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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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April
19,
2007
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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)
534-4200
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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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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
19, 2007, The Hershey Company (“the Company”) announced sales and earnings for
the first quarter of 2007. A copy of the Company’s press release is
attached hereto as Exhibit 99.1 and incorporated herein by
reference.
The
information in Item 2.02 of 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
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Press
Release dated April 19, 2007
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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
19, 2007
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THE
HERSHEY COMPANY
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By: /s/
David J.
West
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David
J. West
Executive
Vice President, Chief Operating
Officer
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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 April 19,
2007
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Exhibit
99.1
HERSHEY
ANNOUNCES FIRST QUARTER RESULTS
AND
REAFFIRMS 2007 OUTLOOK
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·
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Earnings
per share from operations $0.51 diluted, in-line with year
ago
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·
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Progress
made against long-term strategic
initiatives
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·
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Outlook
reaffirmed for 2007, growth in net sales 3-4% and diluted EPS
from
operations 7-9%
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HERSHEY,
Pa., April 19, 2007 — The Hershey Company (NYSE: HSY) today announced
sales and earnings for the first quarter ended April 1, 2007. Consolidated
net
sales were $1,153,109,000 compared with $1,139,507,000 for the first quarter
of
2006. Net income for the first quarter of 2007 was $93,473,000, or $0.40
per
share-diluted, compared with $122,471,000, or $0.50 per share-diluted, for
the
comparable period of 2006.
For
the
first quarters of 2007 and 2006, these results, prepared in accordance with
generally accepted accounting principles (“GAAP”), include net pre-tax charges
of $40.4 million and $1.7 million, or $0.11 and $0.01 per share, respectively.
The 2007 charges are associated with the Global Supply Chain Transformation
plan
announced in February, while the 2006 charges relate to the completed business
realignment initiatives announced in July 2005. Net income from
operations, which excludes the net charges for the first quarters of 2007
and
2006, was $118,786,000, or $0.51 per share-diluted in 2007, compared with
$123,686,000, or $0.51 per share-diluted in 2006.
First-Quarter
Performance
"Results
for the first quarter were essentially in-line with our expectations," said
Richard H. Lenny, Chairman, President and Chief Executive Officer. “Net sales
increased 1.2 percent, as we’re building momentum behind our new products and
continue to benefit from the growth in dark chocolate. Seasons and a
rebound in Canada provided additional growth during the
quarter. However, growth was adversely affected by slower single
serve sales. This is being driven in part by marketplace performance
that has not yet achieved desired levels. While we did experience an improvement
in core brand takeaway, the residual impact of last year’s limited editions and
discontinued items resulted in only a 1.5 percent increase in measured takeaway.
The price increase announced on April 4, 2007, had no impact during the
quarter.
“Core
brand growth is anticipated to accelerate as we move into the second half
of the
year. The combination of stronger consumer programming and more effective
in-store support should deliver an improvement in retail takeaway and sales
growth. Where brands have already received strong programming, the response
has
been solid. Specifically, investment in the Reese’s
franchise, including the recently launched Reese’s Crispy Crunchy,
resulted in an increase of over 5 percent in retail takeaway.
"New
product platforms, including refreshment, premium and dark chocolate are
well
positioned to make meaningful contributions in 2007. Hershey’s Cacao
Reserve distribution is on track, and we'll continue to invest in trial
driving initiatives to establish this brand. Cacao Reserve is the fastest
growing new item at retail, with York Tins and Ice Breaker Sours Gum also
ranked
as top-10 new brands in the first quarter. These new products are consistent
with our strategy of delivering a premium value proposition while extending
Hershey's iconic brands.
"We
made
good progress against Hershey’s major strategic initiatives. These will position
the Company to achieve its long-term marketplace and financial goals. We
recently announced that we entered into an agreement to create the Godrej
Hershey Foods and Beverages Company joint venture in India. This followed
the
January announcement of an agreement to create a manufacturing joint venture
with Lotte in China. Both of these initiatives will enable us to deliver
profitable growth in high potential emerging markets. The Global Supply Chain
Transformation plan is on track and progressing as expected.
