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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
23,
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 July
23, 2008, The Hershey Company (“the Company”) announced sales and earnings for
the second 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 July 23, 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: July
23, 2008
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THE
HERSHEY COMPANY
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By: /s/
Humberto P.
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 July 23,
2008
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Exhibit 99.1
HERSHEY
ANNOUNCES SECOND QUARTER RESULTS
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·
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Net
Sales increase 5.1%
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·
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Earnings
per share-diluted from operations
$0.29
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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., July 23, 2008 —
The Hershey Company (NYSE: HSY) today announced sales and earnings for the
second quarter ended June 29, 2008. Consolidated net sales were $1,105,437,000
compared with $1,051,916,000 for the second quarter of 2007. Net income for the
second quarter of 2008 was $41,467,000 or $0.18 per share-diluted, compared with
$3,554,000 or $0.01 per share-diluted, for the comparable period of
2007.
For the
second quarters of 2008 and 2007, these results, prepared in accordance with
generally accepted accounting principles (“GAAP”), include net pre-tax charges
of $39.3 million and $124.4 million, or $0.11 and $0.34 per share, respectively.
The majority of these 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 second quarters of 2008 and 2007, was
$66,952,000 or $0.29 per share-diluted in 2008, compared with $81,671,000 or
$0.35 per share-diluted in 2007.
Second Quarter
Performance
“Hershey’s
second quarter results reflect the progress the Company continues to make in the
marketplace,” said David J. West, President and Chief Executive Officer. “Sales
increased by 5.1 percent, driven by organic sales gains of 3.5 percent from
pricing and overall growth in core brands and new products, offset by softness
in snacks and refreshment. The Godrej Hershey Ltd. venture in India accounted
for the remaining growth. Gross margin expanded slightly as pricing and supply
chain savings offset higher commodity costs and the impact of integrating our
business in India. Second quarter profitability, which was in line with our
expectations, was curtailed by increased brand support, including costs
associated with new product introductions, greater levels of retail coverage and
investments within key international markets.
“U.S.
retail takeaway in the second quarter, excluding the effect of Easter timing,
increased 5.0 percent in channels that account for over 80 percent of our retail
business. As a result, non-seasonal everyday market share was about equal to the
prior year's second quarter in the channels measured by syndicated data. The
results have been positive where we have focused our resources. In the U.S.,
advertising and consumer brand-building investment increased by about 30 percent
in the second quarter. Activity was primarily concentrated in the Reese’s and Hershey’s franchises,
including Hershey’s
Bliss, and Starbucks
Chocolates.
“We’re
pleased with our U.S. marketplace performance in the second quarter as we
improved in all classes of trade. The category has and will continue to grow. We
expect Hershey’s year-over-year core brand marketplace performance improvement
to continue, benefiting from the new approach of our consumer-driven demand
model.”
First Half Results and
Outlook
For the
first six months of 2008, consolidated net sales were $2,265,779,000 compared
with $2,205,025,000 for the first six months of 2007. Reported net income for
the first six months of 2008 was $104,712,000 or $0.46 per share-diluted,
compared with $97,027,000, or $0.42 per share-diluted, for the first six months
of 2007.
For the
first six months of 2008 and 2007, these results, prepared in accordance with
GAAP, include net pre-tax charges of $69.9 million and $164.8 million, or $0.20
and $0.44 per share, respectively. The majority of these 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 six months
of 2008 and 2007, was $150,867,000, or $0.66 per share-diluted, compared with
$200,457,000 or $0.86 per share-diluted in 2007, a decrease of 23 percent
in earnings per share-diluted.
“Hershey’s
first half results were in line with our expectations,” West stated. “Net sales
and marketplace performance improved, validating our strategy of increasing
advertising and consumer investment behind core U.S. brands. The consumer-driven
model unveiled last month is focusing the Company on brands and innovation that
offer the greatest potential for sustainable sales and earnings
growth.
“Marketplace
momentum has continued as we enter the third quarter and we’re encouraged about
our prospects in the second half of the year. The Global Supply Chain
Transformation program will deliver productivity savings during the remainder of
the year. These savings, combined with price realization and good visibility
into our cost structure in the second half of the year, will enable us to expand
consumer investment, support solid seasonal programming and continue to build
our international business. 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.”
