x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
State
of Incorporation
|
IRS
Employer Identification No.
|
|
Delaware
|
23-0691590
|
Large
accelerated filer x
|
Accelerated
filer o
|
|
Non-accelerated
filer o (Do not check if a smaller
reporting company)
|
Smaller
reporting company o
|
Part
I. Financial Information
|
Page
Number
|
Item
1. Consolidated Financial Statements
(Unaudited)
|
|
Consolidated
Statements of Income
Three
months ended October 4, 2009 and September 28, 2008
|
3
|
Consolidated
Statements of Income
Nine
months ended October 4, 2009 and September 28, 2008
|
4
|
Consolidated
Balance Sheets
October
4, 2009 and December 31, 2008
|
5
|
Consolidated
Statements of Cash Flows
Nine
months ended October 4, 2009 and September 28, 2008
|
6
|
Notes
to Consolidated Financial Statements
|
7
|
Item
2. Management’s Discussion and Analysis of
Results of Operations and Financial
Condition
|
22
|
Item
3. Quantitative and Qualitative Disclosures
About
Market Risk
|
28
|
|
|
Item
4. Controls and Procedures
|
28
|
Part
II. Other Information
|
|
Item
2. Unregistered Sales of Equity Securities and Use
of
Proceeds
|
30
|
|
|
Item
6. Exhibits
|
30
|
For
the Three Months Ended
|
||||||||
October
4,
2009
|
September
28,
2008
|
|||||||
Net
Sales
|
$ | 1,484,118 | $ | 1,489,609 | ||||
Costs
and Expenses:
|
||||||||
Cost
of sales
|
895,020 | 988,380 | ||||||
Selling,
marketing and administrative
|
301,466 | 272,401 | ||||||
Business
realignment and impairment charges, net
|
8,008 | 8,877 | ||||||
|
||||||||
Total
costs and expenses
|
1,204,494 | 1,269,658 | ||||||
Income
before Interest and Income Taxes
|
279,624 | 219,951 | ||||||
Interest
expense, net
|
22,302 | 24,915 | ||||||
Income
before Income Taxes
|
257,322 | 195,036 | ||||||
Provision
for income taxes
|
95,299 | 70,498 | ||||||
Net
Income
|
$ | 162,023 | $ | 124,538 | ||||
Earnings
Per Share - Basic - Class B Common Stock
|
$ | .66 | $ | .51 | ||||
Earnings
Per Share - Diluted - Class B Common Stock
|
$ | .65 | $ | .51 | ||||
Earnings
Per Share - Basic - Common Stock
|
$ | .73 | $ | .56 | ||||
Earnings
Per Share - Diluted - Common Stock
|
$ | .71 | $ | .54 | ||||
Average
Shares Outstanding - Basic - Common Stock
|
167,299 | 166,682 | ||||||
Average
Shares Outstanding - Basic - Class B Common Stock
|
60,709 | 60,784 | ||||||
Average
Shares Outstanding - Diluted
|
229,553 | 228,670 | ||||||
Cash
Dividends Paid Per Share:
|
||||||||
Common
Stock
|
$ | .2975 | $ | .2975 | ||||
Class
B Common Stock
|
$ | .2678 | $ | .2678 | ||||
For
the Nine Months Ended
|
||||||||
October
4,
2009
|
September
28,
2008
|
|||||||
Net
Sales
|
$ | 3,891,332 | $ | 3,755,388 | ||||
Costs
and Expenses:
|
||||||||
Cost
of sales
|
2,408,716 | 2,495,196 | ||||||
Selling,
marketing and administrative
|
874,632 | 788,962 | ||||||
Business
realignment and impairment charges, net
|
58,750 | 34,748 | ||||||
|
||||||||
Total
costs and expenses
|
3,342,098 | 3,318,906 | ||||||
Income
before Interest and Income Taxes
|
549,234 | 436,482 | ||||||
Interest
expense, net
|
68,932 | 72,911 | ||||||
Income
before Income Taxes
|
480,302 | 363,571 | ||||||
Provision
for income taxes
|
171,087 | 134,321 | ||||||
Net
Income
|
$ | 309,215 | $ | 229,250 | ||||
Earnings
Per Share - Basic - Class B Common Stock
|
$ | 1.26 | $ | .93 | ||||
Earnings
Per Share - Diluted - Class B Common Stock
|
$ | 1.26 | $ | .93 | ||||
Earnings
Per Share - Basic - Common Stock
|
$ | 1.39 | $ | 1.03 | ||||
Earnings
Per Share - Diluted - Common Stock
