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
October 21, 2004
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
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Page 1 of 3 Pages
Exhibit Index - Page 3
INFORMATION TO BE INCLUDED IN REPORT
Item 2.02 Results of Operations and Financial Condition
On October 21, 2004, Hershey Foods Corporation (“the Company”) announced sales and earnings for the third quarter of 2004. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
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, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release dated October 21, 2004
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: October 21, 2004
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 |
| 99.1 | Hershey Foods Corporation Press Release dated October 21, 2004 |
Page 3 of 3 Pages
Exhibit Index – Page 3
Exhibit 99.1
HERSHEY FOODS
ANNOUNCES RECORD THIRD QUARTER
AND NINE-MONTHS RESULTS
HERSHEY, Pa., October 21, 2004—Hershey Foods Corporation (NYSE:HSY) today announced record sales and earnings from operations for the third quarter ended October 3, 2004. Consolidated net sales for the third quarter were $1,254,508,000 compared with $1,191,019,000 for the third quarter of 2003. Net income for the third quarter of 2004 was $166,229,000, or $.66 per share-diluted, compared with $143,604,000, or $.55 per share-diluted, for the comparable period of 2003. Earnings per share for 2003 have been adjusted to reflect the two-for-one stock split effective June 15, 2004.
For the third quarter of 2003, these GAAP results include an after-tax charge of $7.4 million, or $.03 per share-diluted, associated with the cumulative effect of a change in accounting for the Company’s leases of certain warehouse and distribution facilities. In addition, the 2003 third quarter results include pre-tax charges related to business rationalization and realignment initiatives of $9.7 million, or $.02 per share-diluted, and a gain on the sale of several gum brands of $8.3 million, or $.02 per share-diluted.
Net income for the third quarter of 2004 was $166,229,000, or $.66 per share-diluted, compared with $151,047,000, or $.57 per share-diluted, after excluding the items described above, for the third quarter of 2003, an increase of 15.8 percent.
Record Nine-Months Results from Operations
For the first nine months of 2004, consolidated net sales were $3,161,285,000 compared with $2,993,296,000 for the first nine months of 2003. GAAP net income for the first nine months of 2004 was $420,593,000, or $1.62 per share-diluted, compared with $312,646,000, or $1.18 per share-diluted, for the first nine months of 2003. Earnings per share for 2003 have been adjusted to reflect the two-for-one stock split effective June 15, 2004.
Net income for the first nine months of 2004 includes the benefit of a $61.1 million, or $.23 per share-diluted, non-cash reduction of income tax expense resulting from second quarter adjustments to tax reserves following the completion of prior years’ tax audits. Results for the first nine months of 2003 included pre-tax charges related to 2003 business rationalization and realignment initiatives of $13.7 million, or $.03 per share-diluted, partially offset by the gain of $8.3 million, or $.02 per share-diluted, on the sale of certain gum brands; and an after-tax charge of $7.4 million, or $.03 per share-diluted, associated with the cumulative effect of the change in accounting for the Company’s leases of certain warehouse and distribution facilities.
Excluding the items mentioned above, net income for the first nine months of 2004 was $359,512,000, or $1.39 per share-diluted, compared with $322,603,000, or $1.22 per share-diluted, in the first nine months of 2003, an increase of 13.9%.
The components of the 2003 brand and product rationalization initiatives and realignment of the sales organization are described in Management’s Discussion and Analysis, and Note 4 to the Consolidated Financial Statements, contained in the Company’s 2003 Annual Report on Form 10-K.
Third Quarter Performance
Hershey’s third quarter sales increased by 5.3%, reflecting unit volume growth associated with the introduction of new products and limited edition items, as well as net price realization. Gross margin expanded, despite higher commodities costs, primarily as a result of productivity improvement throughout the supply chain and favorable pricing. Selling, Marketing, and Administrative costs declined slightly as a percentage of sales due to discipline in all spending areas and better targeted, more efficient brand and customer support.
