Hershey Announces First Quarter Results and Increases Full Year Net Sales and EPS Outlook

http://www.businesswire.com/news/home/20100422005335/en

Core brand performance drives U.S. market share gain
HERSHEY, Pa.--(Business Wire)--
The Hershey Company (NYSE: HSY):

● Net sales increase 13.9%, driven by a balance of volume gains and price
realization

● Earnings per share-diluted of $0.64

● Solid FDMxC marketplace performance, resulting in a 0.5 point market share
gain in the U.S.

● Net sales growth in 2010 to be at least 6%, greater than long-term target and
previous outlook of 3-5%

● Adjusted EPS in 2010 expected to increase low-to-mid-teens on a percentage
basis versus 2009, greater than the 6-8% original outlook

The Hershey Company (NYSE: HSY) today announced sales and earnings for the first
quarter ended April 4, 2010. Consolidated net sales were $1,407,843,000 compared
with $1,236,031,000 for the first quarter of 2009. Reported net income for the
first quarter of 2010 was $147,394,000 or $0.64 per share-diluted, compared with
$75,894,000 or $0.33 per share-diluted for the comparable period of 2009.

In the first quarter of 2009, these results, prepared in accordance with U.S.
generally accepted accounting principles (GAAP), include net pre-tax charges of
$19.0 million, or $0.05 per share-diluted, associated with the Global Supply
Chain Transformation (GSCT) program. Adjusted net income, which excludes these
net charges, was $85,992,000 or $0.38 per share-diluted in the first quarter of
2009. Excluding GSCT charges, adjusted earnings per share-diluted increased 68
percent in the first quarter of 2010 versus 2009. During 2009, the GSCT program
concluded. Except for possible non-cash pension settlement charges, the Company
does not expect any significant charges related to the GSCT program in 2010.

First Quarter Performance and Outlook

"Hershey`s first quarter results were strong against all key metrics, as our
core brand momentum continued to build in the marketplace," said David J. West,
President and Chief Executive Officer. "Financial and marketplace performance
exceeded our expectations as higher levels of advertising and consumer
promotion, as well as focused sales execution, resulted in solid net sales and
retail takeaway. The components of the first quarter net sales growth of 13.9
percent were balanced with volume gains and carryover seasonal pricing
contributing to top-line performance. A portion of this gain, as we mentioned
last quarter, was due to the seasonal shift in volume from the fourth quarter of
2009 to the first quarter of 2010. Growth in our international business as well
as a one point benefit from foreign currency exchange rates also bolstered
results. Base business volume trends improved during the quarter and exceeded
our expectations. Seasonal volume, while down slightly due to volume elasticity
associated with the August 2008 pricing action, was in line with our
projections, with Easter dollar sell through about in line with historical
norms.

"U.S. retail takeaway for the 12 weeks ended March 20, 2010, was up 7.5 percent,
in channels that account for over 80 percent of our retail business. This period
benefited slightly from an early Easter which was one week earlier than the
previous year. Excluding the impact of Easter seasonal activity in the year ago
and current periods, Hershey`s retail takeaway increased 5.5 percent. In the
channels measured by syndicated data, U.S. market share, including Easter
seasonal activity in the year ago and current periods, increased 0.5 points.
Hershey`s retail performance was solid and preliminary data indicates Hershey
will again gain market share in the Easter season. In convenience stores, which
are less impacted by the Easter season, we generated retail takeaway up
mid-single digits driven by volume/mix.

"Hershey`s brands continue to respond to consumer and customer programming. In
the U.S., advertising increased about 68 percent in the first quarter behind
continued support of core brands - Hershey`s, Reese`s, Kisses, Hershey`s Bliss,
Kit Kat and Twizzlers - as well as new advertising copy on the York, Almond Joy
and Mounds brands. Our December new product launches, primarily Hershey`s
Special Dark, Almond Joy and York Pieces are off to a strong start, exceeding
our internal expectations behind advertising and distribution support. Combined
with successful in-store execution by Hershey`s sales force, we are well
positioned to deliver on our 2010 marketplace and revised financial objectives.