|
$ | 1.35 | $ | 1.00 | ||||
Average
Shares Outstanding - Basic - Common Stock
|
166,980 | 166,696 | ||||||
Average
Shares Outstanding - Basic - Class B Common Stock
|
60,710 | 60,798 | ||||||
Average
Shares Outstanding - Diluted
|
228,784 | 228,757 | ||||||
Cash
Dividends Paid Per Share:
|
||||||||
Common
Stock
|
$ | .8925 | $ | .8925 | ||||
Class
B Common Stock
|
$ | .8034 | $ | .8034 | ||||
ASSETS
|
October
4,
2009
|
December
31,
2008
|
||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 119,253 | $ | 37,103 | ||||
Accounts
receivable - trade
|
567,609 | 455,153 | ||||||
Inventories
|
559,318 | 592,530 | ||||||
Deferred
income taxes
|
31,164 | 70,903 | ||||||
Prepaid
expenses and other
|
185,293 | 189,256 | ||||||
Total
current assets
|
1,462,637 | 1,344,945 | ||||||
Property,
Plant and Equipment, at cost
|
3,348,034 | 3,437,420 | ||||||
Less-accumulated
depreciation and amortization
|
(1,935,216 | ) | (1,978,471 | ) | ||||
Net
property, plant and equipment
|
1,412,818 | 1,458,949 | ||||||
Goodwill
|
567,163 | 554,677 | ||||||
Other
Intangibles
|
125,345 | 110,772 | ||||||
Deferred
Income Taxes
|
24,776 | 13,815 | ||||||
Other
Assets
|
180,368 | 151,561 | ||||||
Total
assets
|
$ | 3,773,107 | $ | 3,634,719 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 285,231 | $ | 249,454 | ||||
Accrued
liabilities
|
546,425 | 504,065 | ||||||
Accrued
income taxes
|
33,652 | 15,189 | ||||||
Short-term
debt
|
227,389 | 483,120 | ||||||
Current
portion of long-term debt
|
15,632 | 18,384 | ||||||
Total
current liabilities
|
1,108,329 | 1,270,212 | ||||||
Long-term
Debt
|
1,503,435 | 1,505,954 | ||||||
Other
Long-term Liabilities
|
481,105 | 504,963 | ||||||
Deferred
Income Taxes
|
42,721 | 3,646 | ||||||
Total
liabilities
|
3,135,590 | 3,284,775 | ||||||
Stockholders’
Equity:
|
||||||||
The
Hershey Company Stockholders’ Equity
|
||||||||
Preferred
Stock, shares issued: none in 2009 and 2008
|
— | — | ||||||
Common
Stock, shares issued: 299,192,836 in 2009 and 299,190,836 in
2008
|
299,192 | 299,190 | ||||||
Class
B Common Stock, shares issued: 60,708,908 in 2009 and 60,710,908 in
2008
|
60,709 | 60,711 | ||||||
Additional
paid-in capital
|
386,842 | 352,375 | ||||||
Retained
earnings
|
4,087,572 | 3,975,762 | ||||||
Treasury-Common
Stock shares, at cost: 132,194,512 in 2009 and 132,866,673 in
2008
|
(3,989,117 | ) | (4,009,931 | ) | ||||
Accumulated
other comprehensive loss
|
(248,128 | ) | (359,908 | ) | ||||
The
Hershey Company stockholders’ equity
|
597,070 | 318,199 | ||||||
Noncontrolling
interests in subsidiaries
|
40,447 | 31,745 | ||||||
Total
stockholders’ equity
|
637,517 | 349,944 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 3,773,107 | $ | 3,634,719 |
For
the Nine Months Ended
|
||||||||
October
4,
2009
|
September
28,
2008
|
|||||||
Cash
Flows Provided from (Used by) Operating Activities
|
||||||||
Net
Income
|
$ | 309,215 | $ | 229,250 | ||||
Adjustments
to Reconcile Net Income to Net Cash
|
||||||||
Provided
from Operations:
|
||||||||
Depreciation
and amortization
|
138,874 | 190,762 | ||||||
Stock-based
compensation expense, net of tax of $15,793 and
$9,892, respectively
|
28,077 | 17,283 | ||||||
Excess
tax benefits from exercise of stock options
|
(3,002 | ) | (769 | ) | ||||
Deferred
income taxes
|
70,125 | 58,367 | ||||||
Business
realignment initiatives, net of tax of $29,429 and
$33,529, respectively
|
43,250 | 67,430 | ||||||
Contributions
to pension plans
|
(45,834 | ) | (24,620 | ) | ||||