Outlook
“As
we
look ahead to the balance of 2007, core brand investment, improved customer
programming and innovative new products will enable the Company to meet its
objectives with momentum building throughout the year. For the full year
2007,
we expect net sales growth of 3-4 percent with diluted earnings per share
from
operations to increase in the 7-9 percent range," 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. The
aforementioned items relate to the Global Supply Chain Transformation plan
announced in February 2007 and the 2005 business realignment initiatives
recorded in 2005 and 2006. The Global Supply Chain Transformation
plan will result in pre-tax charges and non-recurring project implementation
costs of $525 million - $575 million. Total charges include project management
and start-up costs of approximately $50 million. In 2007, the Company expects
to
record GAAP charges of about $270 million - $300 million, or $0.75 - $0.84
per
share-diluted. Below is a reconciliation of GAAP and non-GAAP items to the
Company’s earnings per share outlook:
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2006
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2007
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Reported
/ Expected Diluted EPS
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$2.34
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$1.70
- $1.83
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Total
Realignment Charges
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$0.03
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$0.75
- $0.84
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Diluted
EPS from Operations*
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$2.37
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Expected
7-9% Increase in diluted EPS from Operations*
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$2.54
- $2.58
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*From
operations, excluding business realignment and one-time
costs.
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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 transform our supply chain and advance
our value-enhancing strategy; changes in raw material and other costs and
selling price increases; our ability to execute our supply chain transformation
within the anticipated timeframe in accordance with our cost estimates; the
impact of future developments related to the recent product recall and temporary
plant closure in Canada including our ability to recover costs we incurred
for
the recall and plant closure from responsible third-parties; 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 2006.
#
#
#
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Financial
Contact:
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Mark
Pogharian
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717-534-7556
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Medial
Contact:
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Kirk
Saville
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717-534-7641
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Summary
of Consolidated Statements of Income
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||||||||
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for
the periods ended April 1, 2007 and April 2, 2006
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(in
thousands except per share amounts)
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First
Quarter
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||||||||
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2007
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2006
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Net
Sales
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$ |
1,153,109
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$ |
1,139,507
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Costs
and Expenses:
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||||||||
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Cost
of Sales
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739,078
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707,365
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Selling,
Marketing and Administrative
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216,433
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216,794
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Business
Realignment Charge
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27,545
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3,331
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Total
Costs and Expenses
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983,056
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927,490
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Income
Before Interest and Income Taxes (EBIT)
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170,053
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212,017
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Interest
Expense, net
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28,255
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25,203
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Income
Before Income Taxes
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141,798
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186,814
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Provision
for Income Taxes
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48,325
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64,343
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Net
Income
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$ |
93,473
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$ |
122,471
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Net
Income Per Share - Basic – Common
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$ |
0.42
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$ |
0.52
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-
Basic – Class B
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$ |
0.37
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$ |
0.47
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-
Diluted
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$ |
0.40
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$ |
0.50
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Shares
Outstanding - Basic – Common
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169,836
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178,892
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- Basic – Class B
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60,816
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60,818
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- Diluted
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233,708
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243,147
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Key
Margins:
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Gross
Margin
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35.9 | % | 37.9 | % | ||||
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EBIT
Margin
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14.7 | % | 18.6 | % | ||||
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Net
Margin
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8.1 | % | 10.7 | % | ||||
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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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for
the periods ended April 1, 2007 and April 2,
2006
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||||||||||
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(in
thousands except per share amounts)
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||||||||||
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First
Quarter
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||||||||||
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2007
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2006
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Net
Sales
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$ |
1,153,109
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$ |
1,139,507
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Costs
and Expenses:
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||||||||||
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Cost
of Sales
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729,219
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(a)
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708,964
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(b)
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||||||
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Selling,
Marketing and Administrative
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213,447
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(c)
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216,794
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Business
Realignment Charge
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---
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(d)
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---
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(e)
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||||||
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Total
