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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
24,
2008
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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
24, 2008, The Hershey Company (“the Company”) announced sales and earnings for
the first quarter of 2008. 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
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Press
Release dated April 24, 2008
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: April
24, 2008
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THE
HERSHEY COMPANY
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By:
/s/
Humberto
Alfonso
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Humberto
P. Alfonso
Senior
Vice President, Chief Financial
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 24,
2008
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Exhibit
99.1
HERSHEY
ANNOUNCES FIRST QUARTER RESULTS
AND
REAFFIRMS 2008 OUTLOOK
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·
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Earnings
per share-diluted from operations
$0.37
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·
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March
launch of Hershey’s Bliss TM and Starbucks®
new products on track
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·
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Global
Supply Chain Transformation progressing as
planned
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·
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Outlook
reaffirmed for 2008, growth in net sales 3-4%, with earnings per
share-diluted from operations expected to be in the $1.85 to $1.90
range
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HERSHEY, Pa., April 24, 2008 —
The Hershey Company (NYSE: HSY) today announced sales and earnings for the first
quarter ended March 30, 2008. Consolidated net sales were $1,160,342,000
compared with $1,153,109,000 for the first quarter of 2007. Net income for the
first quarter of 2008 was $63,245,000, or $0.28 per share-diluted, compared
with $93,473,000, or $0.40 per share-diluted, for the comparable period of
2007.
For the
first quarters of 2008 and 2007, these results, prepared in accordance with
generally accepted accounting principles (“GAAP”), include net pre-tax charges
of $30.7 million and $40.4 million, or $0.09 and $0.11 per share, respectively.
The majority of the 2008 charges were associated with the Global Supply Chain
Transformation program announced in February 2007. Net income from operations,
which excludes the net charges for the first quarters of 2008 and 2007, was
$83,915,000 or $0.37 per share-diluted in 2008, compared with $118,786,000, or
$0.51 per share-diluted in 2007.
First-Quarter
Performance
“Net
sales increased slightly in the first quarter and were in line with our
expectations,” said David J. West, President and Chief Executive Officer. “As we
previously communicated, the current period was adversely impacted by an
unusually early Easter and the mid-January decision to discontinue the roll-out
of Ice Breakers PACS.
Operating profit targets were achieved in a rising input cost environment. We
invested behind our core brands in the first quarter and will continue to do so
throughout 2008 to strengthen our position in the marketplace.
“During
the first quarter, Hershey made significant progress on growth initiatives that
will benefit net sales and earnings throughout the remainder of the year. The
Hershey’s Bliss
and Starbucks product
launches shipped to customers on schedule in mid-March. Consumer investment,
including advertising, sampling and merchandising, will accelerate in the second
quarter to ensure the success of these launches.
“The
expansion of our businesses in Asia is moving ahead steadily. We are focusing on
the launch of Hershey’s branded products manufactured in and for the Indian
market. In China, we continue to make progress and have full manufacturing
capabilities to support our portfolio roll-out.
“U.S.
retail takeaway in the first quarter was up 14.8 percent in channels that
account for over 80 percent of our retail business. However, this period
benefited from an early Easter season. Excluding seasonal activity, Hershey’s
retail takeaway increased 1.8 percent. In the channels measured by syndicated
data, market share was off 0.8 points. Improvements in certain channels,
customers and core brands indicate that marketplace plans, including higher
levels of consumer investment and increased retail coverage, are starting to
take hold. The price increase announced in late January had a minimal impact
during the quarter.
Outlook
“As we
look ahead to the balance of 2008, plans are in place to deliver our sales and
earnings objectives. Specifically, the launch of new products, increased levels
of brand support, consumer investment, retail coverage and merchandising will
continue to build throughout the year. We expect this to result in a sequential
improvement in net sales. Additionally, we have good visibility into our
full-year cost structure. In Monterrey, Mexico, the construction of our
new
manufacturing facility is progressing and initial production is underway. We are
encouraged by the development of our international investments and will continue
to follow a disciplined approach to growth opportunities in emerging markets.