Changes
in assets and liabilities, net of effects from business
acquisitions and divestitures:
|
||||||||
Accounts
receivable - trade
|
(110,731 | ) | (127,564 | ) | ||||
Inventories
|
17,894 | (62,809 | ) | |||||
Accounts
payable
|
34,556 | 94,593 | ||||||
Other
assets and liabilities
|
153,124 | (193,332 | ) | |||||
Net
Cash Flows Provided from Operating Activities
|
635,548 | 248,591 | ||||||
Cash
Flows Provided from (Used by) Investing Activities
|
||||||||
Capital
additions
|
(94,465 | ) | (198,446 | ) | ||||
Capitalized
software additions
|
(12,416 | ) | (12,672 | ) | ||||
Proceeds
from sales of property, plant and equipment
|
4,907 | 77,180 | ||||||
Business
acquisition
|
(15,220 | ) | — | |||||
Proceeds
from divestiture
|
— | 1,960 | ||||||
Net
Cash Flows (Used by) Investing Activities
|
(117,194 | ) | (131,978 | ) | ||||
Cash
Flows Provided from (Used by) Financing Activities
|
||||||||
Net
decrease in short-term debt
|
(255,287 | ) | (137,575 | ) | ||||
Long-term
borrowings
|
— | 247,845 | ||||||
Repayment
of long-term debt
|
(6,474 | ) | (3,281 | ) | ||||
Cash
dividends paid
|
(197,405 | ) | (197,218 | ) | ||||
Exercise
of stock options
|
21,952 | 34,635 | ||||||
Excess
tax benefits from exercise of stock options
|
3,002 | 769 | ||||||
Contributions
from noncontrolling interests in subsidiaries
|
7,322 | — | ||||||
Repurchase
of Common Stock
|
(9,314 | ) | (55,354 | ) | ||||
Net
Cash Flows (Used by) Financing Activities
|
(436,204 | ) | (110,179 | ) | ||||
Increase
in Cash and Cash Equivalents
|
82,150 | 6,434 | ||||||
Cash
and Cash Equivalents, beginning of period
|
37,103 | 129,198 | ||||||
Cash
and Cash Equivalents, end of period
|
$ | 119,253 | $ | 135,632 | ||||
Interest
Paid
|
$ | 91,508 | $ | 87,672 | ||||
Income
Taxes Paid
|
$ | 140,778 | $ | 115,977 |
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||||||||||
October
4,
2009
|
September
28,
2008
|
October
4,
2009
|
September
28,
2008
|
|||||||||
(in
millions of dollars)
|
||||||||||||
Total
compensation amount charged against income for stock options, performance
stock units (“PSUs”) and restricted stock units
|
$ | 12.0 | $ | 8.9 | $ | 43.5 | $ | 26.7 | ||||
Total
income tax benefit recognized in the Consolidated Statements of Income for
share-based compensation
|
$ | 4.6 | $ | 3.2 | $ | 15.7 | $ | 9.6 |
For
the Nine Months Ended
|
|||||
October
4,
2009
|
September
28,
2008
|
||||
Dividend
yield
|
3.3% | 2.4% | |||
Expected
volatility
|
21.6% | 18.1% | |||
Risk-free
interest rates
|
2.1% | 3.1% | |||
Expected
lives in years
|
6.6 | 6.6 |
For
the Nine Months Ended October 4, 2009
|
|||||||
Stock
Options
|
Shares
|
Weighted-Average
Exercise
Price
|
Weighted-Average
Remaining
Contractual
Term
|
||||
Outstanding
at beginning of year
|
16,671,643 | $42.08 |
6.6
years
|
||||
Granted
|
3,160,470 | $34.92 | |||||
Exercised
|
(792,751 | ) | $27.69 | ||||
Forfeited
|
(402,506 | ) | $44.40 | ||||
Outstanding
as of October 4, 2009
|
18,636,856 | $41.43 |
6.4
years
|
||||
Options
exercisable as of October 4, 2009
|
10,968,359 | $43.34 |
4.8
years
|
For
the Nine Months Ended
|
||||||
October
4,
2009
|
September
28,
2008
|
|||||
Weighted-average
fair value of options granted (per share)
|
$ | 5.31 | $ | 6.20 | ||
Intrinsic
value of options exercised (in millions of dollars)
|
$ | 8.9 | $ | 8.3 |
·
|
As
of October 4, 2009, the aggregate intrinsic value of options outstanding
was $56.0 million and the aggregate intrinsic value of options
exercisable was $30.3 million.
