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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
July 17, 2003
Date of Report
(Date of earliest event reported)
Hershey Foods Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
|
1-183
(Commission File Number) |
23-0691590
(IRS Employer Identification No.) |
100 Crystal A Drive, Hershey, Pennsylvania 17033
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (717) 534-6799
Page 1 of 3 Pages
Exhibit Index - Page 3
INFORMATION TO BE INCLUDED IN REPORT
Item 7. Financial Statements and Exhibits
(c) Exhibits
99 Press Release dated July 17, 2003
Item 9. Regulation FD Disclosure
The information in this Current Report, including the exhibit, is furnished pursuant to Item 12 of Form 8-K, “Results of Operations and Financial Condition,” in accordance with SEC Release Nos. 33-8216 and 34-47583. The information in this Current Report, including the exhibit, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act.
On July 17, 2003, Hershey Foods Corporation (the “Corporation”) issued a press release announcing sales and earnings for the second quarter of 2003. A copy of the Corporation’s press release is attached hereto as Exhibit 99.
SIGNATURE
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.
Date: July 17, 2003
HERSHEY FOODS CORPORATION
By:
/s/Frank Cerminara
Frank Cerminara
Senior Vice President,
Chief Financial Officer
Page 2 of 3 Pages
Exhibit Index - Page 3
EXHIBIT INDEX
| Exhibit No. | Description |
| 99 |
Hershey Foods Corporation Press Release dated July 17, 2003. |
Page 3 of 3 Pages
Exhibit Index - Page 3
EXHIBIT 99
{LOGO FOR HERSHEY FOODS CORPORATION APPEARS HERE} Hershey Foods NEWS
FOR IMMEDIATE RELEASE MEDIA CONTACT:
- --------------------- -------------
Christine M. Dugan
717-508-3238
FINANCIAL CONTACT:
James A. Edris
717-534-7556
HERSHEY FOODS ANNOUNCES SECOND QUARTER RESULTS
AND NEW VALUE-ENHANCING INITIATIVES
HERSHEY, Pa., July 17, 2003--- Hershey Foods Corporation (NYSE:HSY) today
announced sales and earnings for the second quarter ended June 29, 2003.
Consolidated net sales for the second quarter were $849,115,000 compared with
$823,462,000 for the second quarter of 2002. Net income for the second quarter
of 2003 was $71,484,000, or $.54 per share-diluted, compared with $63,148,000,
or $.46 per share-diluted, for the comparable period in 2002.
These GAAP results include pre-tax charges related to business rationalization
and realignment initiatives of $4.0 million, or $.02 per share-diluted, in the
second quarter of 2003; and $2.5 million, or $.01 per share-diluted, in the
second quarter of 2002.
Excluding these charges, net income for the second quarter of 2003 was
$73,998,000, or $.56 per share-diluted, compared with $64,752,000, or $.47 per
share-diluted, for the second quarter of 2002.
SIX-MONTHS RESULTS
- ------------------
For the first six months of 2003, consolidated net sales were $1,802,277,000
compared with $1,811,968,000 for the first half of 2002. Net income for the
first six months of 2003 was $169,042,000, or $1.27 per share-diluted, compared
with $150,193,000, or $1.09 per share-diluted, for the first half of 2002.
These GAAP results include pre-tax charges related to business rationalization
and realignment initiatives of $4.0 million, or $.02 per share-diluted, in the
second quarter of 2003; and $11.5 million, or $.05 per share-diluted, in the
first half of 2002. Excluding these charges, net income for the first half of
2003 was $171,556,000, or $1.29 per share-diluted, compared with $157,495,000,
or $1.14 per share-diluted, for the first half of 2002.
The Corporation uses earnings excluding charges related to business
rationalization and realignment initiatives, as shown in the attached pro forma
income statements, as a key performance measure of results of operations for
purposes of evaluating performance internally. This non-GAAP measurement is not
intended to replace the presentation of financial results in accordance with
GAAP. Rather, the Corporation believes the presentation of earnings excluding
such charges provides additional information to
investors to facilitate the comparison of past and present operations, excluding
items which the Corporation does not believe are indicative of its ongoing
operations.
The 2002 business realignment initiatives are described in Management's
Discussion and Analysis and Note 3 of the Corporation's 2002 Annual Report on
Form 10-K. The components of the 2003 brand and product rationalization
initiatives and realignment of the sales organization are described below.
2003 RATIONALIZATION AND REALIGNMENT INITIATIVES
- ------------------------------------------------
Hershey today announced a number of initiatives continuing its value-enhancing
strategy. These include new product introductions, streamlining the supply chain
by divesting or eliminating certain non-strategic brands and products,
production line rationalization, and realigning the sales organization.
