HERSHEY, Pa., April 17 /PRNewswire-FirstCall/ -- Hershey Foods Corporation (NYSE: HSY) today announced sales and earnings for the first quarter ended March 30, 2003. Consolidated net sales for the first quarter were $953,162,000 compared with $988,506,000 for the first quarter of 2002. Net income was $97,558,000, or $.73 per share-diluted, compared with $87,045,000, or $.63 per share-diluted, in the first quarter of 2002. Excluding a one-time business realignment charge of $9.0 million pre-tax, net income for the first quarter of 2002 was $92,743,000, or $.67 per share-diluted. On this more comparable basis, 2003 earnings per share-diluted increased by 9.0 percent.

This quarter's earnings increase was achieved despite the fact that the Company increased its bad debt reserve by $5.0 million (pre-tax), or two cents per share-diluted, as its best estimate of possible exposure to the Fleming bankruptcy announced on April 1, 2003.

Hershey's first quarter sales for 2003 were essentially flat on a comparable basis as a result of the buy-in associated with the price increase announced in December 2002 and continued rationalization of the Company's product line. Gross margin expanded as a result of improved pricing, product and channel mix, supply chain savings, and lower raw ingredient and packaging costs. Selling, marketing and administrative expenses were also lower in the quarter, despite the provision for the Fleming bankruptcy.

"Our performance during the quarter was in line with expectations, despite a challenging retail environment," said Richard H. Lenny, Chairman, President and Chief Executive Officer. "Profitability and margins increased through a combination of better sales mix and on-going productivity gains. Equally as important, Hershey's market leadership position strengthened with solid gains driven by new products, more effective advertising and continued growth within convenience stores. We look forward to building momentum during the balance of 2003 behind our value-enhancing strategy. In this regard, our sales expectations for the year are 2-3 percent growth on a comparable basis. In addition, we continue to expect earnings growth in the 9-11 percent range for 2003."

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: changes in the confectionery and grocery business environment, including actions of competitors and changes in confectionery preferences; customer and consumer response to selling price increases; changes in governmental laws and regulations, including taxes; market demand for new and existing products; changes in raw material and other costs; pension cost factors such as actuarial assumptions and market performance; adequacy of the Company's bad debt reserve; and the Company's ability to implement improvements to reduce costs associated with its supply chain, as discussed in the Company's annual report on Form 10-K for 2002.

Live Webcast

As previously announced, the Company will hold a conference call with analysts today at 10 a.m. EDT. The conference call will be webcast live via Hershey's corporate Web site www.hersheys.com. Please go to the Investor Relations Section of the Web site for further details.

 Hershey Foods Corporation
                  Summary of Consolidated Statements of Income
             for the periods ended March 30, 2003 and March 31, 2002
               (in thousands of dollars except per share amounts)


                                                    First Quarter

                                                 2003           2002

    Net Sales                                  $953,162 $988,506

    Costs and Expenses:
       Cost of Sales                            596,879        624,024
       Selling, Marketing and
        Administrative                          187,552        202,741
       Business Realignment Charge, net          ---             8,762

       Total Costs and Expenses                 784,431        835,527

    Income Before Interest and Income
     Taxes                                      168,731        152,979
    Interest Expense, net                        14,611         15,465

    Income Before Income Taxes                  154,120        137,514
    Provision for Income Taxes                   56,562         50,469

    Net Income                                  $97,558 $87,045

    Net Income Per
     Share            - Basic                     $0.73 $0.64
                      - Diluted                   $0.73 $0.63

    Shares Outstanding- Basic                   133,366        136,707
                      - Diluted                 134,228        138,219



                          Hershey Foods Corporation
             Pro Forma Summary of Consolidated Statements of Income
             for the periods ended March 30, 2003 and March 31, 2002
               (in thousands of dollars except per share amounts)


                                                      First Quarter

                                                    2003         2002

    Net Sales                                     $953,162 $988,506

    Costs and Expenses:
       Cost of Sales                               596,879      623,787 (a)
       Selling, Marketing and
        Administrative                             187,552      202,741
       Business Realignment
        Charge, net                                 ---          ---    (b)

       Total Costs and Expenses                    784,431      826,528

    Income Before Interest and
     Income Taxes                                  168,731      161,978
    Interest Expense, net                           14,611       15,465

    Income Before Income Taxes                     154,120      146,513
    Provision for Income Taxes                      56,562       53,770

    Net Income                                     $97,558 $92,743

    Net Income
     Per Share   - Basic                             $0.73 $0.68
                 - Diluted                           $0.73 $0.67

    Shares
     Outstanding - Basic                           133,366      136,707
                 - Diluted                         134,228      138,219


     (a) Excludes business realignment charges of $.2 million pre-tax, or $.1
         million after-tax.

     (b) Excludes business realignment charge of $8.8 million pre-tax, or
         $5.6 million after-tax.


                            Hershey Foods Corporation
                           Consolidated Balance Sheets
                    as of March 30, 2003 and December 31, 2002
                            (in thousands of dollars)



    Assets                                          2003            2002

    Cash and Cash Equivalents                     $144,076 $297,743
    Accounts Receivable - Trade (Net)              296,003         370,976
    Inventories                                    554,483         503,291
    Prepaid Expenses and Other                     100,612          91,608

    Total Current Assets                         1,095,174       1,263,618

    Net Plant and Property                       1,493,599       1,486,055
    Goodwill                                       381,863         378,453
    Other Intangibles                               39,772          39,898
    Other Assets                                   302,144         312,527

    Total Assets                                $3,312,552 $3,480,551

    Liabilities and Stockholders' Equity

    Loans Payable                                  $27,571 $28,124
    Accounts Payable                               121,729         124,507
    Accrued Liabilities                            322,820         356,716
    Taxes Payable                                   45,686          12,731
    Deferred Income Taxes                           11,764          24,768

    Total Current Liabilities                      529,570         546,846

    Long-Term Debt                                 851,329         851,800
    Other Long-Term Liabilities                    361,345         362,162
    Deferred Income Taxes                          353,991         348,040

    Total Liabilities                            2,096,235       2,108,848

    Total Stockholders' Equity                   1,216,317       1,371,703

    Total Liabilities and Stockholders'
     Equity                                     $3,312,552 $3,480,551