Hershey Announces Second Quarter Results
|
Source: Hershey Foods Corporation
23/07/2008
|
|
Hershey, Pa., July 23 - The Hershey Company today announced sales and earnings for the second quarter ended June 29, 2008. Consolidated net sales were $1,105,437,000 compared with $1,051,916,000 for the second quarter of 2007. Net income for the second quarter of 2008 was $41,467,000 or $0.18 per share-diluted, compared with $3,554,000 or $0.01 per share-diluted, for the comparable period of 2007.
For the second quarters of 2008 and 2007, these results, prepared in accordance with generally accepted accounting principles ("GAAP"), include net pre-tax charges of $39.3 million and $124.4 million, or $0.11 and $0.34 per share, respectively. The majority of these charges were associated with the Global Supply Chain Transformation program announced in February 2007. Net income from operations, which excludes the net charges for the second quarters of 2008 and 2007, was $66,952,000 or $0.29 per share-diluted in 2008, compared with $81,671,000 or $0.35 per share-diluted in 2007.
Second Quarter Performance
"Hershey's second quarter results reflect the progress the Company continues to make in the marketplace," said David J. West, President and Chief Executive Officer. "Sales increased by 5.1 percent, driven by organic sales gains of 3.5 percent from pricing and overall growth in core brands and new products, offset by softness in snacks and refreshment. The Godrej Hershey Ltd. venture in India accounted for the remaining growth. Gross margin expanded slightly as pricing and supply chain savings offset higher commodity costs and the impact of integrating our business in India. Second quarter profitability, which was in line with our expectations, was curtailed by increased brand support, including costs associated with new product introductions, greater levels of retail coverage and investments within key international markets.
"U.S. retail takeaway in the second quarter, excluding the effect of Easter timing, increased 5.0 percent in channels that account for over 80 percent of our retail business. As a result, non-seasonal everyday market share was about equal to the prior year's second quarter in the channels measured by syndicated data. The results have been positive where we have focused our resources. In the U.S., advertising and consumer brand-building investment increased by about 30 percent in the second quarter. Activity was primarily concentrated in the Reese's and Hershey's franchises, including Hershey's Bliss, and Starbucks Chocolates.
"We're pleased with our U.S. marketplace performance in the second quarter as we improved in all classes of trade. The category has and will continue to grow. We expect Hershey's year-over-year core brand marketplace performance improvement to continue, benefiting from the new approach of our consumer-driven demand model."
First Half Results and Outlook
For the first six months of 2008, consolidated net sales were $2,265,779,000 compared with $2,205,025,000 for the first six months of 2007. Reported net income for the first six months of 2008 was $104,712,000 or $0.46 per share-diluted, compared with $97,027,000, or $0.42 per share-diluted, for the first six months of 2007.
For the first six months of 2008 and 2007, these results, prepared in accordance with GAAP, include net pre-tax charges of $69.9 million and $164.8 million, or $0.20 and $0.44 per share, respectively. The majority of these charges were associated with the Global Supply Chain Transformation program announced in February 2007.
Net income from operations, which excludes the net charges for the first six months of 2008 and 2007, was $150,867,000, or $0.66 per share-diluted, compared with $200,457,000 or $0.86 per share-diluted in 2007, a decrease of 23 percent in earnings per share-diluted.
"Hershey's first half results were in line with our expectations," West stated. "Net sales and marketplace performance improved, validating our strategy of increasing advertising and consumer investment behind core U.S. brands. The consumer-driven model unveiled last month is focusing the Company on brands and innovation that offer the greatest potential for sustainable sales and earnings growth.
"Marketplace momentum has continued as we enter the third quarter and we're encouraged about our prospects in the second half of the year. The Global Supply Chain Transformation program will deliver productivity savings during the remainder of the year. These savings, combined with price realization and good visibility into our cost structure in the second half of the year, will enable us to expand consumer investment, support solid seasonal programming and continue to build our international business. Therefore, for the full-year 2008, we continue to expect net sales growth of 3-4 percent and earnings per share-diluted from operations of $1.85 to $1.90."
2007 2008
Reported / Expected EPS-Diluted $0.93 $1.43 - $1.51
Total Business Realignment
and Impairment Charges $1.15 $0.39 - $0.42
EPS-Diluted from Operations* $2.08 --
Expected EPS-Diluted from Operations* $1.85 - $1.90
*From operations, excluding business realignment and impairment charges.
