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UNITED
STATES
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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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July
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)
534-7628
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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
July
20, 2006, The Hershey Company (“the Company”) announced sales and earnings for
the second 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) Exhibits
99.1
Press
Release dated July 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:
July 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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The
Hershey Company Press Release dated July 20, 2006
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Page
3 of 3 Pages
Exhibit
Index - Page 3
Exhibit
99.1
HERSHEY
ANNOUNCES RECORD SECOND QUARTER RESULTS
FROM
OPERATIONS AND REAFFIRMS EXPECTATIONS
FOR 2006
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·
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Net
Sales increase 6.4%
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·
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Reported
Earnings per share $0.41
diluted
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·
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Earnings
per share from operations $0.42 diluted, up
13.5%
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HERSHEY,
Pa., July 20, 2006 —
The
Hershey Company (NYSE:HSY) today announced sales and earnings for the second
quarter ended July 2, 2006. Consolidated net sales were $1,052,067,000, up
6.4
percent compared with $988,447,000 for the second quarter of 2005. Net income
for the second quarter of 2006 was $98,440,000, or $0.41 per share-diluted,
compared with $93,223,000 or $0.37 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,
under
the modified retrospective application method. Under the
modified
retrospective application method, the results for 2005 were adjusted and
are reported as though stock options granted by the Company had been expensed
beginning January 1, 2005.
For
the
second quarter of 2006, these results, prepared in accordance with generally
accepted accounting principles (“GAAP”), include a net pre-tax charge of $2.6
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 second quarter of 2006, was
$100,250,000, or $0.42 per share-diluted, compared with $93,223,000 or $0.37
per
share-diluted in 2005, an increase of 13.5 percent.
Record
Second-Quarter Performance
“Hershey’s
second quarter results were encouraging,” said Richard H. Lenny, Chairman,
President and Chief Executive Officer, “as strong sales growth of 6.4 percent
combined with overall solid cost controls delivered a 13.5 percent increase
in
diluted earnings per share from operations. Hershey’s new product innovation,
particularly in the areas of dark chocolate, refreshment, and Kissables,
was the
major contributor to this sales performance. Seasonal shipments also positively
impacted sales during the quarter.”
First
Half Results
For
the
first six months of 2006, consolidated net sales were $2,184,795,000, compared
with $2,114,861,000 for the first half of 2005. Net income for the first six
months of 2006 was $219,408,000, or $.91 per share-diluted, compared with
$206,245,000, or $0.83
per
share-diluted, for the first half of 2005. Excluding a first half pre-tax net
charge of $4.4 million related to the Company’s business realignment
initiatives, net income for the first six months of 2006 was $222,433,000,
or
$0.92 per share-diluted.
“Our
first half results showed an improvement in net sales trends, a strengthening
of
Hershey’s marketplace leadership behind our new product platforms and excellent
retail execution, and strong profitability” Lenny continued.
“As
we
enter the second half of 2006, we’re encouraged by our prospects. A combination
of new product innovation, solid seasonal programming, and good visibility
into
our total cost structure will enable us to deliver our full-year objectives.
Therefore,
we
anticipate net sales growth for 2006 to be somewhat above our long-term range
of 3-4
percent, and the increase in diluted earnings per share from operations should
slightly exceed our long-term expectations of 9-11 percent,” 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.
During
the second half of 2005, the Company recorded pre-tax charges associated with
business realignment initiatives of $119.0 million or $0.29 per share-diluted.
Net pre-tax charges for business realignment initiatives of $4.4 million or
$0.01 per share-diluted were recorded during the first half of 2006. Based
on
our current estimates, the total cost to implement the business realignment
initiatives is expected to be approximately $125
million to $135 million before tax or $0.30 to $0.32 per share-diluted. The
business realignment program is expected to be fully completed by the end of
2006.
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.