|
·
|
As
of October 4, 2009, there was $30.9 million of total unrecognized
compensation cost related to non-vested stock option compensation
arrangements granted under our stock option plans. That cost is
expected to be recognized over a weighted-average period of 2.4
years.
|
Performance
Stock Units and Restricted Stock Units
|
For
the Nine
Months
Ended
October
4,
2009
|
Weighted-average
grant date
fair
value for equity awards or
market
value for liability awards
|
||
Outstanding
at beginning of year
|
766,209 | $36.13 | ||
Granted
|
571,348 | $35.06 | ||
Performance
assumption change
|
497,639 | $38.45 | ||
Vested
|
(276,094) | $34.50 | ||
Forfeited
|
(17,376) | $35.60 | ||
Outstanding
as of October 4, 2009
|
1,541,726 | $38.51 |
For
the Nine Months Ended
|
|||||
October
4,
2009
|
September
28,
2008
|
||||
Intrinsic
value of share-based liabilities paid, combined with the fair
value of shares vested (in millions of dollars)
|
$ 9.0 | $ 9.4 |
For
the Nine Months Ended
|
||||||||
October
4,
2009
|
September
28,
2008
|
|||||||
(in
thousands of dollars)
|
||||||||
Interest
expense
|
$ | 71,693 | $ | 78,775 | ||||
Interest
income
|
(693 | ) | (1,305 | ) | ||||
Capitalized
interest
|
(2,068 | ) | (4,559 | ) | ||||
Interest
expense, net
|
$ | 68,932 | $ | 72,911 |
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||||||||||
October
4,
2009
|
September
28,
2008
|
October
4,
2009
|
September
28,
2008
|
|||||||||
(in
thousands of dollars)
|
||||||||||||
Cost
of sales:
2007 business realignment initiatives
|
$ | 1,325 | $ | 19,965 | $ | 8,492 | $ | 60,146 | ||||
Selling,
marketing and administrative:
2007 business realignment initiatives
|
1,683 | 2,188 | 5,437 | 6,065 | ||||||||
Business
realignment and impairment charges, net:
|
||||||||||||
Global supply chain transformation program:
|
||||||||||||
Losses
(gains) on sale of fixed assets
|
— | 233 | — | (6,557 | ) | |||||||
Fixed
asset impairments and plant closure expenses
|
1,584 | 1,755 | 18,473 | 17,020 | ||||||||
Employee
separation costs
|
193 | 3,984 | 3,071 | 11,115 | ||||||||
Pension
settlement loss
|
6,181 | 1,882 | 36,736 | 6,625 | ||||||||
Contract
termination costs
|
50 | 1 | 470 | 1,592 | ||||||||
Brazilian
business realignment:
|
||||||||||||
Employee
separation costs
|
— | 92 | — | 1,618 | ||||||||
Fixed
asset impairment charges
|
— | 35 | — | 752 | ||||||||
Contract
termination and other exit costs
|
— | 895 | — | 2,583 | ||||||||
Total
business realignment and
impairment charges, net
|
8,008 | 8,877 | 58,750 | 34,748 | ||||||||
Total
net charges associated with 2007 business
realignment initiatives
|
$ | 11,016 | $ | 31,030 | $ | 72,679 | $ | 100,959 |
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||||||||||
October
4,
2009
|
September
28,
2008
|
October
4,
2009
|
September
28,
2008
|
|||||||||
(in
thousands except per share amounts)
|
||||||||||||
Net
income
|
$ | 162,023 | $ | 124,538 | $ | 309,215 | $ | 229,250 | ||||
Weighted-average
shares - Basic
|
||||||||||||
Common
Stock
|
167,299 | 166,682 | 166,980 | 166,696 | ||||||||
Class
B Common Stock
|
60,709 | 60,784 | 60,710 | 60,798 | ||||||||
Total
weighted-average shares - Basic
|
228,008 | 227,466 | 227,690 | 227,494 | ||||||||
Effect
of dilutive securities:
|
||||||||||||
Employee
stock options
|
1,116 | 904 | 785 | 939 | ||||||||
Performance
and restricted stock units
|
429 | 300 | 309 | 324 | ||||||||
Weighted-average
shares - Diluted
|
229,553 | 228,670 | 228,784 | 228,757 | ||||||||
Earnings
Per Share - Basic
|
||||||||||||
Class
B Common Stock
|
$ | .66 | $ | .51 | $ | 1.26 | $ | .93 | ||||
Common
Stock
|
$ | .73 | $ | .56 | $ | 1.39 | $ | 1.03 | ||||
Earnings
Per Share - Diluted
|
||||||||||||
Class
B Common Stock
|
$ | .65 | $ | .51 | $ | 1.26 | $ | .93 | ||||
Common
Stock
|
$ | .71 | $ | .54 | $ | 1.35 | $ | 1.00 |
—
|
whether
the instrument qualifies for, and has been designated as, a hedging
relationship; and
|
—
|
the
type of hedging relationship.