The Hershey Company
Summary of Consolidated Statements of Income
for the periods ended June 29, 2008 and July 1, 2007
(in thousands except per share amounts)
Second Quarter Six Months
2008 2007 2008 2007
Net Sales $1,105,437 $1,051,916 $2,265,779 $2,205,025
Costs and Expenses:
Cost of Sales 722,926 722,478 1,506,816 1,461,556
Selling, Marketing
and Administrative 266,612 216,870 516,561 433,303
Business Realignment
and Impairment
Charges, net 21,786 79,728 25,871 107,273
Total Costs and
Expenses 1,011,324 1,019,076 2,049,248 2,002,132
Income Before
Interest and
Income Taxes (EBIT) 94,113 32,840 216,531 202,893
Interest Expense, net 23,610 29,213 47,996 57,468
Income Before Income
Taxes 70,503 3,627 168,535 145,425
Provision for Income
Taxes 29,036 73 63,823 48,398
Net Income $41,467 $3,554 $104,712 $97,027
Net Income Per Share
- Basic - Common $0.19 $0.02 $0.47 $0.43
- Basic - Class B $0.17 $0.01 $0.43 $0.39
- Diluted - Common $0.18 $0.01 $0.46 $0.42
Shares Outstanding
- Basic - Common 166,624 168,309 166,701 169,078
- Basic - Class B 60,806 60,815 60,806 60,815
- Diluted - Common 228,664 231,963 228,798 232,841
Key Margins:
Gross Margin 34.6% 31.3% 33.5% 33.7%
EBIT Margin 8.5% 3.1% 9.6% 9.2%
Net Margin 3.8% 0.3% 4.6% 4.4%
The Hershey Company
Pro Forma Summary of Consolidated Statements of Income
for the periods ended June 29, 2008 and July 1, 2007
(in thousands except per share amounts)
Second Quarter Six Months
2008 2007 2008 2007
Net Sales $1,105,437 $1,051,916 $2,265,779 $2,205,025
Costs and Expenses:
Cost of Sales 707,899(a) 681,171(d) 1,466,635(a) 1,410,390(d)
Selling, Marketing
and Administrative 264,169(b) 213,523(e) 512,684(b) 426,970(e)
Business Realignment
and Impairment
Charges, net ---( c ) ---(f) ---( c ) ---(f)
Total Costs
and Expenses 972,068 894,694 1,979,319 1,837,360
Income Before
Interest and
Income Taxes (EBIT) 133,369 157,222 286,460 367,665
Interest Expense, net 23,610 29,213 47,996 57,468
Income Before
Income Taxes 109,759 128,009 238,464 310,197
Provision for
Income Taxes 42,807 46,338 87,597 109,740
Net Income $66,952 $81,671 $150,867 $200,457
Net Income Per Share
- Basic - Common $0.30 $0.37 $0.68 $0.90
- Basic - Class B $0.27 $0.33 $0.61 $0.80
- Diluted - Common $0.29 $0.35 $0.66 $0.86
Shares Outstanding
- Basic - Common 166,624 168,309 166,701 169,078
- Basic - Class B 60,806 60,815 60,806 60,815
- Diluted - Common 228,664 231,963 228,798 232,841
Key Margins:
Adjusted Gross Margin 36.0% 35.2% 35.3% 36.0%
Adjusted EBIT Margin 12.1% 14.9% 12.6% 16.7%
Adjusted Net Margin 6.1% 7.8% 6.7% 9.1%
(a) Excludes business realignment and impairment charges of
$15.0 million pre-tax or $10.0 million after-tax for the second
quarter and $40.2 million pre-tax or $27.4 million after-tax for the
six months.
(b) Excludes business realignment and impairment charges of $2.4 million
pre-tax or $1.7 million after-tax for the second quarter and
$3.9 million pre-tax or $2.2 million after-tax for the six months.
( c ) Excludes business realignment and impairment charges of
$21.8 million pre-tax or $13.8 million after-tax for the second
quarter and $25.9 million pre-tax or $16.4 million after-tax for the
six months.
(d) Excludes business realignment and impairment charges of
$41.3 million pre-tax or $26.3 million after-tax for the second
quarter and $51.2 million pre-tax or $32.5 million after-tax for the
six months.
(e) Excludes business realignment and impairment charges of $3.4 million
pre-tax or $2.1 million after-tax for the second quarter and
$6.3 million pre-tax or $3.9 million after-tax for the six months.
(f) Excludes business realignment and impairment charges of
$79.7 million pre-tax or $49.7 million after-tax for the second
quarter and $107.3 million pre-tax or $67.0 million after-tax for
the six months.
The Hershey Company
Consolidated Balance Sheets
as of June 29, 2008 and December 31, 2007
(in thousands of dollars)
Assets 2008 2007
Cash and Cash Equivalents $45,427 $129,198
Accounts Receivable - Trade (Net) 302,952 487,285
Deferred Income Taxes 44,913 83,668
Inventories 697,569 600,185
Prepaid Expenses and Other 188,156 126,238
Total Current Assets 1,279,017 1,426,574
Net Plant and Property 1,492,694 1,539,715
Goodwill 578,689 584,713
Other Intangibles 168,522 155,862
Other Assets 559,770 540,249
Total Assets $4,078,692 $4,247,113
Liabilities, Minority Interest and
Stockholders' Equity
Loans Payable $436,246 $856,392
Accounts Payable 281,152 223,019
Accrued Liabilities 486,128 538,986
Taxes Payable 1,579 373
Total Current Liabilities 1,205,105 1,618,770
Long-Term Debt 1,514,029 1,279,965
Other Long-Term Liabilities 527,693 544,016
Deferred Income Taxes 181,897 180,842
Total Liabilities 3,428,724 3,623,593
Minority Interest 42,345 30,598
Total Stockholders' Equity 607,623 592,922
Total Liabilities, Minority Interest
and Stockholders' Equity $4,078,692 $4,247,113
|