During 2003, these actions are expected to result in a net charge of
approximately $17 million, or $.08 per share-diluted, of which $.02 per
share-diluted have been recognized in the second quarter. The total impact of
the initiatives will be cash flow positive in 2003 and slightly accretive in
2004 as a result of expected savings of approximately $5 million annually.
SECOND QUARTER PERFORMANCE
- --------------------------
Hershey's second quarter sales increased 3.1 percent, reflecting sales of new
products and limited edition items, as well as the impact of the price increase
announced in December 2002, partially offset by brand and product
rationalization. Gross margin expanded as a
result of pricing, lower raw ingredient and packaging costs, and supply chain
savings. Selling, marketing, and administrative costs were essentially flat as a
percentage of sales.
"Hershey achieved solid performance in the second quarter of 2003," said Richard
H. Lenny, Chairman, President, and Chief Executive Officer, "with balanced gains
in sales, profitability, and returns. In addition, our marketplace momentum
continues to build with market share gains driven by our leading brands, instant
consumables, and continued strength in high growth channels. Margins and
profitability also increased through a combination of better price realization
and on-going productivity savings.
"The rationalization and realignment initiatives announced today are the latest
steps in our value-enhancing strategy. The sale of non-strategic brands and
relocation of certain manufacturing lines will further streamline the supply
chain, ensuring proper resource allocation against our growth opportunities.
Realigning the sales force provides us with superior category selling
capabilities and improved coverage at retail.
"On the new product front, we plan to introduce HERSHEY'S S'MORES candy bar, a
major new product which will be available in stores late this year. HERSHEY'S
S'MORES is a convenient candy bar form of the traditional campfire favorite,
incorporating graham crackers, marshmallow, and HERSHEY'S milk chocolate.
Consumers overwhelmingly associate homemade s'mores with HERSHEY'S milk
chocolate. Later in the year we also will launch SWOOPS chocolate slices in four
favorite flavors, packaged in re-sealable on-the-go containers. Also adding
excitement to Hershey's fall line-up are Reese's mini pieces in portable tubes,
as well as additional Limited Edition REESE'S offerings.
"Together these initiatives build upon the progress we've made to date and will
further advance our goal of delivering superior shareholder value over the long
term," Lenny concluded.
SAFE HARBOR STATEMENT
- ---------------------
This release contains statements which are forward-looking. These statements are
made based upon current expectations which are subject to risk and uncertainty.
Actual results may differ materially from those contained in the forward-looking
statements. Factors which could cause results to differ materially include, but
are not limited to: changes in the confectionery and grocery business
environment, including actions of competitors and changes in confectionery
preferences; customer and consumer response to selling price increases; changes
in governmental laws and regulations, including taxes; market demand for new and
existing products; changes in raw material and other costs; pension cost factors
such as actuarial assumptions and market performance; adequacy of the Company's
bad debt reserve; the Company's ability to implement improvements to reduce
costs associated with its supply chain; and the Company's ability to
successfully implement its 2003 rationalization and realignment initiatives, as
discussed in this press release and in the Company's Annual Report on Form 10-K
for 2002.
LIVE WEBCAST
- ------------
As previously announced, the Company will hold a conference call with analysts
today at 10 a.m. EDT. The conference call will be webcast live via Hershey's
corporate Web site www.hersheys.com. Please go to the Investor Relations Section
of the Web site for further details.