|
—
|
cash
flow hedge;
|
—
|
fair
value hedge; and
|
—
|
hedge
of foreign currency exposure of a net investment in a foreign
operation.
|
Balance Sheet Caption
|
Interest
Rate Swap
Agreements
|
Foreign
Exchange
Forward
Contracts
and Options
|
Commodities
Futures
and
Options
Contracts
|
|||||||||
(in
thousands of dollars)
|
||||||||||||
Prepaid
expense and other current assets
|
$ | — | $ | 4,700 | $ | 26,409 | ||||||
Other
assets
|
$ | 3,473 | $ | 1,114 | $ | — | ||||||
Accrued
liabilities
|
$ | — | $ | 5,519 | $ | 17,468 | ||||||
Other
long-term liabilities
|
$ | — | $ | 928 | $ | — |
Cash Flow Hedging
Derivatives
|
Interest
Rate Swap
Agreements
|
Foreign
Exchange
Forward
Contracts
and Options
|
Commodities
Futures
and
Options
Contracts
|
|||||||||
(in
thousands of dollars)
|
||||||||||||
Gains
(losses) recognized in other comprehensive income (“OCI”) (effective
portion)
|
$ | 3,473 | $ | (957 | ) | $ | 79,758 | |||||
Gains
(losses) reclassified from accumulated OCI into income (effective portion)
(a)
|
$ | — | $ | 6,916 | $ | 2,800 | ||||||
Gains
(losses) recognized in income (ineffective portion) (b)
|
$ | — | $ | — | $ | 306 |
|
(a)
|
Gains
(losses) reclassified from accumulated OCI into earnings were included in
cost of sales for commodities futures and options contracts and in
selling, marketing and administrative expenses for foreign exchange
forward contracts and options.
|
|
(b)
|
Gains
(losses) recognized in earnings were included in cost of
sales.
|
For
the Three Months Ended October 4, 2009
|
|||||||||||
Pre-Tax
Amount
|
Tax
(Expense)
Benefit
|
After-Tax
Amount
|
|||||||||
(in
thousands of dollars)
|
|||||||||||
Net
income
|
$ | 162,023 | |||||||||
Other
comprehensive income (loss):
|
|||||||||||
Foreign
currency translation adjustments
|
$ | 10,674 | $ | — | 10,674 | ||||||
Pension
and post-retirement benefit plans
|
16,615 | (6,789 | ) | 9,826 | |||||||
Cash
flow hedges:
|
|||||||||||
Gains
on cash flow hedging derivatives
|
69,402 | (27,449 | ) | 41,953 | |||||||
Reclassification
adjustments
|
(15,697 | ) | 6,167 | (9,530 | ) | ||||||
Total
other comprehensive income
|
$ | 80,994 | $ | (28,071 | ) | 52,923 | |||||
Comprehensive
income
|
$ | 214,946 |
For
the Three Months Ended September 28, 2008
|
|||||||||||
Pre-Tax
Amount
|
Tax
(Expense)
Benefit
|
After-Tax
Amount
|
|||||||||
(in
thousands of dollars)
|
|||||||||||
Net
income
|
$ | 124,538 | |||||||||
Other
comprehensive income (loss):
|
|||||||||||
Foreign
currency translation adjustments
|
$ | (17,153 | ) | $ | — | (17,153 | ) | ||||
Pension
and post-retirement benefit plans
|
4,438 | (1,817 | ) | 2,621 | |||||||
Cash
flow hedges:
|
|||||||||||
Losses
on cash flow hedging derivatives
|
(62,646 | ) | 22,090 | (40,556 | ) | ||||||
Reclassification
adjustments
|
(10,365 | ) | 3,737 | (6,628 | ) | ||||||
Total
other comprehensive loss
|
$ | (85,726 | ) | $ | 24,010 | (61,716 | ) | ||||
Comprehensive
income
|
$ | 62,822 |
For
the Nine Months Ended October 4, 2009
|
|||||||||||
Pre-Tax
Amount
|
Tax
(Expense)
