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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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______________________________
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FORM
8-K
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CURRENT
REPORT
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Pursuant
to Section 13 or 15(d) of the
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Securities
Exchange Act of 1934
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April 20,
2006
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Date
of Report (Date of earliest event
reported)
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The Hershey Company
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(Exact
name of registrant as specified in its
charter)
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Delaware
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(State
or other jurisdiction of
incorporation)
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1-183
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23-0691590
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(Commission
File Number)
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(IRS
Employer Identification No.)
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100
Crystal A Drive, Hershey, Pennsylvania
17033
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(Address
of Principal Executive Offices) (Zip
Code)
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Registrant's
telephone number, including area code: (717)
534-6799
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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:
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[
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Page
1
of
3
Pages
Exhibit
Index - Page 3
INFORMATION
TO BE INCLUDED IN REPORT
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Item
2.02
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Results
of Operations and Financial
Condition
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On
April
20, 2006, The Hershey Company (“the Company”) announced sales and earnings for
the first quarter of 2006. 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.
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Item
9.01
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Financial
Statements and Exhibits
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(d)
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Exhibits
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99.1
Press
Release dated April 20, 2006
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:
April 20, 2006
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THE
HERSHEY COMPANY
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By:
/s/
David J.
West
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David
J. West
Senior
Vice President,
Chief
Financial Officer
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Page 2
of 3
Pages
Exhibit
Index - Page 3
EXHIBIT
INDEX
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Exhibit
No.
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Description
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99.1
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Press
Release dated April 20, 2006
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Page 3
of
3
Pages
Exhibit
Index - Page 3
Exhibit
99.1
HERSHEY
REPORTS FIRST QUARTER RESULTS;
ANNOUNCES
MAJOR GROWTH INITIATIVES;
REAFFIRMS EXPECTATIONS
FOR 2006
HERSHEY,
Pa., April 20, 2006—The
Hershey Company (NYSE:HSY) today announced sales and earnings for the first
quarter ended April 2, 2006. Consolidated net sales were $1,132,728,000 compared
with $1,126,414,000 for the first quarter of 2005. Net income for the first
quarter of 2006 was $120,968,000, or $.50 per share-diluted, compared with
$113,022,000, or $.45 per share-diluted, for the comparable period of 2005.
The
results reflect the expensing of employee stock options and other share-based
compensation for all periods presented in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 123 (Revised
2004)
Share-Based Payment
(“SFAS
No. 123R”), under the modified retrospective application method. Under the
modified retrospective application method, the results for 2005 are reported
as
though stock options granted by the Company had been expensed beginning January
1, 2005.
For
the
first quarter of 2006, these results, prepared in accordance with generally
accepted accounting principles (“GAAP”), include a net pre-tax charge of $1.7
million associated with the previously announced business realignment
initiatives to advance the Company’s value-enhancing strategy. Net income from
operations, which excludes the net charge for the first quarter of 2006,
was
$122,183,000, or $.50 per share-diluted, compared with $113,022,000, or $.45
per
share-diluted in 2005.
Modest
sales growth, strong productivity, solid cost
control, and a lower tax rate generated an 11.1 percent increase in diluted
earnings per share from operations.
First-Quarter
Performance
“Results
for the first quarter were mixed,” said Richard H. Lenny, Chairman, President
and Chief Executive Officer, “as modest sales growth was leveraged through
productivity improvement and cost control to deliver solid earnings from
operations. Our sales performance was impacted by earlier seasonal
shipments, which benefited our market share results, as well as lower
single-serve shipments. This slowdown can be attributed to a price increase
buy-in from last year and a reduction in retail inventory levels at selected
customers.
“Importantly,
Hershey’s marketplace leadership continued to strengthen. We gained market share
in all major product segments and across most classes of trade on both a
seasonal and everyday basis. New products such as Kissables and Ice
Breaker Ice Cubes were solid contributors to our share
gains.
“As
we
approach the balance of 2006, we’ve identified several opportunities to ensure
that Hershey continues to deliver a superior value proposition to both our
consumers and our customers. We’re accelerating the development and introduction
of innovative platforms. Specifically, we’re expanding our presence within the
dark chocolate, refreshment, cookies, and single-serve snack nut segments.
These
platforms deliver highly incremental sales and profitability while enabling
Hershey to leverage its iconic brands, marketplace leadership, and in-store
presence. In addition, we’ll be reducing the absolute number of both existing
and new products. This will streamline our business system and ensure the
appropriate focus on these high growth initiatives.
“Across
the business system, we have good visibility into our full-year cost profile.
We
anticipate expanding operating margins will provide the appropriate leverage
to improving sales performance. Therefore, for the full year 2006, we
expect that net sales will increase at a rate somewhat above our 3-4 percent
long-term goal, with diluted earnings per share from operations to increase
slightly above our 9-11 percent long-term expectations,” Lenny concluded.
Note: In
this
sales and earnings release, Hershey has provided income measures excluding
certain items described above, in addition to net 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.
Live
Web Cast
As
previously announced, the Company will hold a conference call with analysts
today at 8:30 a.m. Eastern Time. The conference call will be web cast live
via
Hershey’s corporate Website www.hersheys.com.
Please
go to the Investor Relations Section of the Website for further
details.
