HERSHEY, Pa., Jan. 29 /PRNewswire/ -- Hershey Foods Corporation (NYSE: HSY) today announced its financial results for the fourth quarter and year ended December 31, 1998. In the fourth quarter, consolidated net sales were $1,239,903,000 compared with $1,242,428,000 for the fourth quarter of 1997. Net income was $109,957,000, or $.76 per share diluted, compared with $116,120,000, or $.80 per share diluted. Record consolidated net sales for the year were $4,435,615,000 compared with $4,302,236,000 for 1997. Record net income for the year was $340,888,000, or $2.34 per share diluted, compared with $336,251,000, or $2.23 per share diluted.

''While the retail growth rate of the confectionery category slowed in the last half of the year,'' said Kenneth L. Wolfe, Chairman and Chief Executive Officer, ''we continued to outgrow the market by a significant rate. We are pleased with our recent new product introductions, ReeseSticks wafer bars and Hershey's Bite's candies, both of which fueled our 1998 growth as we continue to emphasize new products.

''The year was disappointing, however, because certain commodity costs such as milk and cocoa were higher than the previous year, offsetting strong manufacturing efficiency gains achieved throughout our confectionery and grocery businesses. Higher distribution costs related to the diversity of our product line and the demands of our customers and the marketplace continued to exert pressure on our gross margins. In addition, losses related to our international operations which occurred in the early part of the year were not offset by improved international performance in the fourth quarter.

''Overall our 1998 results, even though a record in terms of sales and income, were a disappointment to us. As we cautioned in October, the fourth quarter results were weaker than anticipated by the investment community.

''Fourth quarter sales were flat versus last year resulting from volume gains for Hershey Chocolate North America, offset by lower sales from the pasta business and Hershey International, as well as the effect of currency translation. Our gross margin weakness in the fourth quarter was attributable to higher commodity, packaging and distribution costs. In addition, during the fourth quarter we implemented changes to our retiree medical program that, while providing a benefit in the quarter and years to come, were not sufficient to offset these higher operating expenses.

''We continue to expect future growth to result from sales volume gains which exceed industry growth rates, as well as a continued emphasis on improving manufacturing and distribution efficiency. With the sale of our pasta business, we are now a more focused company which will better prepare us to meet the challenges of the future. We fully expect 1999 to be another record year for Hershey Foods,'' Wolfe concluded.

                          HERSHEY FOODS CORPORATION
                 Summary of Consolidated Statements of Income
         for the period ended December 31, 1998 and December 31, 1997
              (in thousands of dollars except per share amounts)

                                Fourth Quarter            Twelve Months
                               1998        1997         1998         1997

    Net Sales              $1,239,903   $1,242,428   $4,435,615  $4,302,236

    Costs and Expenses:
     Cost of Sales            743,397      696,693    2,625,057   2,488,896
     Selling, Marketing
      and Administrative      298,558      330,272    1,167,895   1,183,130

     Total Costs and
      Expenses              1,041,955    1,026,965    3,792,952   3,672,026

    Income Before Interest
     and Income Taxes         197,948      215,463      642,663     630,210
    Interest Expense, net      19,516       24,164       85,657      76,255

    Income Before Income
     Taxes                    178,432      191,299      557,006     553,955
    Provision for Income
     Taxes                     68,475       75,179      216,118     217,704

    Net Income               $109,957     $116,120     $340,888    $336,251

    Net Income Per Share
     - Basic                     $.77         $.81        $2.38       $2.25
     - Diluted                   $.76         $.80        $2.34       $2.23

NOTE:  Net Income Per Share - Basic and Diluted 
have been computed based on the provisions of 
Statement of Financial Accounting Standards No. 128
Earnings per Share.  Basic shares outstanding for the fourth 
quarter and twelve months of 1998 were 143,466,000 and 
143,446,000, respectively, and 143,244,000 and 149,174,000, 
respectively, for the comparable periods of 1997.
Diluted shares outstanding for the fourth quarter and 
twelve months of 1998 were 145,532,000 and 145,563,000, 
respectively, and 145,155,000 and 151,016,000, 
respectively, for the comparable periods of 1997.