Benefit
|
After-Tax
Amount
|
|||||||||
(in
thousands of dollars)
|
|||||||||||
Net
income
|
$ | 309,215 | |||||||||
Other
comprehensive income (loss):
|
|||||||||||
Foreign
currency translation adjustments
|
$ | 27,278 | $ | — | 27,278 | ||||||
Pension
and post-retirement benefit plans
|
64,713 | (25,495 | ) | 39,218 | |||||||
Cash
flow hedges:
|
|||||||||||
Gains
on cash flow hedging derivatives
|
82,274 | (31,100 | ) | 51,174 | |||||||
Reclassification
adjustments
|
(9,716 | ) | 3,826 | (5,890 | ) | ||||||
Total
other comprehensive income
|
$ | 164,549 | $ | (52,769 | ) | 111,780 | |||||
Comprehensive
income
|
$ | 420,995 |
For
the Nine Months Ended September 28, 2008
|
|||||||||||
Pre-Tax
Amount
|
Tax
(Expense)
Benefit
|
After-Tax
Amount
|
|||||||||
(in
thousands of dollars)
|
|||||||||||
Net
income
|
$ | 229,250 | |||||||||
Other
comprehensive income (loss):
|
|||||||||||
Foreign
currency translation adjustments
|
$ | (17,248 | ) | $ | — | (17,248 | ) | ||||
Pension
and post-retirement benefit plans
|
9,362 | (3,778 | ) | 5,584 | |||||||
Cash
flow hedges:
|
|||||||||||
Gains
on cash flow hedging derivatives
|
34,654 | (12,930 | ) | 21,724 | |||||||
Reclassification
adjustments
|
(39,329 | ) | 14,189 | (25,140 | ) | ||||||
Total
other comprehensive loss
|
$ | (12,561 | ) | $ | (2,519 | ) | (15,080 | ) | |||
Comprehensive
income
|
$ | 214,170 |
October
4,
2009
|
December
31,
2008
|
|||||||
(in
thousands of dollars)
|
||||||||
Foreign
currency translation adjustments
|
$ | (2,475 | ) | $ | (29,753 | ) | ||
Pension
and post-retirement benefit plans, net of tax
|
(275,135 | ) | (314,353 | ) | ||||
Cash
flow hedges, net of tax
|
29,482 | (15,802 | ) | |||||
Total
accumulated other comprehensive loss
|
$ | (248,128 | ) | $ | (359,908 | ) |
October
4,
2009
|
December
31,
2008
|
|||||||
(in
thousands of dollars)
|
||||||||
Raw
materials
|
$ | 254,801 | $ | 215,309 | ||||
Goods
in process
|
90,300 | 95,986 | ||||||
Finished
goods
|
410,128 | 419,016 | ||||||
Inventories
at FIFO
|
755,229 | 730,311 | ||||||
Adjustment
to LIFO
|
(195,911 | ) | (137,781 | ) | ||||
Total
inventories
|
$ | 559,318 | $ | 592,530 |
October
4, 2009
|
||||||
Contract
Amount
|
Primary
Currencies
|
|||||
(in
millions of dollars)
|
||||||
Foreign
exchange forward contracts to
purchase
foreign currencies
|
$ | 4.4 |
Euros
|
|||
Foreign
exchange forward contracts to
sell
foreign currencies
|
$ | 111.8 |
Canadian
dollars
|
—
|
Level
1 Inputs – quoted prices in active markets for identical assets or
liabilities;
|
—
|
Level
2 Inputs – quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar instruments in markets
that are not active; inputs other than quoted prices that are observable;
and inputs that are derived from or corroborated by observable market data
by correlation; and
|
—
|
Level
3 Inputs – unobservable inputs used to the extent that observable inputs
are not available. These reflect the entity’s own assumptions
about the assumptions that market participants would use in pricing the
asset or liability.