Costs and Expenses
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942,666
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925,758
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Income
Before Interest and Income Taxes (EBIT)
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210,443
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213,749
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Interest
Expense, net
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28,255
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25,203
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Income
Before Income Taxes
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182,188
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188,546
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||||||||
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Provision
for Income Taxes
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63,402
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64,860
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||||||||
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Net
Income
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$ |
118,786
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$ |
123,686
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||||||
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Net
Income Per Share - Basic – Common
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$ |
0.53
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$ |
0.53
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||||||
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-
Basic – Class B
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$ |
0.48
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$ |
0.48
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||||||
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-
Diluted
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$ |
0.51
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$ |
0.51
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||||||
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Shares
Outstanding - Basic – Common
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169,836
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178,892
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||||||||
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- Basic – Class B
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60,816
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60,818
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||||||||
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- Diluted
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233,708
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243,147
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||||||||
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Key
Margins:
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||||||||||
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Adjusted
Gross Margin
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36.8 | % | 37.8 | % | ||||||
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Adjusted
EBIT Margin
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18.3 | % | 18.8 | % | ||||||
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Adjusted
Net Margin
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10.3 | % | 10.9 | % | ||||||
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(a)
Excludes business realignment charge of $9.9 million pre-tax
or $6.2
million after-tax for the first quarter of 2007.
(b)
Excludes business realignment credit of $(1.6) million pre-tax
or $(1.0)
million after-tax for the first quarter of 2006.
(c)
Excludes business realignment and project implementation charges
of $3.0
million pre-tax or $1.8 million after-tax
for
the first quarter of 2007.
(d)
Excludes business realignment charge of $27.5 million pre-tax
or $17.3
million after-tax for the first quarter of 2007.
(e)
Excludes business realignment charge of $3.3 million pre-tax
or $2.2
million after-tax for the first quarter of 2006.
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||||||||||
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The
Hershey Company
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||||||||
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Consolidated
Balance Sheets
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||||||||
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as
of April 1, 2007 and December 31, 2006
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||||||||
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(in
thousands of dollars)
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||||||||
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Assets
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2007
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2006
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||||||
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Cash
and Cash Equivalents
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$ |
60,483
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$ |
97,141
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Accounts
Receivable - Trade (Net)
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405,908
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522,673
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||||||
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Deferred
Income Taxes
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59,649
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61,360
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||||||
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Inventories
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664,703
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648,820
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||||||
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Prepaid
Expenses and Other
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89,502
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87,818
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||||||
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Total
Current Assets
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1,280,245
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1,417,812
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||||||
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Net
Plant and Property
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1,611,323
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1,651,300
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||||||
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Goodwill
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502,815
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501,955
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||||||
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Other
Intangibles
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139,284
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140,314
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||||||
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Other
Assets
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451,607
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446,184
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||||||
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Total
Assets
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$ |
3,985,274
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$ |
4,157,565
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||||
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Liabilities
and Stockholders' Equity
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||||||||
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Loans
Payable
|
$ |
722,597
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$ |
843,998
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||||
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Accounts
Payable
|
198,147
|
155,517
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||||||
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Accrued
Liabilities
|
405,327
|
454,023
|
||||||
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Taxes
Payable
|
39,005
|
---
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||||||
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Total
Current Liabilities
|
1,365,076
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1,453,538
|
||||||
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Long-Term
Debt
|
1,248,137
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1,248,128
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||||||
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Other
Long-Term Liabilities
|
520,617
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486,473
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||||||
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Deferred
Income Taxes
|
230,743
|
286,003
|
||||||
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Total
Liabilities
|
3,364,573
|
3,474,142
|
||||||
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Total
Stockholders' Equity
|
620,701
|
683,423
|
||||||
|
Total
Liabilities and Stockholders' Equity
|
$ |
3,985,274
|
$ |
4,157,565
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||||