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
January 26, 2005
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 January 26, 2005, Hershey Foods Corporation (“the Company”) announced sales and earnings for the fourth quarter and full year ended December 31, 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 January 26, 2005
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: January 26, 2005
HERSHEY FOODS CORPORATION
By:
/s/David J. West
David J. West
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 January 26, 2005 |
Page 3 of 3 Pages
Exhibit Index - Page 3
Exhibit 99.1
HERSHEY FOODS
ANNOUNCES RECORD FOURTH QUARTER
AND FULL-YEAR RESULTS
HERSHEY, Pa., January 26, 2005 — Hershey Foods Corporation (NYSE:HSY) today announced record sales and earnings from operations for the fourth quarter ended December 31, 2004. Consolidated net sales were $1,267,963,000 compared with $1,179,255,000 for the fourth quarter of 2003. Net income for the fourth quarter of 2004 was $170,286,000, or $.68 per share-diluted, compared with $144,938,000, or $.55 per share diluted, for the comparable period of 2003.
For the fourth quarter of 2003, these results, prepared in accordance with generally accepted accounting principals (GAAP), include a pre-tax charge of $11.8 million, or $.03 per share-diluted, relating to business rationalization and realignment initiatives. Net income for the fourth quarter of 2004 was $170,286,000, or $.68 per share-diluted, compared with $152,131,000, or $.58 per share-diluted, after excluding the item described above, for the fourth quarter of 2003, an increase of 17.2 percent.
Record Full-Year Results from Operations
For the full year 2004, consolidated net sales were $4,429,248,000 compared with $4,172,551,000 for 2003, an increase of 6.2 percent. Net income for 2004 was $590,879,000, or $2.30 per share-diluted, compared with $457,584,000, or $1.73 per share-diluted, for 2003.
Net income for 2004 includes the benefit of a $61.1 million, or $.24 per share-diluted, non-cash reduction of income tax expense resulting from the second quarter adjustment to tax reserves following the completion of prior years’ tax audits. Net income for 2003 includes 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 for certain warehouse and distribution facilities. The results for 2003 also include pre-tax charges related to business rationalization and realignment initiatives of $25.5 million, or $.05 per share-diluted, and a pre-tax gain on the sale of certain gum brands of $8.3 million, or $.02 per share-diluted.
A discussion of the non-cash reduction of income tax expense is contained in Note 15 of the Company’s Form 10-Q for the quarterly period ended October 3, 2004. 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.
Excluding the items mentioned above, net income for 2004 was $529,798,000, or $2.06 per share-diluted, compared with $474,734,000, or $1.79 per share-diluted, for 2003, an increase of 15.1 percent.
Fourth Quarter Performance
Hershey’s fourth quarter sales increased by 7.5 percent, primarily attributable to strong unit volume growth for new products and limited editions. Despite higher commodity costs and expenses associated with new product introductions, earnings before interest and taxes grew by 11.7 percent, after excluding the charges for business rationalization and realignment in 2003. Shares outstanding declined as a result of the share purchase from the Milton Hershey School Trust in July, contributing to an increase of 17.2 percent in earnings per share-diluted.
“The fourth quarter was excellent,” said Richard H. Lenny, Chairman, President, and Chief Executive Officer. “Strong sales growth fueled by new products and more efficient trade spending combined with solid cost control to deliver record profitability. Marketplace momentum accelerated as we gained market share in all major classes of trade. For the year, Hershey delivered record sales, earnings, and returns despite significant cost pressures. This performance further validates the sustainability of our value-enhancing strategy.
“We expect this momentum to continue in 2005 behind additional consumer-driven innovation and superior performance across the value chain, both within core confectionery and the broader snack market. We expect organic net sales to grow near the top of our long-term objective of 3 to 4 percent, before the benefit of the business acquisitions completed in 2004. Earnings per share-diluted should increase within our long-range goal of 9 to 11 percent,” Lenny concluded.