|
Description
|
Fair
Value as of
October
4, 2009
|
Quoted
Prices in
Active
Markets
of
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level
3)
|
|||||||||||
(in
thousands of dollars)
|
|||||||||||||||
Assets
|
|||||||||||||||
Cash
flow hedging derivatives
|
$ | 35,696 | $ | 26,409 | $ | 9,287 | $ | — | |||||||
Liabilities
|
|||||||||||||||
Cash
flow hedging derivatives
|
$ | 23,915 | $ | 17,468 | $ | 6,447 | $ | — |
Pension
Benefits
|
Other
Benefits
|
|||||||||||||||
For
the Three Months Ended
|
||||||||||||||||
October
4,
2009
|
September
28,
2008
|
October
4,
2009
|
September
28,
2008
|
|||||||||||||
(in
thousands of dollars)
|
||||||||||||||||
Service
cost
|
$ | 6,471 | $ | 7,364 | $ | 382 | $ | 438 | ||||||||
Interest
cost
|
14,788 | 14,902 | 4,682 | 5,078 | ||||||||||||
Expected
return on plan assets
|
(17,822 | ) | (26,910 | ) | — | — | ||||||||||
Amortization
of prior service cost
|
302 | 322 | (118 | ) | (115 | ) | ||||||||||
Recognized
net actuarial loss (gain)
|
8,297 | (134 | ) | (40 | ) | — | ||||||||||
Administrative
expenses
|
40 | 107 | — | — | ||||||||||||
Net
periodic benefits cost (income)
|
12,076 | (4,349 | ) | 4,906 | 5,401 | |||||||||||
Special
termination benefits
|
— | (2 | ) | — | — | |||||||||||
Settlement
losses
|
6,181 | 4,458 | — | — | ||||||||||||
Total
amount reflected in earnings
|
$ | 18,257 | $ | 107 | $ | 4,906 | $ | 5,401 |
Pension
Benefits
|
Other
Benefits
|
|||||||||||||||
For
the Nine Months Ended
|
||||||||||||||||
October
4,
2009
|
September
28,
2008
|
October
4,
2009
|
September
28,
2008
|
|||||||||||||
(in
thousands of dollars)
|
||||||||||||||||
Service
cost
|
$ | 19,360 | $ | 22,128 | $ | 1,146 | $ | 1,315 | ||||||||
Interest
cost
|
44,070 | 44,801 | 14,012 | 15,248 | ||||||||||||
Expected
return on plan assets
|
(53,204 | ) | (80,818 | ) | — | — | ||||||||||
Amortization
of prior service cost
|
903 | 965 | (356 | ) | (343 | ) | ||||||||||
Recognized
net actuarial loss (gain)
|
24,988 | (421 | ) | (113 | ) | (2 | ) | |||||||||
Administrative
expenses
|
227 | 286 | — | — | ||||||||||||
Net
periodic benefits cost (income)
|
36,344 | (13,059 | ) | 14,689 | 16,218 | |||||||||||
Special
termination benefits
|
— | 145 | — | — | ||||||||||||
Settlement
losses
|
36,736 | 9,301 | — | — | ||||||||||||
Total
amount reflected in earnings
|
$ | 73,080 | $ | (3,613 | ) | $ | 14,689 | $ | 16,218 |
For
the Nine Months Ended
October
4, 2009
|
||||||||
Shares
|
Dollars
|
|||||||
(in
thousands)
|
||||||||
Shares
repurchased in the open market under pre-approved
share repurchase programs
|
— | $ | — | |||||
Shares
repurchased to replace Treasury Stock issued for stock
options
and incentive compensation
|
252 | 9,314 | ||||||
Total
share repurchases
|
252 | 9,314 | ||||||
Shares
issued for stock options and incentive compensation
|
(924 | ) | (30,128 | ) | ||||
Net
change
|
(672 | ) | $ | (20,814 | ) |
For
the Three Months Ended
|
For
the Nine Months Ended
|
||||||||||
October
4,
2009
|
September
28,
2008
|
Percent
Change
Increase
(Decrease)
|
October
4,
2009
|
September
28,
2008
|
Percent
Change
Increase
(Decrease)
|
||||||
(in
thousands except per share amounts)
|
|||||||||||
Net
Sales
|
$ 1,484.1
|
$ 1,489.6
|
(0.4)%
|
$ 3,891.3
|
$ 3,755.4
|
3.6%
|
|||||
Cost
of Sales
|
895.0
|
988.4
|
(9.4)%
|
2,408.7
|
2,495.2
|
(3.5)%
|
|||||
Gross
Profit
|
589.1
|
501.2
|
17.5%
|
1,482.6
|
1,260.2
|
17.7%
|
|||||
Gross
Margin
|
39.7%
|
33.6%
|
38.1%
|
33.6%
|
|||||||
SM&A
Expense
|
301.5
|
272.4
|
10.7%
|
874.6
|
789.0
|
10.9%
|
|||||
SM&A
Expense as a
percent
of sales
|
20.3%
|
18.3%
|
22.5%
|
21.0%
|
|||||||
Business
Realignment