#
#
#
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Media
Contact:
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Kirk
Saville
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717-534-7641
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Financial
Contact:
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Mark
Pogharian
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717-534-7556
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Summary
of Consolidated Statements of Income
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|||||||||||||
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for
the periods ended July 2, 2006 and July 3, 2005
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|||||||||||||
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(in
thousands except per share amounts)
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|||||||||||||
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Second
Quarter
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Six
Months
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||||||||||||
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2006
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2005
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2006
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2005
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Net
Sales
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$
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1,052,067
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$
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988,447
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$
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2,184,795
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$
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2,114,861
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|||||
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Costs
and Expenses:
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|||||||||||||
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Cost
of Sales
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643,375
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595,152
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1,346,253
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1,290,736
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|||||||||
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Selling,
Marketing and Administrative
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221,478
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226,658
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438,272
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459,816
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|||||||||
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Business
Realignment Charge, net
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4,240
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---
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7,571
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---
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|||||||||
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Total
Costs and Expenses
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869,093
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821,810
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1,792,096
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1,750,552
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|||||||||
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Income
Before Interest and Income Taxes (EBIT)
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182,974
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166,637
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392,699
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364,309
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|||||||||
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Interest
Expense, net
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27,490
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20,625
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52,693
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40,029
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|||||||||
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Income
Before Income Taxes
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155,484
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146,012
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340,006
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324,280
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|||||||||
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Provision
for Income Taxes
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57,044
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52,789
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120,598
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118,035
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|||||||||
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Net
Income
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$
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98,440
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$
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93,223
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$
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219,408
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$
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206,245
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|||||
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Net
Income Per Share - Basic - Common
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$
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0.43
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$
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0.39
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$
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0.95
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$
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0.86
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|||||
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-
Basic - Class B
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$
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0.38
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$
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0.35
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$
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0.85
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$
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0.78
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|||||
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-
Diluted
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$
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0.41
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$
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0.37
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$
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0.91
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$
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0.83
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|||||
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Shares
Outstanding - Basic - Common
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175,779
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184,362
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177,344
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185,047
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|||||||||
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- Basic - Class B
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60,817
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60,818
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60,818
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60,824
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|||||||||
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- Diluted
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240,124
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248,993
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241,644
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249,666
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Key
Margins:
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|||||||||||||
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Gross
Margin
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38.8
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%
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39.8
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%
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38.4
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%
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39.0