“Our performance during the third quarter was very strong,” said Richard H. Lenny, Chairman, President, and Chief Executive Officer. “Innovative, on-trend new products and well-executed retail initiatives delivered excellent sales and market share gains. This above-trend sales growth combined with tight cost control yielded record profitability. Through the first nine months of 2004, Hershey’s performance has been balanced and consistent with solid gains in sales, consumer takeaway, and profitability.
“As we look to the fourth quarter and into early 2005, we’ll continue to leverage our scale brands by providing meaningful benefits to consumers and ensuring profitable growth opportunities for our customers. I’m pleased with our progress to date, and the Company is committed to building upon this strong foundation. For the full year, net sales growth is expected to be above our 3-4% long-term objective, and diluted EPS growth will exceed our long-term 9-11% range,” Lenny concluded.
Note: In this sales and earnings release, Hershey has provided income excluding certain items described above, in addition to net income determined in accordance with generally accepted accounting principles (GAAP). This non-GAAP financial measure, as shown in the attached pro forma income statements, is used in evaluating results of operations for internal purposes. This non-GAAP measure is not intended to replace the presentation of financial results in accordance with GAAP. Rather, the Company believes exclusion of such items provides additional information to investors to facilitate the comparison of past and present operations.
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, market performance, and employee retirement decisions; 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 rationalization and realignment initiatives, as discussed in the Company’s Annual Report on Form 10-K for 2003.
Live Webcast
As previously announced, the Company will hold a conference call with analysts today at 10:00 a.m. Eastern Time. 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.
# # # #
Media Contact:
Stephanie L. Moritz (717) 508-3238
Financial Contact: James A. Edris (717) 534-7556
Hershey Foods Corporation
Summary of Consolidated Statements of Income
for the periods ended October 3, 2004 and September 28, 2003
(in thousands of dollars except per share amounts)
Third Quarter Nine Months
------------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Net Sales $1,254,508 $1,191,019 $3,161,285 $2,993,296
------------- ------------ ------------ ------------
Costs and Expenses:
Cost of Sales 756,408 724,185 1,915,244 1,836,434
Selling, Marketing and Administrative 216,696 212,107 630,390 601,047
Business Realignment Charge, net --- 8,564 --- 12,449
Gain on Sale of Business --- (8,330) --- (8,330)
------------- ------------ ------------ ------------
Total Costs and Expenses 973,104 936,526 2,545,634 2,441,600
------------- ------------ ------------ ------------
Income Before Interest and Income
Taxes (EBIT) 281,404 254,493 615,651 551,696
Interest Expense, net 18,252 17,258 48,594 47,413
------------- ------------ ------------ ------------
Income Before Income Taxes 263,152 237,235 567,057 504,283
Provision for Income Taxes 96,923 86,263 146,464 184,269
------------- ------------ ------------ ------------
Income Before Accounting Change 166,229 150,972 420,593 320,014
Cumulative Effect of Accounting Change,
net of tax --- 7,368 --- 7,368
------------- ------------ ------------ ------------
Net Income $166,229 $143,604 $420,593 $312,646
============= ============ ============ ============
Net Income Per Share Before Cumulative
Effect of Accounting Change - Basic - Common $0.68 $0.59 $1.68 $1.24
============= ============ ============ ============
- Basic - Class B $0.62 $0.54 $1.53 $1.12
============ ============ ============ ============
- Diluted $0.66 $0.57 $1.62 $1.21
============= ============ ============ ============
Net Income Per Share - Basic - Common $0.68 $0.57 $1.68 $1.21
============= ============ ============ ============
- Basic - Class B $0.62 $0.51 $1.53 $1.09
============ ============ ============ ============
- Diluted $0.66 $0.55 $1.62 $1.18
============= ============ ============ ============
