HERSHEY, Pa., July 21 /PRNewswire-FirstCall/ -- The Hershey Company
(NYSE: HSY) today reported record sales and earnings from operations for the
second quarter and first half ended July 3, 2005. Consolidated net sales for
the second quarter were $988,447,000, compared with $893,688,000 for the
second quarter of 2004, an increase of 10.6 percent. Net income for the second
quarter of 2005 was $97,361,000, or $.39 per share-diluted, compared with
$147,217,000, or $.56 per share-diluted, for the comparable period of 2004.
Results for the second quarter of 2004 include the benefit of a $61.1 million,
or $.23 per share-diluted, non-cash reduction of income tax expense resulting
from adjustments to income tax contingency reserves following the completion
of prior years' tax audits. Excluding this item, net income for the second
quarter of 2004 was $86,136,000, or $.33 per share-diluted; second quarter
2005 earnings per share-diluted rose 18.2 percent over this number.
"Hershey's strong second quarter results clearly show the continued
momentum behind our value-enhancing strategy. A combination of solid sales
growth and improved leverage across the business system delivered record
profitability, with earnings per share-diluted from operations increasing by
18.2 percent compared with the same period a year ago," said Richard H. Lenny,
Chairman, President and Chief Executive Officer, The Hershey Company. "Organic
sales growth of 7.6 percent represented a good balance between higher net
price realization and continued new product innovation both within core
confectionery and our snack platforms. The recently acquired Mauna Loa and
Grupo Lorena businesses contributed three percent to the quarter's 10.6
percent sales growth."
For the first six months of 2005, consolidated net sales were
$2,114,861,000, compared with $1,906,777,000 for the first half of 2004, an
increase of 10.9 percent. Net income for the first six months of 2005 was
$215,582,000, or $.86 per share-diluted, compared with $254,364,000, or $.97
per share-diluted, for the first half of 2004. Excluding the one-time income
tax contingency reserve adjustment mentioned above, net income for the first
half of 2004 was $193,283,000, or $.74 per share-diluted.
"Hershey's performance has been very healthy through the first half of
2005," Lenny said. "We've delivered above-trend organic sales growth of
8.0 percent, strengthened our marketplace leadership, and delivered earnings
per share-diluted growth from operations of 16.2 percent compared with the
first half of last year. These results have been driven by broad-based
innovation, superior retail execution and solid cost control.
"Looking ahead, our second-half seasonal programs are off to a good start.
We've recently announced several exciting new products that further extend
Hershey's iconic brands. For the year as a whole, we expect 2005 net sales to
increase at a rate somewhat above our long-term goal of 3 to 4 percent, with
diluted earnings per share from operations increasing slightly above our long-
term range of 9 to 11 percent."
Program To Further Enhance Value
The Hershey Company also announced a new program to further advance its
value-enhancing strategy. This program includes three components:
(1) voluntary workforce reduction through an Early Retirement Program and an
Enhanced Mutual Separation Program; (2) streamlining and creating new
capabilities in Hershey's North American operations; and (3) closure of the
Company's under-utilized Las Piedras, Puerto Rico manufacturing facility.
Employees at this facility will receive severance support as well as
assistance with career decisions and transition leading up to the plant
closing in late 2005.
Hershey estimates that the cost to implement the program will result in a
pre-tax charge of approximately $140 million to $150 million, or $.41 to $.44
per share-diluted on an after-tax basis. The cash portion of the charge is
$85 million to $90 million. About 80 percent of the charge will be recorded in
the second half of 2005, and the final 20 percent in the first half of 2006.
The program, when fully implemented, is expected to generate ongoing annual
savings of approximately $45 million to $50 million. A substantial portion of
these savings will be invested in key growth efforts in the US snack market as
well as in selected international markets principally through global customer
alliances.
"The changes announced today are necessary for Hershey to remain
competitive in the years ahead," Lenny said. "They will enable us to
streamline our business, increase the investment in our consumer and customer
initiatives, and build new organization capabilities. Our value-enhancing
strategy implemented in late 2001 has served Hershey shareholders well. This
strategy has accelerated profitable organic growth, strengthened Hershey's
leadership position, and delivered record profitability. We anticipate similar
benefits into the future. Based on our 2005 expected performance and the
impact of today's announcement, we believe that, in 2006, net sales will
increase at a rate somewhat above our 3 to 4 percent expectations, and diluted
earnings per share, excluding the charge related to our new value-enhancing
program, will be slightly above the 9 to 11 percent long-term range."
Note: In this sales and earnings release, Hershey has provided income
measures excluding certain items described above, in addition to income
determined in accordance with GAAP. These non-GAAP financial measures, as
shown in the attached pro forma income statements, 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.
Live Web Cast
As previously announced, the Company will hold a conference call with
analysts today at 8:00 a.m. Eastern Time. The conference call, with slides,
will be broadcast live via Hershey's corporate Web site
http://www.hersheys.com. Please go to the Investor Relations Section of the
Web site 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: the Company's ability to implement
and generate expected ongoing annual savings from the program to advance its
value-enhancing strategy, announced today; changes in the Company's business
environment, including actions of competitors and changes in consumer
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, market performance, and
employee retirement decisions; and the Company's ability to implement
improvements to and reduce costs associated with its supply chain, as
discussed in the Company's Annual Report on Form 10-K for 2004.