Therefore, for the full-year 2008, we continue to expect net sales growth of 3-4
percent and earnings per share-diluted from operations of $1.85 to $1.90,” West
concluded.
Note:
In this 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 summary of consolidated statements of income, 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 program announced in February 2007 and the business realignment
in Brazil announced in December 2007. The Global Supply Chain Transformation
program is expected to 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 recorded GAAP charges related to the Global Supply Chain Transformation
program of $400.0 million, or $1.10 per share-diluted. Additionally, in the
fourth quarter of 2007 the Company recorded business realignment and impairment
charges of $12.6 million, or $0.05 per share-diluted, related to its business in
Brazil. In 2008, the Company expects to record total GAAP charges of
about $140 million - $160 million, or $0.37 - $0.42 per share-diluted. Below is
a reconciliation of GAAP and non-GAAP items to the Company’s earnings per
share-diluted outlook:
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2007
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2008
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Reported
/ Expected EPS-Diluted
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$0.93
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$1.43
- $1.53
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Total
Business Realignment
and
Impairment Charges
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$1.15
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$0.37
- $0.42
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EPS-Diluted
from Operations*
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$2.08
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--
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Expected
EPS-Diluted from Operations*
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$1.85
- $1.90
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*From
operations, excluding business realignment and impairment
charges.
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 product recall and temporary plant
closure in Canada in the fourth quarter of 2006, including our ability to
recover costs we incurred for the recall and plant closure from responsible
third-parties; the impact of future developments related to the investigation by
government regulators of alleged pricing practices by members of the
confectionery industry, including risks of subsequent litigation or further
government action; 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 2007. All information in this press release is as of April 24, 2008.
The Company undertakes no duty to update any forward-looking statement to
conform the statement to actual results or changes in the Company’s
expectations.
# #
#
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Financial
Contact:
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Mark
Pogharian
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717-534-7556
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Media
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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for
the periods ended March 30, 2008 and April 1, 2007
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(in
thousands except per share amounts)
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First
Quarter
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2008
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2007
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Net
Sales
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$ | 1,160,342 | $ | 1,153,109 | ||||
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Costs
and Expenses:
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Cost
of Sales
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783,890 | 739,078 | ||||||
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Selling,
Marketing and Administrative
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249,949 | 216,433 | ||||||
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Business
Realignment and Impairment Charges, net
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4,085 | 27,545 | ||||||
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Total
Costs and Expenses
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1,037,924 | 983,056 | ||||||
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Income
Before Interest and Income Taxes (EBIT)
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122,418 | 170,053 | ||||||
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Interest
Expense, net
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24,386 | 28,255 | ||||||
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Income
Before Income Taxes
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98,032 | 141,798 | ||||||
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Provision
for Income Taxes
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34,787 | 48,325 | ||||||
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Net
Income
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$ | 63,245 | $ | 93,473 | ||||
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Net
Income Per Share - Basic – Common
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$ | 0.29 | $ | 0.42 | ||||
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- Basic – Class B
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$ | 0.26 | $ | 0.37 | ||||
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- Diluted
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$ | 0.28 | $ | 0.40 | ||||
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Shares
Outstanding - Basic – Common
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166,771 | 169,836 | ||||||
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-
Basic – Class B
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60,806 | 60,816 | ||||||
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- Diluted
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228,926 | 233,708 | ||||||
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Key
Margins:
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Gross
Margin
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32.4 | % | 35.9 | % | ||||
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EBIT
Margin
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10.6 | % | 14.7 | % | ||||
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Net
Margin
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5.5 | % | 8.1 | % | ||||
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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 March 30, 2008 and April 1, 2007
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(in
thousands except per share amounts)
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First
Quarter
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2008
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2007
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Net
Sales
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$ | 1,160,342 | $ | 1,153,109 | ||||||
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Costs
and Expenses:
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Cost
of Sales
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758,736 |
(a)
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729,219 |
(b)
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Selling,
Marketing and Administrative
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248,515 |
(c)
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213,447 |
(d)
