under utilization of manufacturing capacity; destruction of all or part of manufacturing facilities; labor strikes or unrest; political or economic instability in local markets; war or acts of terrorism; competition and other industry trends; retention of preferred retail space; effective marketing campaigns or new product introductions; consumer preferences, spending patterns, and demographic trends; legislation and governmental regulation; and accounting policies and practices.

 

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.

 
 

Item 4 - Controls and Procedures

 

Disclosure Control and Procedures

 

As of September 30, 2003, the Company's Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Chief Executive officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2003. Additionally, there have been no significant changes in the Company's internal controls that could significantly affect these controls subsequent to September 30, 2003, including any corrective actions with regard to significant deficiencies and material weaknesses.

 
 

11

Table of Contents

FORM 10-Q
PART II - OTHER INFORMATION

 
 

Item 6 - Exhibits and Reports on Form 8-K

 

(a)

Exhibits reference is made to the Exhibit Index on page 14.

(b)

On July 22, 2003, the Company filed a report on Form 8-K. The report contained a press release issued by the Company, regarding the Company's result of operations and financial condition for the fiscal quarter ended June 30, 2003.

 
 

12

Table of Contents

FORM 10-Q
SIGNATURES

 
 
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
     
 
 
   

WM. WRIGLEY JR. COMPANY

 
   

(Registrant)

 
       
       
       
   

By:

/s/ Reuben Gamoran

 

     

Reuben Gamoran
Vice President and Controller
Authorized Signatory and Chief Accounting Officer

 
         
 

Date:

11/14/03

     

           
 
 

13

 

WM. WRIGLEY JR. COMPANY AND WHOLLY OWNED ASSOCIATED COMPANIES

INDEX TO EXHIBITS
(Item 14 (a))

 
 

Exhibit
Number


Description of Exhibit

 

3.

Articles of Incorporation and By-laws.

(i).

Certificate of Incorporation of the Registrant. The Registrant's Amended and Restated Certificate of Incorporation, effective from March 5, 2002 is incorporated by reference to Exhibit 3(i) of the Company's Quarterly Report on Form 10-Q filed for the fiscal quarter ended March 31, 2002.

(ii).

By-laws of the Registrant. The Registrant's Amended and Restated By-laws effective March 5, 2002 is incorporated by reference to Exhibit 3(ii) of the Company's Quarterly Report on Form 10-Q filed for he fiscal quarter ended March 31, 2002.

4.

Instruments defining the rights of security holders. The Stockholder Rights Plan is incorporated by reference to Exhibit 4.1 of the Company's Report on Form 8-K filed June 5, 2001.

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 fled 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, 1995.

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).

Stock Deferral Plan For Non-Employee Directors (formerly Stock Retirement Plan For Non-Employee Directors) as amended is incorporated by reference to Exhibit 10(e) of the Company's Annual Report on Form 10-K fled for the fiscal year ended December 31, 2002.

10(f).

Wm. Wrigley Jr. Company 1997 Management Incentive Plan. The Registrant's Amended Management Incentive Plan, effective from March 5, 2002, is incorporated by reference to the Company's Quarterly Report on Form 10-Q filed for the fiscal quarter ended March 31, 2002.

   

10(g).

Forms of Change-in-Control Severance Agreement. Incorporated by reference to Exhibits 10(h) and 10(i) to the Company's Quarterly Report on Form 10-Q field for the fiscal quarter ended September 30, 2001.

31.

Rule 13a-14(a)/15a-14(a) Certifications

31(a).

Certification of Mr. William Wrigley, Jr., President and Chief Executive Officer

31(b).

Certification of Mr. Ronald V. Waters, Senior Vice President and Chief Financial Officer

32.

Section 1350 Certifications

32(a).

Certification of Mr. William Wrigley, Jr., President and Chief Executive Officer

32(b).

Certification of Mr. Ronald V. Waters, Senior Vice President and Chief Financial Officer

   

For copies of Exhibits not attached hereto, 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.

 
 

14

 

31.

RULE 13A-14(A) OR 15A-14(A) CERTIFICATIONS

 

31(a).

Certification of Disclosure Pursuant to 17 C.F.R. 240.13a-14(a) or 15a-14(a)

   
 
 

I, William Wrigley, Jr., certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of the Wm. Wrigley Jr. Company;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the registrant and we have:

   

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

   

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of September 30, 2003 (the "Evaluation Date"); and

   

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

   

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

   

b)

fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control; and

 

6.

The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:

November 14, 2003

   
   
   

/s/William Wrigley, Jr.

   

William Wrigley, Jr.
President and Chief Executive Officer

     
     

15

 

31.

RULE 13A-14(A) OR 15A-14(A) CERTIFICATIONS

 

31(a).

Certification of Disclosure Pursuant to 17 C.F.R. 240.13a-14(a) or 15a-14(a)

   
 
 

I, Ronald V. Waters, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of the Wm. Wrigley Jr. Company;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the registrant and we have:

   

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

   

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of September 30, 2003 (the "Evaluation Date"); and

   

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

   

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

   

b)

fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control; and

 

6.

The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:

November 14, 2003

   
   
   

/s/Ronald V. Waters

   

Ronald V. Waters
Senior Vice President and Chief Financial Officer

     
     

16

 

(32)

SECTION 1350 CERTIFICATIONS

 

(32)(a)

Certification of Mr. William Wrigley, Jr., pursuant to Section 1350 of Chapter 63 of Title 8 of the United States Code

   
 
 

I, William Wrigley, Jr., the Chief Executive Officer of Wm. Wrigley Jr. Company (the "Company"), certify that to the best of my knowledge:

 

(i)

The Quarterly Report of the company on Form 10-Q dated November 14, 2003 for the period ended September 30, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(ii)

The information contained in the said Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

     
     
     
     

/s/William Wrigley, Jr.

     

William Wrigley, Jr.
President and Chief Executive Officer

       

Dated the 14th day of November, 2003

 
   
 
 

17

(32)

SECTION 1350 CERTIFICATIONS

 

(32)(a)

Certification of Mr. Ronald V. Waters, pursuant to Section 1350 of Chapter 63 of Title 8 of the United States Code

   
 
 

I, Ronald V. Waters, the Chief Financial Officer of Wm. Wrigley Jr. Company (the "Company"), certify that to the best of my knowledge:

 

(i)

the Quarterly Report of the company on Form 10-Q dated November 14, 2003 for the period ended September 30, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(ii)

the information contained in the said Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

     
     
     
     

/s/Ronald V. Waters

     

Ronald V. Waters
Senior Vice President and Chief Financial Officer

       

Dated the 14th day of November, 2003

 
   
 

18