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%
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|||||
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EBIT
Margin
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17.4
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%
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16.9
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%
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18.0
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%
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17.2
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%
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|||||
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Net
Margin
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9.4
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%
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9.4
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%
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10.0
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%
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9.8
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%
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|||||
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The
Hershey Company
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|||||||||||||
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Pro
Forma Summary of Consolidated Statements of
Income
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|||||||||||||
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for
the periods ended July 2, 2006 and July 3, 2005
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|||||||||||||
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(in
thousands except per share amounts)
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|||||||||||||
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Second
Quarter
|
Six
Months
|
||||||||||||
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2006
|
2005
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2006
|
2005
|
||||||||||
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Net
Sales
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$
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1,052,067
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$
|
988,447
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$
|
2,184,795
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$
|
2,114,861
|
|||||
|
Costs
and Expenses:
|
|||||||||||||
|
Cost
of Sales
|
644,975
|
(a)
|
595,152
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1,349,452
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(a)
|
1,290,736
|
|||||||
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Selling,
Marketing and Administrative
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221,478
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226,658
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438,272
|
459,816
|
|||||||||
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Business
Realignment Charge, net
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---
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(b)
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---
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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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866,453
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821,810
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1,787,724
|
1,750,552
|
|||||||||
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Income
Before Interest and Income Taxes (EBIT)
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185,614
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166,637
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397,071
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364,309
|
|||||||||
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Interest
Expense, net
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27,490
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20,625
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52,693
|
40,029
|
|||||||||
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Income
Before Income Taxes
|
158,124
|
146,012
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344,378
|
324,280
|
|||||||||
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Provision
for Income Taxes
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57,874
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52,789
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121,945
|
118,035
|
|||||||||
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Net
Income
|
$
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100,250
|
$
|
93,223
|
$
|
222,433
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$
|
206,245
|
|||||
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Net
Income Per Share - Basic - Common
|
$
|
0.43
|
$
|
0.39
|
$
|
0.96
|
$
|
0.86
|
|||||
|
-
Basic - Class B
|
$
|
0.39
|
$
|
0.35
|
$
|
0.86
|
$
|
0.78
|
|||||
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-
Diluted
|
$
|
0.42
|
$
|
0.37
|
$
|
0.92
|
$
|
0.83
|
|||||
|
Shares
Outstanding - Basic - Common
|
175,779
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184,362
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177,344
|
185,047
|
|||||||||
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- Basic - Class B
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60,817
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60,818
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60,818
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60,824
|
|||||||||
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- Diluted
|
240,124
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248,993
|
241,644
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249,666
|
|||||||||
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Key
Margins:
|
|||||||||||||
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Adjusted
Gross Margin
|
38.7
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%
|
39.8
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%
|
38.2
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%
|
39.0
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%
|
|||||
|
Adjusted
EBIT Margin
|
17.6
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%
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16.9
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%
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18.2
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%
|
17.2
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%
|
|||||
|
Adjusted
Net Margin
|
9.5
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%
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9.4
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%
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10.2
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%
|
9.8
|
%
|
|||||
|
(a)
Excludes business realignment credit of $(1.6) million pre-tax or
$(1.0)
million after-tax for the second quarter and $(3.2) million pre-tax
or
$(2.0) million after-tax for the six months.
(b)
Excludes business realignment charge of $4.2 million pre-tax or $2.8
million after-tax for the second quarter and $7.6 million pre-tax
or $5.0
million after-tax for the six
months.
|
|||||||||||||
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The
Hershey Company
|
||||||
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Consolidated
Balance Sheets
|
||||||
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as
of July 2, 2006 and December 31, 2005
|
||||||
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(in
thousands of dollars)
|
||||||
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Assets
|
2006
|
2005
|
||||
|
Cash
and Cash Equivalents
|
$
|
23,485
|
$
|
67,183
|
||
|
Accounts
Receivable - Trade (Net)
|
369,436
|
559,289
|
||||
|
Deferred
Income Taxes
|
62,638
|
78,196
|
||||
|
Inventories
|
857,861
|
610,284
|
||||
|
Prepaid
Expenses and Other
|
131,629
|
93,988
|
||||
|
Total
Current Assets
|
1,445,049
|
1,408,940
|
||||
|
Net
Plant and Property
|
1,647,220
|
1,659,138
|
||||
|
Goodwill
|
489,383
|
487,338
|
||||
|
Other
Intangibles
|
140,004
|
142,626
|
||||
|
Other
Assets
|
590,604
|
597,194
|
||||
|
Total
Assets
|
$
|
4,312,260
|
$
|
4,295,236
|
||
|
Liabilities
and Stockholders' Equity
|
||||||
|
Loans
Payable
|
$
|
1,323,749
|
$
|
819,115
|
||
|
Accounts
Payable
|
156,423
|
167,812
|
||||
|
Accrued
Liabilities
|
415,528
|
507,843
|
||||
|
Taxes
Payable
|
2,638
|
23,453
|
||||
|
Total
Current Liabilities
|
1,898,338
|
1,518,223
|
||||
|
Long-Term
Debt
|
752,654
|
942,755
|
||||
|
Other
Long-Term Liabilities
|
409,729
|
412,929
|
||||
|
Deferred
Income Taxes
|
400,718
|
400,253
|
||||
|
Total
Liabilities
|
3,461,439
|
3,274,160
|
||||
|
Total
Stockholders' Equity
|
850,821
|
1,021,076
|
||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
4,312,260
|
$
|
4,295,236
|
||