"Adjusted income before interest and income taxes (EBIT) increased 47 percent in
the first quarter, exceeding our expectations, resulting in a 410 basis point
margin improvement. The increase was driven by better volume trends than we had
initially expected, net price realization, supply chain efficiencies and
productivity gains. Offsetting a portion of these gains were higher marketing
and selling expenses, costs related to our consideration of a transaction with
Cadbury plc, as well as legal and other administrative expenses. Strong earnings
growth and our disciplined approach to balance sheet and working capital
management resulted in another solid quarter of operating cash flow generation.

"We`re very pleased with the start to 2010. Similar to last year, our
performance continues to afford us the flexibility to deliver on our financial
objectives while making additional investments in our business, in both domestic
and international markets that should benefit Hershey in the near and long term.
We will focus our efforts on brand-building initiatives and consumer insights
that will ensure that the category and Hershey continue to perform well during
the remainder of the year and into 2011. We are planning additional advertising
for the full year and now expect advertising expense to increase 35 to 40
percent in 2010. This is greater than our previous estimate of a 25-to-30
percent increase. We now see 2010 net sales increasing at least 6 percent,
including an approximate one point benefit from foreign currency exchange rates.
This will exceed our long-term objective and initial estimate of 3 to 5 percent
growth. For the full year, we have good visibility into our cost structure and
expect to achieve gross and EBIT margin expansion that will result in a
low-to-mid-teens increase in adjusted earnings per share-diluted on a percentage
basis versus 2009," West concluded.

Note: In this release, Hershey has provided income measures excluding certain
items described above, in addition to net income determined in accordance with
GAAP. These non-GAAP financial measures, as shown on the summary of consolidated
statements of income, 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.

In 2009, the Company recorded GAAP charges, including non-cash pension
settlement charges, of $99.1 million, or $0.27 per share-diluted, attributable
to the GSCT program. Except for possible non-cash pension settlement charges,
the Company does not expect any significant charges related to the GSCT program
in 2010.

Below is a reconciliation of GAAP and non-GAAP items to the Company`s 2009
adjusted earnings per share-diluted:

2009

Reported EPS-Diluted $ 1.90

Total Business Realignment and Impairment Charges $ 0.27

Adjusted EPS-Diluted * $ 2.17

*Excludes business realignment and impairment charges.

Possible adjustments to exclude business realignment charges for 2010 are not
known at this time; therefore, the Company is unable to provide a reconciliation
of adjusted earnings per share-diluted for 2010.

Safe Harbor Statement

This release contains statements that are forward-looking. These statements are
made based upon current expectations that are subject to risk and uncertainty.
Actual results may differ materially from those contained in the forward-looking
statements. Factors that could cause results to differ materially include, but
are not limited to: issues or concerns related to the quality and safety of our
products, ingredients or packaging; changes in raw material and other costs;
market demand for our new and existing products; increased marketplace
competition; selling price increases, including volume declines associated with
pricing elasticity; disruption to our supply chain; failure to successfully
execute acquisitions, divestitures and joint ventures; changes in governmental
laws and regulations, including taxes; political, economic, and/or financial
market conditions; risks and uncertainties related to our international
operations; disruptions, failures or security breaches of our information
technology infrastructure; the impact of future developments related to the
investigation by government regulators of alleged pricing practices by members
of the confectionery industry, including risks of subsequent litigation or
further government action; pension cost factors, such as actuarial assumptions,
market performance and employee retirement decisions and funding requirements;
and such other matters as discussed in our Annual Report on Form 10-K for 2009.
All information in this press release is as of April 22, 2010. The Company
undertakes no duty to update any forward-looking statement to conform the
statement to actual results or changes in the Company`s expectations.

