The Hershey Company (HSY) 10-Q 13 Aug 09 2009 Q2 Quarterly report Financial data

1000 - CONSOLIDATED STATEMENTS

1000 - CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Share data	3 Months Ended Jul. 05, 2009	3 Months Ended Jun. 29, 2008	6 Months Ended Jul. 05, 2009	6 Months Ended Jun. 29, 2008
Net Sales	$1,171,183	$1,105,437	$2,407,214	$2,265,779
Costs and Expenses
Cost of sales	717,893	722,926	1,513,696	1,506,816
Selling, marketing and administrative	298,710	266,612	573,166	516,561
Business realignment and impairment charges, net	37,904	21,786	50,742	25,871
Total costs and expenses	1,054,507	1,011,324	2,137,604	2,049,248
Income before Interest and Income Taxes	116,676	94,113	269,610	216,531
Interest expense, net	22,734	23,610	46,630	47,996
Income before Income Taxes	93,942	70,503	222,980	168,535
Provision for income taxes	22,644	29,036	75,788	63,823
Net Income	$71,298	$41,467	$147,192	$104,712
Earnings Per Share - Basic - Class B Common Stock (in dollars per share)	0.29	0.17	0.6	0.43
Earnings Per Share - Diluted - Class B Common Stock (in dollars per share)	0.29	0.17	0.6	0.43
Earnings Per Share - Basic - Common Stock (in dollars per share)	0.32	0.19	0.66	0.47
Earnings Per Share - Diluted - Common Stock (in dollars per share)	0.31	0.18	0.64	0.46
Average Shares Outstanding - Basic - Common Stock (in shares)	166,846	166,624	166,817	166,701
Average Shares Outstanding - Basic - Class B Common Stock (in shares)	60,710	60,806	60,710	60,806
Average Shares Outstanding - Diluted (in shares)	228,489	228,664	228,396	228,798
Cash Dividends Paid Per Share
Common Stock (in dollars per share)	0.2975	0.2975	0.595	0.595
Class B Common Stock (in dollars per share)	0.2678	0.2678	0.5356	0.5356

2000 - CONSOLIDATED BALANCE SHE

2000 - CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	Jul. 05, 2009	Dec. 31, 2008
Assets
Cash and cash equivalents	$28,768	$37,103
Accounts receivable - trade	272,542	455,153
Inventories	642,505	592,530
Deferred income taxes	65,854	70,903
Prepaid expenses and other	169,255	189,256
Total current assets	1,178,924	1,344,945
Property, Plant and Equipment, at cost	3,400,412	3,437,420
Less-accumulated depreciation and amortization	(1,959,882)	(1,978,471)
Net property, plant and equipment	1,440,530	1,458,949
Goodwill	563,622	554,677
Other Intangibles	125,315	110,772
Deferred Income Taxes	21,182	13,815
Other Assets	163,849	151,561
Total assets	3,493,422	3,634,719
Liabilities
Accounts payable	279,706	249,454
Accrued liabilities	460,304	504,065
Accrued income taxes	0	15,189
Short-term debt	245,434	483,120
Current portion of long-term debt	16,495	18,384
Total current liabilities	1,001,939	1,270,212
Long-term Debt	1,504,475	1,505,954
Other Long-term Liabilities	503,638	504,963
Deferred Income Taxes	26,190	3,646
Total liabilities	3,036,242	3,284,775
Stockholders' Equity
Preferred Stock, shares issued: none in 2009 and 2008	0	0
Common Stock, shares issued: 299,191,836 in 2009 and 299,190,836 in 2008	299,192	299,190
Class B Common Stock, shares issued: 60,709,908 in 2009 and 60,710,908 in 2008	60,709	60,711
Additional paid-in capital	375,559	352,375
Retained earnings	3,991,467	3,975,762
Treasury-Common Stock shares at cost:132,891,936 in 2009 and 132,866,673 in 2008	(4,008,120)	(4,009,931)
Accumulated other comprehensive loss	(301,051)	(359,908)
The Hershey Company stockholders' equity	417,756	318,199
Noncontrolling interests in subsidiaries	39,424	31,745
Total stockholders' equity	457,180	349,944
Total liabilities and stockholders' equity	$3,493,422	$3,634,719

2100 - PARENTHETICAL DATA FOR C

2100 - PARENTHETICAL DATA FOR CONSOLIDATED BALANCE SHEETS (USD $)
	Jul. 05, 2009	Dec. 31, 2008
STOCKHOLDERS' EQUITY
Common Stock, shares issued (in shares)	299,192,436	299,190,836
Class B Common Stock, shares issued (in shares)	60,709,308	60,710,908
Treasury-Common Stock shares (in shares)	132,777,431	132,866,673