# # #
Hershey Foods Corporation
Summary of Consolidated Statements of Income
for the periods ended June 29, 2003 and June 30, 2002
(in thousands of dollars except per share amounts)
Second Quarter Six Months
--------------- ------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales $849,115 $823,462 $1,802,277 $1,811,968
------------- --------------- --------------- --------------
Costs and Expenses:
Cost of Sales 515,370 509,991 1,112,249 1,134,015
Selling, Marketing and Administrative 201,388 195,875 388,940 398,616
Business Realignment Charge, net 3,885 1,976 3,885 10,738
------------- --------------- --------------- --------------
Total Costs and Expenses 720,643 707,842 1,505,074 1,543,369
------------- --------------- --------------- --------------
Income Before Interest and Income Taxes (EBIT) 128,472 115,620 297,203 268,599
Interest Expense, net 15,544 15,863 30,155 31,328
------------- --------------- --------------- --------------
Income Before Income Taxes 112,928 99,757 267,048 237,271
Provision for Income Taxes 41,444 36,609 98,006 87,078
------------- --------------- --------------- --------------
Net Income $71,484 $63,148 $169,042 $150,193
============= =============== =============== ==============
Net Income Per Share - Basic $0.55 $0.46 $1.28 $1.10
============= =============== =============== ==============
- Diluted $0.54 $0.46 $1.27 $1.09
============= =============== =============== ==============
Shares Outstanding - Basic 131,130 136,831 132,234 136,765
============= =============== =============== ==============
- Diluted 131,983 138,002 133,094 138,062
============= =============== =============== ==============
Key Margins:
- ------------
Gross Margin 39.3% 38.1% 38.3% 37.4%
==== ==== ==== ====
EBIT Margin 15.1% 14.0% 16.5% 14.8%
==== ==== ==== ====
Net Margin 8.4% 7.7% 9.4% 8.3%
=== === === ===
Hershey Foods Corporation
Consolidated Balance Sheets
as of June 29, 2003 and December 31, 2002
(in thousands of dollars)
Assets 2003 2002
Cash and Cash Equivalents $18,698 $297,743
Accounts Receivable - Trade (Net) 230,380 370,976
Inventories 676,630 503,291
Prepaid Expenses and Other 153,364 91,608
------------ --------------
Total Current Assets 1,079,072 1,263,618
Net Plant and Property 1,502,465 1,486,055
Goodwill 386,484 378,453
Other Intangibles 39,651 39,898
Other Assets 290,668 312,527
------------ --------------
Total Assets $3,298,340 $3,480,551
============ ==============
Liabilities and Stockholders' Equity
Loans Payable $52,937 $28,124
Accounts Payable 134,293 124,507
Accrued Liabilities 329,116 356,716
Taxes Payable 5,220 12,731
Deferred Income Taxes --- 24,768
------------ --------------
Total Current Liabilities 521,566 546,846
Long-Term Debt 850,738 851,800
Other Long-Term Liabilities 363,380 362,162
Deferred Income Taxes 358,830 348,040
------------ --------------
Total Liabilities 2,094,514 2,108,848
Total Stockholders' Equity 1,203,826 1,371,703
------------ --------------
Total Liabilities and Stockholders' Equity $3,298,340 $3,480,551
============ ==============
Hershey Foods Corporation
Pro Forma Summary of Consolidated Statements of Income
for the periods ended June 29, 2003 and June 30, 2002
(in thousands of dollars except per share amounts)
Second Quarter Six Months
-------------- ----------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales $849,115 $823,462 $1,802,277 $1,811,968
---------- ------------ ------------- ------------
Costs and Expenses:
Cost of Sales 515,249 (a) 509,430 (c) 1,112,128 (a) 1,133,217 (c)
Selling, Marketing and Administrative 201,388 195,875 388,940 398,616
Business Realignment Charge, net --- (b) --- (d) --- (b) --- (d)
---------- ------------ ------------- ------------
Total Costs and Expenses 716,637 705,305 1,501,068 1,531,833
---------- ------------ ------------- ------------
Income Before Interest and Income Taxes (EBIT) 132,478 118,157 301,209 280,135
Interest Expense, net 15,544 15,863 30,155 31,328
---------- ------------ ------------- ------------
Income Before Income Taxes 116,934 102,294 271,054 248,807
Provision for Income Taxes 42,936 37,542 99,498 91,312
---------- ------------ ------------- ------------
Net Income $73,998 $64,752 $171,556 $157,495
========== ============ ============= ============
Net Income Per Share - Basic $0.56 $0.47 $1.30 $1.15
========== ============ ============= ============
- Diluted $0.56 $0.47 $1.29 $1.14
========== ============ ============= ============
Shares Outstanding - Basic 131,130 136,831 132,234 136,765
========== ============ ============= ============
- Diluted 131,983 138,002 133,094 138,062
========== ============ ============= ============
Key Margins:
- ------------
Adjusted Gross Margin 39.3% 38.1% 38.3% 37.5%
==== ==== ==== ====
Adjusted EBIT Margin 15.6% 14.3% 16.7% 15.5%
==== ==== ==== ====
Adjusted Net Margin 8.7% 7.9% 9.5% 8.7%
=== === === ===
(a) Excludes business realignment charge of $.1 million on a pre-tax and after-tax basis for the second quarter
and for the six months.
(b) Excludes business realignment charge of $3.9 million pre-tax or $2.5 million after tax for the second quarter
and for the six months.
(c) Excludes business realignment charge of $.6 million pre-tax or $.4 million after tax for the second quarter
and $.8 million pre-tax or $.5 million after tax for the six months.
(d) Excludes business realignment charge of $2.0 million pre-tax or $1.3 million after tax for the second quarter
and $10.7 million pre-tax or $6.8 million after tax for the six months.