Note:
In this 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 $550 million - $575 million. Total charges include project management
and start-up costs of approximately $60 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 $135 million - $145 million, or $0.39 - $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
- $1.51
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Total
Business Realignment and
Impairment Charges
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$1.15
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$0.39
- $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.
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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 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 July
23, 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 June 29, 2008 and July 1, 2007
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(in
thousands except per share amounts)
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Second Quarter
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Six Months
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2008
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2007
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2008
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2007
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Net
Sales
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$ | 1,105,437 | $ | 1,051,916 | $ | 2,265,779 | $ | 2,205,025 | ||||||||
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Costs
and Expenses:
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Cost
of Sales
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722,926 | 722,478 | 1,506,816 | 1,461,556 | ||||||||||||
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Selling,
Marketing and Administrative
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266,612 | 216,870 | 516,561 | 433,303 | ||||||||||||
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Business
Realignment and Impairment
Charges,
net
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21,786 | 79,728 | 25,871 | 107,273 | ||||||||||||
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Total
Costs and Expenses
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1,011,324 | 1,019,076 | 2,049,248 | 2,002,132 | ||||||||||||
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Income
Before Interest and Income Taxes (EBIT)
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94,113 | 32,840 | 216,531 | 202,893 | ||||||||||||
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Interest
Expense, net
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23,610 | 29,213 | 47,996 | 57,468 | ||||||||||||
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Income
Before Income Taxes
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70,503 | 3,627 | 168,535 | 145,425 | ||||||||||||
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Provision
for Income Taxes
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29,036 | 73 | 63,823 | 48,398 | ||||||||||||
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Net
Income
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$ | 41,467 | $ | 3,554 | $ | 104,712 | $ | 97,027 | ||||||||
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Net
Income Per Share - Basic - Common
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$ | 0.19 | $ | 0.02 | $ | 0.47 | $ | 0.43 | ||||||||
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- Basic - Class B
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$ | 0.17 | $ | 0.01 | $ | 0.43 | $ | 0.39 | ||||||||
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- Diluted - Common
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$ | 0.18 | $ | 0.01 | $ | 0.46 | $ | 0.42 | ||||||||
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Shares
Outstanding - Basic - Common
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166,624 | 168,309 | 166,701 | 169,078 | ||||||||||||
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- Basic - Class B
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60,806 | 60,815 | 60,806 | 60,815 | ||||||||||||
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- Diluted - Common
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228,664 | 231,963 | 228,798 | 232,841 | ||||||||||||
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Key
Margins:
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Gross
Margin
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34.6 | % | 31.3 | % | 33.5 | % | 33.7 | % | ||||||||
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EBIT
Margin
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8.5 | % | 3.1 | % | 9.6 | % | 9.2 | % | ||||||||
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Net
Margin
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3.8 | % | 0.3 | % | 4.6 | % | 4.4 | % | ||||||||
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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 June 29, 2008 and July 1, 2007
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(in
thousands except per share amounts)
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Second Quarter
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Six Months
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2008
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2007
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2008
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2007
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Net
Sales
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$ | 1,105,437 | $ | 1,051,916 | $ | 2,265,779 | $ | 2,205,025 | ||||||||
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Costs
and Expenses:
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Cost
of Sales
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707,899 | (a) | 681,171 | (d) | 1,466,635 | (a) | 1,410,390 | (d) | ||||||||
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Selling,
Marketing and Administrative
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264,169 | (b) | 213,523 | (e) | 512,684 | (b) | 426,970 | (e) | ||||||||
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Business
Realignment and Impairment
Charges,
net
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--- | (c) | --- | (f) | --- | (c) | --- | (f) | ||||||||
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Total
Costs and Expenses
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972,068 | 894,694 | 1,979,319 | 1,837,360 | ||||||||||||
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Income
Before Interest and Income Taxes (EBIT)
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133,369 | 157,222 | 286,460 | 367,665 | ||||||||||||
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Interest
Expense, net
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23,610 | 29,213 | 47,996 | 57,468 | ||||||||||||
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Income
Before Income Taxes
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109,759 | 128,009 | 238,464 | 310,197 | ||||||||||||
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Provision
for Income Taxes
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42,807 | 46,338 | 87,597 | 109,740 | ||||||||||||
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Net
Income
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$ | 66,952 | $ | 81,671 | $ | 150,867 | $ | 200,457 | ||||||||
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Net
Income Per Share - Basic - Common
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$ | 0.30 | $ | 0.37 | $ | 0.68 | $ | 0.90 | ||||||||
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- Basic - Class B
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$ | 0.27 | $ | 0.33 | $ | 0.61 | $ | 0.80 | ||||||||
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- Diluted - Common
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$ | 0.29 | $ | 0.35 | $ | 0.66 | $ | 0.86 | ||||||||
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Shares
Outstanding - Basic - Common
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166,624 | 168,309 | 166,701 | 169,078 | ||||||||||||
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-
Basic - Class B
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60,806 | 60,815 | 60,806 | 60,815 | ||||||||||||
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- Diluted - Common
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228,664 | 231,963 | 228,798 | 232,841 | ||||||||||||
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Key
Margins:
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Adjusted
Gross Margin
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36.0 | % | 35.2 | % | 35.3 | % | 36.0 | % | ||||||||
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Adjusted
EBIT Margin
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12.1 | % | 14.9 | % | 12.6 | % | 16.7 | % | ||||||||
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Adjusted
Net Margin
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6.1 | % | 7.8 | % | 6.7 | % | 9.1 | % | ||||||||
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(a)
Excludes business realignment and impairment charges of $15.0 million
pre-tax or $10.0 million after-tax for the second quarter and $40.2
million pre-tax or $27.4 million after-tax for the six
months.