Live Web Cast

As previously announced, the Company will hold a conference call with analysts
today at 8:30 a.m. Eastern Time. The conference call will be web cast live via
Hershey`s corporate website www.hersheys.com. Please go to the Investor
Relations section of the website for further details.

The Hershey Company
Summary of Consolidated Statements of Income
Reconciliation Excluding the Global Supply Change Transformation (GSCT) Program
for the three months ended April 4, 2010 and April 5, 2009
(in thousands except per share amounts)

2010 2009
Adjusted to
Exclude GSCT
As Reported As Reported GSCT Program* Program*

Net Sales $ 1,407,843 $ 1,236,031 $ -- $ 1,236,031

Costs and Expenses:
Cost of Sales 813,863 795,803 4,051 791,752
Selling, Marketing and Administrative 340,646 274,456 2,083 272,373
Business Realignment and Impairment
Charges, net -- 12,838 12,838 --

Total Costs and Expenses 1,154,509 1,083,097 18,972 1,064,125

Income Before Interest and Income Taxes (EBIT) 253,334 152,934 (18,972 ) 171,906
Interest Expense, net 23,749 23,896 -- 23,896

Income Before Income Taxes 229,585 129,038 (18,972 ) 148,010
Provision for Income Taxes 82,191 53,144 (8,874 ) 62,018

Net Income $ 147,394 $ 75,894 $ (10,098 ) $ 85,992

Net Income Per Share - Basic - Common $ 0.66 $ 0.34 $ (0.05 ) $ 0.39
- Basic - Class B $ 0.60 $ 0.31 $ (0.04 ) $ 0.35
- Diluted - Common $ 0.64 $ 0.33 $ (0.05 ) $ 0.38

Shares Outstanding - Basic - Common 167,257 166,767 166,767
- Basic - Class B 60,709 60,711 60,711
- Diluted - Common 229,551 228,284 228,284

Key Margins:
Gross Margin 42.2 % 35.6 % 35.9 %
EBIT Margin 18.0 % 12.4 % 13.9 %
Net Margin 10.5 % 6.1 % 7.0 %

* For more information on the use of adjusted non-GAAP financial measures and
the Company`s global supply chain transformation program, refer to the
management's discussion and analysis, consolidated financial statements and
notes included in our Annual Report on Form 10-K for 2009.

Note: The impact of the GSCT program on Net Income Per Share - Basic and -
Diluted may not necessarily equal Net Income Per Share if calculated
independently as a result of rounding.

The Hershey Company
Consolidated Balance Sheets
as of April 4, 2010 and December 31, 2009
(in thousands of dollars)

Assets 2010 2009

Cash and Cash Equivalents $ 303,786 $ 253,605
Accounts Receivable - Trade (Net) 411,245 410,390
Deferred Income Taxes 56,884 39,868
Inventories 481,854 519,712
Prepaid Expenses and Other 159,263 161,859

Total Current Assets 1,413,032 1,385,434

Net Plant and Property 1,394,678 1,404,767
Goodwill 577,712 571,580
Other Intangibles 125,327 125,520
Deferred Income Taxes 7,319 4,353
Other Assets 180,619 183,377

Total Assets $ 3,698,687 $ 3,675,031

Liabilities and Stockholders' Equity

Loans Payable $ 55,948 $ 39,313
Accounts Payable 294,223 287,935
Accrued Liabilities 466,288 546,462
Taxes Payable 85,836 36,918

Total Current Liabilities 902,295 910,628

Long-Term Debt 1,502,183 1,502,730
Other Long-Term Liabilities 500,504 501,334
Deferred Income Taxes 4,640 -

Total Liabilities 2,909,622 2,914,692

Total Stockholders' Equity 789,065 760,339

Total Liabilities and Stockholders' Equity $ 3,698,687 $ 3,675,031

The Hershey Company
Financial Contact:
Mark Pogharian
717-534-7556
or
Media Contact:
Kirk Saville
717-534-7641

Copyright Business Wire 2010