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Business
Realignment and Impairment Charges, net
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--- |
(e)
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--- |
(f)
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Total
Costs and Expenses
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1,007,251 | 942,666 | ||||||||
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Income
Before Interest and Income Taxes (EBIT)
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153,091 | 210,443 | ||||||||
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Interest
Expense, net
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24,386 | 28,255 | ||||||||
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Income
Before Income Taxes
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128,705 | 182,188 | ||||||||
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Provision
for Income Taxes
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44,790 | 63,402 | ||||||||
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Net
Income
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$ | 83,915 | $ | 118,786 | ||||||
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Net
Income Per Share - Basic – Common
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$ | 0.38 | $ | 0.53 | ||||||
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- Basic – Class
B
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$ | 0.34 | $ | 0.48 | ||||||
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- Diluted
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$ | 0.37 |
$
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0.51 | ||||||
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Shares
Outstanding - Basic – Common
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166,771 | 169,836 | ||||||||
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- Basic – Class B
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60,806 | 60,816 | ||||||||
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- Diluted
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228,926 | 233,708 | ||||||||
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Key
Margins:
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Adjusted
Gross Margin
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34.6 | % | 36.8 | % | ||||||
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Adjusted
EBIT Margin
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13.2 | % | 18.3 | % | ||||||
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Adjusted
Net Margin
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7.2 | % | 10.3 | % | ||||||
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(a)
Excludes business realignment and impairment charges of $25.2 million
pre-tax or $17.5 million after-tax for the first quarter of
2008.
(b)
Excludes business realignment and impairment charges of $9.9 million
pre-tax or $6.2 million after-tax for the first quarter of
2007.
(c)
Excludes business realignment and impairment charges of $1.4 million
pre-tax or $.6 million after-tax for the first quarter of
2008.
(d)
Excludes business realignment and impairment charges of $3.0 million
pre-tax or $1.8 million after-tax for the first quarter of
2007.
(e)
Excludes business realignment and impairment charges of $4.1 million
pre-tax or $2.6 million after-tax for the first quarter of
2008.
(f)
Excludes business realignment and impairment charges of $27.5 million
pre-tax or $17.3 million after-tax for the first quarter of
2007.
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The
Hershey Company
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Consolidated
Balance Sheets
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as
of March 30, 2008 and December 31, 2007
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(in
thousands of dollars)
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Assets
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2008
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2007
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Cash
and Cash Equivalents
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$ | 152,875 | $ | 129,198 | ||||
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Accounts
Receivable - Trade (Net)
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298,668 | 487,285 | ||||||
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Deferred
Income Taxes
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73,539 | 83,668 | ||||||
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Inventories
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619,406 | 600,185 | ||||||
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Prepaid
Expenses and Other
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118,115 | 126,238 | ||||||
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Total
Current Assets
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1,262,603 | 1,426,574 | ||||||
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Net
Plant and Property
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1,510,667 | 1,539,715 | ||||||
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Goodwill
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582,326 | 584,713 | ||||||
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Other
Intangibles
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168,459 | 155,862 | ||||||
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Other
Assets
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542,962 | 540,249 | ||||||
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Total
Assets
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$ | 4,067,017 | $ | 4,247,113 | ||||
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Liabilities, Minority
Interest and Stockholders' Equity
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Loans
Payable
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$ | 479,037 | $ | 856,392 | ||||
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Accounts
Payable
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231,982 | 223,019 | ||||||
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Accrued
Liabilities
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466,050 | 538,986 | ||||||
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Taxes
Payable
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23,921 | 373 | ||||||
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Total
Current Liabilities
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1,200,990 | 1,618,770 | ||||||
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Long-Term
Debt
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1,528,691 | 1,279,965 | ||||||
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Other
Long-Term Liabilities
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523,410 | 544,016 | ||||||
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Deferred
Income Taxes
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178,800 | 180,842 | ||||||
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Total
Liabilities
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3,431,891 | 3,623,593 | ||||||
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Minority
Interest
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43,935 | 30,598 | ||||||
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Total
Stockholders' Equity
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591,191 | 592,922 | ||||||
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Total
Liabilities, Minority Interest and Stockholders’ Equity
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$ | 4,067,017 | $ | 4,247,113 | ||||