Note: In this sales and earnings release, Hershey has provided income measures excluding certain items described above, in addition to income determined in accordance with GAAP. These non-GAAP financial measures, as shown in the attached pro forma income statements, are used in evaluating results of operations for internal purposes. These non-GAAP measures are 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; and the Company’s ability to implement improvements to reduce costs associated with its supply chain, 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 a.m. Eastern Time. The conference call will be webcast live via Hershey’s corporate Web site www.hersheyfoods.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 December 31, 2004 and December 31, 2003
(in thousands of dollars except per share amounts)
Fourth Quarter Twelve Months
-------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Net Sales $1,267,963 $1,179,255 $4,429,248 $4,172,551
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of Sales 764,287 708,292 2,679,531 2,544,726
Selling, Marketing and Administrative 217,150 215,395 847,540 816,442
Business Realignment Charge, net --- 10,908 --- 23,357
Gain on Sale of Business --- --- --- (8,330)
----------- ----------- ----------- -----------
Total Costs and Expenses 981,437 934,595 3,527,071 3,376,195
----------- ----------- ----------- -----------
Income Before Interest and Income Taxes (EBIT) 286,526 244,660 902,177 796,356
Interest Expense, net 17,939 16,116 66,533 63,529
----------- ----------- ----------- -----------
Income Before Income Taxes 268,587 228,544 835,644 732,827
Provision for Income Taxes 98,301 83,606 244,765 267,875
----------- ----------- ----------- -----------
Income Before Accounting Change 170,286 144,938 590,879 464,952
Cumulative Effect of Accounting Change,
net of tax --- --- --- 7,368
----------- ----------- ----------- -----------
Net Income $170,286 $144,938 $590,879 $457,584
=========== =========== =========== ===========
Net Income Per Share Before Cumulative
Effect of Accounting Change - Basic - Common $0.71 $0.57 $2.38 $1.81
=========== =========== =========== ===========
- Basic - Class B $0.64 $0.52 $2.17 $1.64
=========== =========== =========== ===========
- Diluted $0.68 $0.55 $2.30 $1.76
=========== =========== =========== ===========
Net Income Per Share - Basic - Common $0.71 $0.57 $2.38 $1.78
=========== =========== =========== ===========
- Basic - Class B $0.64 $0.52 $2.17 $1.61
=========== =========== =========== ===========
- Diluted $0.68 $0.55 $2.30 $1.73
=========== =========== =========== ===========
Shares Outstanding - Basic - Common 186,032 199,456 193,037 201,768
=========== =========== =========== ===========
- Basic - Class B 60,842 60,844 60,844 60,844
=========== =========== =========== ===========
- Diluted 250,457 262,564 256,827 264,532
=========== =========== =========== ===========
Key Margins:
Gross Margin 39.7% 39.9% 39.5% 39.0%
EBIT Margin 22.6% 20.7% 20.4% 19.1%
Net Margin 13.4% 12.3% 13.3% 11.0%
Hershey Foods Corporation
Pro Forma Summary of Consolidated Statements of Income
for the periods ended December 31, 2004 and December 31, 2003
(in thousands of dollars except per share amounts)
Fourth Quarter Twelve Months
-------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Net Sales $1,267,963 $1,179,255 $4,429,248 $4,172,551
--------- ---------- ---------- ----------
Costs and Expenses:
Cost of Sales 764,287 707,411 (a) 2,679,531 2,542,606 (a)
Selling, Marketing and Administrative 217,150 215,395 847,540 816,442
Business Realignment Charge, net --- --- (b) --- --- (b)
Gain on Sale of Business --- --- --- --- (c)
--------- ---------- ---------- ---------
Total Costs and Expenses 981,437 922,806 3,527,071 3,359,048
--------- ---------- ---------- ---------
Income Before Interest and Income Taxes (EBIT) 286,526 256,449 902,177 813,503
Interest Expense, net 17,939 16,116 66,533 63,529
--------- ---------- ---------- ---------
Income Before Income Taxes 268,587 240,333 835,644 749,974
Provision for Income Taxes 98,301 88,202 305,846 (d) 275,240
--------- ---------- ---------- ---------
Net Income $ 170,286 $ 152,131 $ 529,798 $ 474,734
========= ========== ========== =========
Net Income Per Share - Basic - Common $ 0.71 $ 0.60 $ 2.14 $ 1.85
========= ========== ========== =========
- Basic - Class B $ 0.64 $ 0.54 $ 1.94 $ 1.67
========= ========== ========== =========
- Diluted $ 0.68 $ 0.58 $ 2.06 $ 1.79
========= ========== ========== =========
Shares Outstanding - Basic - Common 186,032 199,456 193,037 201,768
========= ========== ========== =========
- Basic - Class B 60,842 60,844 60,844 60,844
========= ========== ========== =========
- Diluted 250,457 262,564 256,827 264,532
========= ========== ========== =========
Key Margins:
Adjusted Gross Margin 39.7% 40.0% 39.5% 39.1%
Adjusted EBIT Margin 22.6% 21.7% 20.4% 19.5%
Adjusted Net Margin 13.4% 12.9% 12.0% 11.4%
(a) Excludes business realignment charge of $.9 million pre-tax or $.5 million after-tax for the fourth
quarter and $2.1 million pre-tax or $1.3 million after-tax for the twelve months.
(b) Excludes business realignment charge of $10.9 million pre-tax or $6.7 million after-tax for the fourth
quarter and $23.4 million pre-tax or $14.2 million after-tax for the twelve months.
(c) Excludes gain on sale of business of $8.3 million pre-tax or $5.7 million after-tax for the twelve months.
(d) Excludes tax adjustment of $(61.1) million for the twelve months, reflecting the completion of prior years'
tax audits.
Hershey Foods Corporation
Consolidated Balance Sheets
as of December 31, 2004 and December 31, 2003
(in thousands of dollars)
Assets 2004 2003
- ------ ---- ----
Cash and Cash Equivalents $54,837 $114,793
Accounts Receivable - Trade (Net) 408,930 407,612
Deferred Income Taxes 46,503 13,285
Inventories 557,180 492,859
Prepaid Expenses and Other 114,991 103,020
---------- ---------
Total Current Assets 1,182,441 1,131,569
Net Plant and Property 1,682,698 1,661,939
Goodwill 463,947 388,960
Other Intangibles 125,233 38,511
Other Assets 343,212 361,561
---------- ----------
Total Assets $3,797,531 $3,582,540
========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Loans Payable $622,320 $12,509
Accounts Payable 148,686 132,222
Accrued Liabilities 472,096 416,181
Taxes Payable 42,280 24,898
----------- ----------
Total Current Liabilities 1,285,382 585,810
Long-Term Debt 690,602 968,499
Other Long-Term Liabilities 403,356 370,776
Deferred Income Taxes 328,889 377,589
----------- ----------
Total Liabilities 2,708,229 2,302,674
Total Stockholders' Equity 1,089,302 1,279,866
----------- ----------
Total Liabilities and Stockholders' Equity $3,797,531 $3,582,540
=========== ==========