About The Hershey Company
The Hershey Company (NYSE: HSY) is a leading snack food company and the
largest North American manufacturer of quality chocolate and non-chocolate
confectionery products. With revenues of over $4 billion and more than 13,000
employees worldwide, The Hershey Company markets such well-known brands as
Hershey's, Reese's, Hershey's Kisses, Kit Kat, Almond Joy, Mounds, Jolly
Rancher, Twizzlers, Ice Breakers, and Mauna Loa, as well as innovative new
products such as Take 5 candy bar and Hershey's cookies. In addition to its
traditional confectionery products, Hershey offers a range of products
specifically developed to address the nutritional interests of today's health-
conscious consumer. These products include sugar-free Hershey's, Reese's and
York candies, as well as Hershey's SmartZone bars for people seeking balanced
nutrition. It also markets Hershey's cocoa, Hershey's syrup and other branded
baking ingredients, toppings and beverages. Visit us at
http://www.hersheynewsroom.com.
The Hershey Company
Summary of Consolidated Statements of Income
for the periods ended July 3, 2005 and July 4, 2004
(in thousands except per share amounts)
Second Quarter Six Months
2005 2004 2005 2004
Net Sales $988,447 $893,688 $2,114,861 $1,906,777
Costs and Expenses:
Cost of Sales 594,699 533,204 1,289,830 1,158,836
Selling, Marketing and
Administrative 220,626 209,561 446,036 413,694
Total Costs and
Expenses 815,325 742,765 1,735,866 1,572,530
Income Before Interest
and Income Taxes
(EBIT) 173,122 150,923 378,995 334,247
Interest Expense, net 20,625 15,488 40,029 30,342
Income Before Income
Taxes 152,497 135,435 338,966 303,905
Income Tax Provision
(Benefit) 55,136 (11,782) 123,384 49,541
Net Income $97,361 $147,217 $215,582 $254,364
Net Income Per Share
- Basic - Common $0.41 $0.58 $.90 $1.00
- Basic - Class B $0.37 $0.53 $.82 $.91
- Diluted $0.39 $0.56 $.86 $.97
Shares Outstanding
- Basic - Common 184,362 198,068 185,047 198,482
- Basic - Class B 60,818 60,844 60,824 60,844
- Diluted 248,927 261,707 249,625 261,871
Key Margins:
Gross Margin 39.8% 40.3% 39.0% 39.2%
EBIT Margin 17.5% 16.9% 17.9% 17.5%
Net Margin 9.8% 16.5% 10.2% 13.3%
The Hershey Company
Pro Forma Summary of Consolidated Statements of Income
for the periods ended July 3, 2005 and July 4, 2004
(in thousands except per share amounts)
Second Quarter Six Months
2005 2004 2005 2004
Net Sales $988,447 $893,688 $2,114,861 $1,906,777
Costs and Expenses:
Cost of Sales 594,699 533,204 1,289,830 1,158,836
Selling, Marketing
and Administrative 220,626 209,561 446,036 413,694
Total Costs and
Expenses 815,325 742,765 1,735,866 1,572,530
Income Before Interest
and Income Taxes
(EBIT) 173,122 150,923 378,995 334,247
Interest Expense, net 20,625 15,488 40,029 30,342
Income Before Income
Taxes 152,497 135,435 338,966 303,905
Provision for Income
Taxes 55,136 49,299(a) 123,384 110,622(a)
Net Income $97,361 $86,136 $215,582 $193,283
Net Income Per Share
- Basic - Common $0.41 $0.34 $.90 $.76
- Basic - Class B $0.37 $0.31 $.82 $.69
- Diluted $0.39 $0.33 $.86 $.74
Shares Outstanding
- Basic - Common 184,362 198,068 185,047 198,482
- Basic - Class B 60,818 60,844 60,824 60,844
- Diluted 248,927 261,707 249,625 261,871
Key Margins:
Gross Margin 39.8% 40.3% 39.0% 39.2%
EBIT Margin 17.5% 16.9% 17.9% 17.5%
Adjusted Net Margin 9.8% 9.6% 10.2% 10.1%
(a) Excludes adjustment to income tax contingency reserves of ($61.1)
million for the second quarter and the six months.
The Hershey Company
Consolidated Balance Sheets
as of July 3, 2005 and December 31, 2004
(in thousands of dollars)
Assets 2005 2004
Cash and Cash Equivalents $24,712 $54,837
Accounts Receivable - Trade (Net) 296,980 408,930
Deferred Income Taxes 46,703 46,503
Inventories 834,586 557,180
Prepaid Expenses and Other 130,803 114,991
Total Current Assets 1,333,784 1,182,441
Net Plant and Property 1,681,390 1,682,698
Goodwill 455,165 463,947
Other Intangibles 136,123 125,233
Other Assets 425,271 343,212
Total Assets $4,031,733 $3,797,531
Liabilities and Stockholders' Equity
Loans Payable $959,499 $622,320
Accounts Payable 173,636 148,686
Accrued Liabilities 404,047 472,096
Taxes Payable 14,564 42,280
Total Current Liabilities 1,551,746 1,285,382
Long-Term Debt 690,060 690,602
Other Long-Term Liabilities 429,312 403,356
Deferred Income Taxes 332,650 328,889
Total Liabilities 3,003,768 2,708,229
Total Stockholders' Equity 1,027,965 1,089,302
Total Liabilities and Stockholders' Equity $4,031,733 $3,797,531
SOURCE The Hershey Company
07/21/2005
CONTACT: MEDIA: Stephanie L. Moritz, +1-717-534-7641 or
FINANCIAL: James A. Edris, +1-717-534-7556, both of Hershey
Web site: http://www.hersheys.com
http://www.hersheynewsroom.com
(HSY)
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