Charges, net
|
8.0
|
8.9
|
(9.8)%
|
58.8
|
34.7
|
69.1%
|
|||||
EBIT
|
279.6
|
219.9
|
27.1%
|
549.2
|
436.5
|
25.8%
|
|||||
EBIT
Margin
|
18.8%
|
14.8%
|
14.1%
|
11.6%
|
|||||||
Interest
Expense, net
|
22.3
|
24.9
|
(10.5)%
|
68.9
|
72.9
|
(5.5)%
|
|||||
Provision
for Income Taxes
|
95.3
|
70.5
|
35.2%
|
171.1
|
134.3
|
27.4%
|
|||||
Effective
Income Tax Rate
|
37.0%
|
36.1%
|
35.6%
|
36.9%
|
|||||||
Net
Income
|
$ 162.0
|
$ 124.5
|
30.1%
|
$ 309.2
|
$ 229.3
|
34.9%
|
|||||
Net
Income Per Share-Diluted
|
$ .71
|
$ .54
|
31.5%
|
$ 1.35
|
$ 1.00
|
35.0%
|
2009
|
||
Expected
EPS-diluted
|
$1.80
- $1.88
|
|
Total
expected business realignment and impairment charges
|
$0.26
- $0.32
|
|
Non-GAAP
expected adjusted EPS-diluted
|
$2.12
- $2.14
|
·
|
Issues
or concerns related to the quality and safety of our products, ingredients
or packaging could cause a product recall and/or result in harm to the
Company’s reputation, negatively impacting our operating
results;
|
·
|
Increases
in raw material and energy costs could affect future financial
results;
|
·
|
Price
increases may not be sufficient to offset cost increases and maintain
profitability or may result in sales volume declines associated with
pricing elasticity;
|
·
|
Market
demand for new and existing products could
decline;
|
·
|
Increased
marketplace competition could hurt our
business;
|
·
|
Changes
in governmental laws and regulations could increase our costs and
liabilities or impact demand for our
products;
|
·
|
Political,
economic, and/or financial market conditions in the United States and
abroad could negatively impact our financial
results;
|
·
|
International
operations could fluctuate unexpectedly and adversely impact our
business;
|
·
|
Future
developments related to the investigation by government regulators of
alleged pricing practices by members of the confectionery industry could
impact our reputation, the regulatory environment under which we operate,
and our operating results;
|
·
|
Pension
costs or funding requirements could increase at a higher than anticipated
rate;
|
·
|
Annual
savings from initiatives to transform our supply chain and advance our
value-enhancing strategy may be less than we
expect;
|
·
|
Implementation
of our global supply chain transformation program may not occur within the
anticipated timeframe and/or may exceed our cost estimates;
and
|
·
|
Such
other matters as discussed in our Annual Report on Form 10-K for
2008.
|
Period
|
(a)
Total Number
of
Shares
Purchased
|
(b)
Average
Price
Paid
per
Share
|
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
(d)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the
Plans or Programs
|
||||||||
(in
thousands of
dollars)
|
||||||||||||
July
6 through
August
2, 2009
|
— | $ — | — | $100,017 | ||||||||
August
3 through
August
30, 2009
|
— | $ — | — | $100,017 | ||||||||
August
31 through
October
4, 2009
|
— | $ — | — | $100,017 | ||||||||
Total
|
— | — |
Exhibit
Number
|
Description
|
|
12.1
|
Statement
showing computation of ratio of earnings to fixed charges for the nine
months ended October 4, 2009 and September 28,
2008.
|
|
31.1
|
Certification
of David J. West, Chief Executive Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Humberto P. Alfonso, Chief Financial Officer, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of David J. West, Chief Executive Officer, and Humberto P. Alfonso, Chief
Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
101.INS
|
XBRL
Instance Document
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase |
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
||
THE
HERSHEY COMPANY
|
||