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: our ability to implement and generate expected ongoing
annual savings from the initiatives to advance our value-enhancing strategy;
changes in raw material and other costs and selling price increases; our
ability
to implement improvements to and reduce costs associated with our supply
chain;
pension cost factors, such as actuarial assumptions, market performance and
employee retirement decisions; changes in our stock price, and resulting
impacts
on our expenses for incentive compensation,
stock options and certain employee benefits; market demand for our new and
existing products; changes in our business environment, including actions
of
competitors and changes in consumer preferences; changes in governmental
laws
and regulations, including taxes; risks and uncertainties related to our
international operations; and such other matters as discussed in our Annual
Report on Form 10-K for 2005.
#
#
#
Media
Contact: Stephanie L. Moritz (717)
534-7641
Financial
Contact: James A.
Edris (717)
534-7556
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Summary
of Consolidated Statements of Income
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for
the periods ended April 2, 2006 and April 3, 2005
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(in
thousands except per share amounts)
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First
Quarter
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2006
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2005
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Net
Sales
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$
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1,132,728
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$
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1,126,414
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Costs
and Expenses:
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Cost
of Sales
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702,878
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695,584
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Selling,
Marketing and Administrative
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216,794
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233,158
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Business
Realignment Charge
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3,331
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----
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Total
Costs and Expenses
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923,003
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928,742
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Income
Before Interest and Income Taxes (EBIT)
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209,725
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197,672
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Interest
Expense, net
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25,203
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19,404
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Income
Before Income Taxes
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184,522
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178,268
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Provision
for Income Taxes
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63,554
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65,246
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Net
Income
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$
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120,968
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$
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113,022
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Net
Income Per Share - Basic - Common
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$
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0.52
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$
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0.47
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- Basic - Class B
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$
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0.47
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$
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0.43
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- Diluted
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$
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0.50
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$
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0.45
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Shares
Outstanding - Basic - Common
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178,892
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185,715
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-
Basic - Class B
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60,818
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60,829
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- Diluted
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243,147
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250,323
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Key
Margins:
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Gross
Margin
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37.9
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%
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38.2
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%
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EBIT
Margin
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18.5
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%
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17.5
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%
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Net
Margin
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10.7
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%
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10.0
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%
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The
Hershey Company
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Pro
Forma Summary of Consolidated Statements of
Income
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for
the periods ended April 2, 2006 and April 3, 2005
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(in
thousands except per share amounts)
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First
Quarter
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2006
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2005
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Net
Sales
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$
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1,132,728
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$
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1,126,414
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Costs
and Expenses:
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Cost
of Sales
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704,477
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(a)
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695,584
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Selling,
Marketing and Administrative
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216,794
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233,158
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Business
Realignment Charge
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---
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(b)
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---
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Total
Costs and Expenses
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921,271
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928,742
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Income
Before Interest and Income Taxes (EBIT)
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211,457
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197,672
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Interest
Expense, net
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25,203
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19,404
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Income
Before Income Taxes
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186,254
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178,268
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Provision
for Income Taxes
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64,071
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65,246
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Net
Income
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$
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122,183
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$
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113,022
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Net
Income Per Share - Basic - Common
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$
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0.52
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$
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0.47
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- Basic - Class B
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$
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0.47
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$
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0.43
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- Diluted
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$
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0.50
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$
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0.45
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Shares
Outstanding - Basic - Common
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178,892
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185,715
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- Basic - Class B
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60,818
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60,829
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-
Diluted
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243,147
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250,323
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Key
Margins:
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Adjusted
Gross Margin
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37.8
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%
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38.2
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%
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Adjusted
EBIT Margin
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18.7
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%
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17.5
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%
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Adjusted
Net Margin
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10.8
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%
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10.0
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%
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(a)
Excludes business realignment credit of $(1.6) million pre-tax or
$(1.0) million after-tax for the first quarter.
(b)
Excludes business realignment charge of $3.3 million pre-tax or $2.2
million after-tax for the first
quarter.
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The
Hershey Company
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Consolidated
Balance Sheets
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as
of April 2, 2006 and December 31, 2005
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(in
thousands of dollars)
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Assets
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2006
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2005
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Cash
and Cash Equivalents
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$
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43,940
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$
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67,183
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Accounts
Receivable - Trade (Net)
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414,807
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559,289
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Deferred
Income Taxes
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70,347
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78,196
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Inventories
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720,380
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610,284
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Prepaid
Expenses and Other
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109,665
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93,988
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Total
Current Assets
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1,359,139
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1,408,940
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Net
Plant and Property
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1,648,125
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1,659,138
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Goodwill
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487,666
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487,338
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Other
Intangibles
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141,380
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142,626
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Other
Assets
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590,222
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597,194
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Total
Assets
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$
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4,226,532
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$
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4,295,236
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Liabilities
and Stockholders' Equity
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Loans
Payable
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$
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1,088,331
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$
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819,115
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Accounts
Payable
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177,907
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167,812
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Accrued
Liabilities
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417,734
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507,843
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Taxes
Payable
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51,996
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23,453
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Total
Current Liabilities
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1,735,968
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1,518,223
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Long-Term
Debt
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752,781
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942,755
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Other
Long-Term Liabilities
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402,544
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412,929
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Deferred
Income Taxes
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403,456
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400,253
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Total
Liabilities
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3,294,749
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3,274,160
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Total
Stockholders' Equity
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931,783
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1,021,076
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Total
Liabilities and Stockholders' Equity
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$
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4,226,532
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$
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4,295,236
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