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October 14, 2005
Mr. Burton H. Snyder, Esq.
Senior Vice President, General Counsel, and Secretary
The Hershey Company
100 Crystal A Drive
Hershey, Pennsylvania 17033
Re: The Hershey Company
Registration Statement on Form S-3
Filed September 16, 2005
File No. 333-128375
Form 10-K for the year ended December 31, 2004
Filed March 7, 2005
File No. 01-00183
Form 10-Q for the quarters ended April 1, 2005 and July 3,
2005
Filed March 11, 2005 and August 9, 2005
Dear Mr. Snyder:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response
to these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. Where comments on one document or section also relate to
disclosure
in another document or section, please make parallel changes to
all
affected disclosure. This will eliminate the need for us to
repeat
similar comments.
2. We note that you do not include a risk factors section in
either
your Form S-3 or your Form 10-K. But several factors appear to
merit
special emphasis. For example, you rely heavily on cocoa for your
business. You disclose at page 4 of the Form 10-K that the Ivory
Coast, the world`s largest cocoa-producing country, has
experienced
continued civil unrest, resulting in volatile market conditions.
While it is unclear from your disclosure what percentage of your
cocoa
supply in recent periods has come from the Ivory Coast, it would
appear that the potential disruption of the supply from such a
substantial world supplier would necessarily have an adverse
impact on
your business and results of operations. Include enhanced
disclosure
regarding what percentage of your past, current and future cocoa
needs
you have obtained and expect to obtain from the Ivory Coast. Also
include appropriate Risk Factors disclosure to identify the risks
and
potential harm to your business and results of operations that
could
result from the uncertain political situation in that country.
Another issue deserving of Risk Factors disclosure is the
substantial
control wielded by your largest shareholder and its ability to
determine to a large degree your corporate direction. We note for
example the aborted decision to put the company up for sale
several
years ago.
Disclose any trends towards substantially increased leverage as
well
as a decreased current asset to current liability ratio, along
with
the potential implications on your ability to continue to borrow
or to
repurchase your shares in the amounts contemplated. Similarly
discuss
any risks relating to current and future pension plan obligations,
if
material. We note the substantial increase in recent
contributions to
your plans as well as your widespread rationalization efforts in
recent periods.
To the extent that your recent acquisitions make less likely your
ability to achieve your stated goals regarding increased margin,
as
the disclosure at page 17 of your most recent Form 10-Q suggests,
consider whether this represents merely a trend worthy of
disclosure
in your current MD&A section or also constitutes a risk.
Lastly, if there are any particular risks associated with the debt
securities you will be offering, include those in the prospectus
or
corresponding prospectus supplement. For example, it appears that
you
are entitled to continue paying dividends and to incur substantial
additional debt, even if those actions make less likely your
ability
to satisfy the terms of the debt you are issuing.
Form S-3
Prospectus Cover Page
3. You indicate that the Debt Securities may be listed for
trading.
If you are in the process of making any applications in that
regard,
please advise us of the status in each case. Also explain the
statement at page 9 under "Legal Matters" which suggests that
underwriters may already have been identified. We may have
additional
comments.
Documents Incorporated by Reference, page 1
4. For purposes of clarity, we suggest that you specify the
periods
involved and dates filed in each case. Separately list each
incorporated document, including amendments.
Description of Debt Securities, page 2
5. Define "original issue discount" when you first use the term.
In
the case of Original Issue Discount Securities, advise us of your
consideration to including an opinion as to the tax effects of
such
securities. Also confirm that you will file a new "clean"
legality
opinion with each issuance of securities, which opinion will not
include the assumptions relating to the future issuance and
approvals
required.
Signatures
6. Rather than using initials for all signatories, please include
each
individual`s first name as well.
Form 10-K for the Year Ended December 31, 2004
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations, page 16
7. We note your explanation of the lower effective tax rate in
2004
due to the adjustment to contingency reserves from the settlement
of
tax audits related to the deductibility and timing of certain
expenses. We also note your statutory income tax reconciliations
provided in the income tax footnotes to your financial statements
for
the years 1999 through 2004.
With regard to each of the items settled in these audits, tell us:
* the nature and amount of each item of income or expense,
* the years in which each item arose,
* the amount of the tax reserve associated with each item,
* your classification of each item as a temporary or other than
temporary item as it relates to your SFAS 109 income tax
disclosure,
* the effect that each such tax reserve item had in your effective
income tax rate reconciliation, and
* the rationale for such classification
In addition, tell us how you have accounted for and disclosed in
your
financial statements and footnotes any tax benefits associated
with
non-qualified stock option exercises.
We may have further comment.
Off-Balance Sheet Arrangements, Contractual Obligations..., page
21
8. Make a statement as to what source(s) you expect to use to fund
these obligations.
Directors and Executive Officers of the Registrant, page 76
9. Your disclosure is ambiguous with regard to several periods in
the
five year sketches. To the extent that there are gaps of two
months
or more in any sketch you include or incorporate by reference,
revise
to cover all periods during the five years, as Item 401 of
Regulation
S-K requires.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Act of 1933
and
that they have provided all information investors require for an
informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in connection with our review of your
filing or
in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering of
the securities specified in the above registration statement. We
will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Gary Newberry at (202) 551-3761 or April
Sifford, Branch Chief, at (202) 551-3684 if you have questions
regarding comments on the financial statements and related
matters.
Please contact Jason Wynn at (202) 551-3756 or Timothy Levenberg,
Special Counsel, at (202) 551-3707 with any other questions.
Direct
all correspondence to the following ZIP code: 20549-7010.
Sincerely,
H. Roger Schwall
Assistant Director
cc: G. Newberry
A. Sifford
J. Wynn
T. Levenberg
via facsimile
Rise B. Norman and Reza Odouli
Simpson Thacher & Bartlett LLP
(212) 455-2502
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Mr. Burton H. Snyder, Esq.
The Hershey Company
October 14, 2005
page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
MAIL STOP 7010