(b)
Excludes business realignment and impairment charges of $2.4 million
pre-tax or $1.7 million after-tax for the second quarter and $3.9 million
pre-tax or $2.2 million after-tax for the six months.
(c)
Excludes business realignment and impairment charges of $21.8 million
pre-tax or $13.8 million after-tax for the second quarter and $25.9
million pre-tax or $16.4 million after-tax for the six
months.
(d)
Excludes business realignment and impairment charges of $41.3 million
pre-tax or $26.3 million after-tax for the second quarter and $51.2
million pre-tax or $32.5 million after-tax for the six
months.
(e)
Excludes business realignment and impairment charges of $3.4 million
pre-tax or $2.1 million after-tax for the second quarter and $6.3 million
pre-tax or $3.9 million after-tax for the six months.
(f)
Excludes business realignment and impairment charges of $79.7 million
pre-tax or $49.7 million after-tax for the second quarter and $107.3
million pre-tax or $67.0 million after-tax for the six months.
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The
Hershey Company
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Consolidated
Balance Sheets
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as
of June 29, 2008 and December 31, 2007
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(in
thousands of dollars)
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Assets
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2008
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2007
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||||||
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Cash
and Cash Equivalents
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$ | 45,427 | $ | 129,198 | ||||
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Accounts
Receivable - Trade (Net)
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302,952 | 487,285 | ||||||
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Deferred
Income Taxes
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44,913 | 83,668 | ||||||
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Inventories
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697,569 | 600,185 | ||||||
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Prepaid
Expenses and Other
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188,156 | 126,238 | ||||||
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Total
Current Assets
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1,279,017 | 1,426,574 | ||||||
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Net
Plant and Property
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1,492,694 | 1,539,715 | ||||||
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Goodwill
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578,689 | 584,713 | ||||||
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Other
Intangibles
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168,522 | 155,862 | ||||||
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Other
Assets
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559,770 | 540,249 | ||||||
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Total
Assets
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$ | 4,078,692 | $ | 4,247,113 | ||||
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Liabilities, Minority
Interest and Stockholders' Equity
|
||||||||
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Loans
Payable
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$ | 436,246 | $ | 856,392 | ||||
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Accounts
Payable
|
281,152 | 223,019 | ||||||
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Accrued
Liabilities
|
486,128 | 538,986 | ||||||
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Taxes
Payable
|
1,579 | 373 | ||||||
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Total
Current Liabilities
|
1,205,105 | 1,618,770 | ||||||
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Long-Term
Debt
|
1,514,029 | 1,279,965 | ||||||
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Other
Long-Term Liabilities
|
527,693 | 544,016 | ||||||
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Deferred
Income Taxes
|
181,897 | 180,842 | ||||||
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Total
Liabilities
|
3,428,724 | 3,623,593 | ||||||
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Minority
Interest
|
42,345 | 30,598 | ||||||
|
Total
Stockholders' Equity
|
607,623 | 592,922 | ||||||
|
Total
Liabilities, Minority Interest and Stockholders' Equity
|
$ | 4,078,692 | $ | 4,247,113 | ||||