Shares Outstanding - Basic - Common 188,726 200,460 195,288 202,561
============= ============ ============ ============
- Basic - Class B 60,843 60,844 60,844 60,844
============= ============ ============ ============
- Diluted 252,683 263,298 258,866 265,229
============= ============ ============ ============
Key Margins:
Gross Margin 39.7% 39.2% 39.4% 38.6%
EBIT Margin 22.4% 21.4% 19.5% 18.4%
Net Margin 13.3% 12.1% 13.3% 10.4%
Hershey Foods Corporation
Pro Forma Summary of Consolidated Statements of Income
for the periods ended October 3, 2004 and September 28, 2003
(in thousands of dollars except per share amounts)
Third Quarter Nine Months
------------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Net Sales $1,254,508 $1,191,019 $3,161,285 $2,993,296
----------- ------------ ------------ ------------
Costs and Expenses:
Cost of Sales 756,408 723,067 (a) 1,915,244 1,835,195 (a)
Selling, Marketing and Administrative 216,696 212,107 630,390 601,047
Business Realignment Charge, net --- --- (b) --- --- (b)
Gain on Sale of Business --- --- (c) --- --- (c)
----------- ------------ ------------ ------------
Total Costs and Expenses 973,104 935,174 2,545,634 2,436,242
----------- ------------ ------------ ------------
Income Before Interest and Income
Taxes (EBIT) 281,404 255,845 615,651 557,054
Interest Expense, net 18,252 17,258 48,594 47,413
----------- ------------ ------------ ------------
Income Before Income Taxes 263,152 238,587 567,057 509,641
Provision for Income Taxes 96,923 87,540 207,545 (d) 187,038
----------- ------------ ------------ ------------
Net Income $166,229 $151,047 $359,512 $322,603
=========== ============ ============ ============
Net Income Per Share - Basic - Common $0.68 $0.59 $1.44 $1.25
=========== ============ ============ ============
- Basic - Class B $0.62 $0.54 $1.31 $1.13
=========== ============ ============ ============
- Diluted $0.66 $0.57 $1.39 $1.22
=========== ============ ============ ============
Shares Outstanding - Basic - Common 188,726 200,460 195,288 202,561
=========== ============ ============ ============
- Basic - Class B 60,843 60,844 60,844 60,844
=========== ============ ============ ============
- Diluted 252,683 263,298 258,866 265,229
=========== ============ ============ ============
Key Margins:
Adjusted Gross Margin 39.7% 39.3% 39.4% 38.7%
Adjusted EBIT Margin 22.4% 21.5% 19.5% 18.6%
Adjusted Net Margin 13.3% 12.7% 11.4% 10.8%
(a) Excludes business realignment charge of $1.1 million pre-tax or $.7 million after-tax for
the third quarter, and $1.2 million pre-tax or $.8 million after-tax for the nine months.
(b) Excludes business realignment charge of $8.6 million pre-tax or $5.2 million after-tax for
the third quarter, and $12.4 million pre-tax or $7.5 million after-tax for the nine months.
(c) Excludes gain on sale of business of $8.3 million pre-tax or $5.7 million after-tax for the
third quarter and the nine months.
(d) Excludes tax provision adjustment of $(61.1) million for the nine months.
Hershey Foods Corporation
Consolidated Balance Sheets
as of October 3, 2004 and December 31, 2003
(in thousands of dollars)
Assets 2004 2003
- ------ ---- ----
Cash and Cash Equivalents $87,389 $114,793
Accounts Receivable - Trade (Net) 484,197 407,612
Deferred Income Taxes 18,024 13,285
Inventories 643,549 492,859
Prepaid Expenses and Other 117,015 103,020
--------------- ---------------
Total Current Assets 1,350,174 1,131,569
Net Plant and Property 1,667,791 1,661,939
Goodwill 377,762 388,960
Other Intangibles 38,222 38,511
Other Assets 352,774 361,561
--------------- ---------------
Total Assets $3,786,723 $3,582,540
=============== ===============
Liabilities and Stockholders' Equity
- ------------------------------------
Loans Payable $563,057 $12,509
Accounts Payable 154,890 132,222
Accrued Liabilities 424,399 416,181
Taxes Payable 19,924 24,898
-------------- ---------------
Total Current Liabilities 1,162,270 585,810
Long-Term Debt 968,956 968,499
Other Long-Term Liabilities 394,933 370,776
Deferred Income Taxes 320,055 377,589
--------------- ---------------
Total Liabilities 2,846,214 2,302,674
Total Stockholders' Equity 940,509 1,279,866
--------------- ---------------
Total Liabilities and Stockholders' Equity $3,786,723 $3,582,540
=============== ===============