3000 - CONSOLIDATED STATEMENTS

3000 - CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	6 Months Ended Jul. 05, 2009	6 Months Ended Jun. 29, 2008
Cash Flows Provided from (Used by) Operating Activities
Net Income	$147,192	$104,712
Adjustments to Reconcile Net Income to Net Cash Provided from Operations
Depreciation and amortization	94,058	125,088
Stock-based compensation expense, net of tax of $4,760 and $3,216, respectively	20,567	11,537
Excess tax benefits from exercise of stock options	(1,069)	(559)
Deferred Income Taxes	38,495	39,795
Business realignment initiatives, net of tax of $8,874 and $10,003, respectively	36,765	46,155
Contributions to pension plans	(2,026)	(3,813)
Changes in assets and liabilities, net of effects from business acquisitions and divestitures
Accounts receivable - trade	184,336	183,876
Inventories	(66,893)	(95,618)
Accounts payable	29,031	58,133
Other assets and liabilities	(34,275)	(149,234)
Net Cash Flows Provided from Operating Activities	446,181	320,072
Cash Flows Provided from (Used by) Investing Activities
Capital Additions	(66,273)	(138,374)
Capitalized Software Additions	(7,543)	(8,157)
Proceeds from sales of property, plant and equipment	3,061	76,860
Business acquisition	(15,220)	0
Proceeds from divestiture	0	1,960
Net Cash Flows (Used by) Investing Activities	(85,975)	(67,711)
Cash Flows Provided from (Used by) Financing Activities
Net decrease in short-term debt	(237,409)	(430,916)
Long-term borrowings	0	247,845
Repayment of long-term debt	(4,763)	(2,167)
Cash dividends paid	(131,487)	(131,481)
Exercise of stock options	6,041	21,114
Excess tax benefits from exercise of stock options	1,069	559
Contributions from noncontrolling interests in subsidiaries	7,322	0
Repurchase of Common Stock	(9,314)	(41,086)
Net Cash Flows (Used by) Financing Activities	(368,541)	(336,132)
Increase in Cash and Cash Equivalents	(8,335)	(83,771)
Cash and Cash Equivalents,beginning of period	37,103	129,198
Cash and Cash Equivalents, end of period	28,768	45,427
Interest Paid	46,665	47,259
Income Taxes Paid	$109,182	$94,988

3100 - PARENTHETICAL DATA FOR C

3100 - PARENTHETICAL DATA FOR CONSOLIDATATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	6 Months Ended Jul. 05, 2009	6 Months Ended Jun. 29, 2008
Cash Flows Provided from (Used by) Operating Activities
Stock-based compensation expense, tax	$11,270	$6,546
Business realignment initiatives, tax	$24,898	$23,774

6000 - BASIS OF PRESENTATION

6000 - BASIS OF PRESENTATION
	6 Months Ended Jul. 05, 2009 USD / shares
BASIS OF PRESENTATION
BASIS OF PRESENTATION	1.BASIS OF PRESENTATION Our unaudited consolidated financial statements provided in this report include the accounts of the Company and our majority-owned subsidiaries and entities in which we have a controlling financial interest after the elimination of intercompany accounts and transactions.We have a controlling financial interest if we own a majorityof the outstanding voting common stock and the noncontrolling stockholders do not have substantive participating rights, or we have significant control over an entity through contractual or economic interests in which we are the primary beneficiary. We prepared these statements in accordance with the instructions to Form 10-Q.These statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles (GAAP) for complete financial statements. We included all adjustments (consisting only of normal recurring accruals) which we believe were considered necessary for a fair presentation. We reclassified certain prior year amounts to conform to the 2009 presentation.Operating results for the six months ended July 5, 2009 may not be indicative of the results that may be expectedfor the year ending December 31, 2009, because of the seasonal effects of our business. For more information, refer to the consolidated financial statements and notes included in our 2008 Annual Report on Form 10-K. In May 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 165, Subsequent Events (SFAS No. 165).This new standard is effective for both interim and annual financial statements ending after June 15, 2009.SFASNo. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted SFAS No. 165 as of July 5, 2009 and have evaluated all subsequent events through the date and time our financial statements were issued on August 13, 2009.The adoption of this standard did not have a material impact on our financial accounting or reporting.See Note 19 for related subsequent event disclosures.

6010 - BUSINESS ACQUISITIONS AN

6010 - BUSINESS ACQUISITIONS AND DIVESTITURES
	6 Months Ended Jul. 05, 2009 USD / shares
BUSINESS ACQUISITIONS AND DIVESTITURES
BUSINESS ACQUISITIONS AND DIVESTITURES	2.BUSINESS ACQUISITIONS AND DIVESTITURES In January 2008 our Brazilian subsidiary, Hershey do Brasil, entered into a cooperative agreement with Pandurata Alimentos LTDA (Bauducco), a leading manufacturer of baked goods in Brazil whose primary brand is Bauducco. The arrangement with Bauducco leverages Bauduccos strong sales and distribution capabilities for our products throughout Brazil. Under this agreement we manufacture and market, and they sell and distribute our products. In the first quarter of 2008, we received approximately $2.0 million in cash and recorded an other intangible asset of $13.7 million associated with the cooperative agreement with Bauducco in exchange for our conveying to Bauducco a 49% interest in Hershey do Brasil. We maintain a 51% controlling interest in Hershey do Brasil. In March 2009, the Company completed the acquisition of the Van Houten Singapore consumer business.The acquisition from Barry Callebaut, AG provides the Company with an exclusive license of the Van Houten brand name and related trademarks in Asia and the Middle East for the retail and duty free distribution channels.The purchase price for the acquisition of Van Houten Singapore and the licensing agreement was approximately $15.2 million. Results subsequent to the acquisition dates were included in the consolidated financial statements.Had the results of the acquisitions been included in the consolidated financial statements for each of the periods presented, the effect would not have been material.

6020 - NONCONTROLLING INTERESTS

6020 - NONCONTROLLING INTERESTS IN SUBSIDIARIES
	6 Months Ended Jul. 05, 2009 USD / shares
NONCONTROLLING INTEREST IN SUBSIDIARIES
NONCONTROLLING INTEREST IN SUBSIDIARIES	3.NONCONTROLLING INTERESTS IN SUBSIDIARIES As of January 1, 2009, the Company adopted FASB Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (SFAS No. 160).SFAS No. 160 establishes new accounting and reporting standardsfor the noncontrolling interest in a subsidiary (formerly known as minority interest) and for the deconsolidation of a subsidiary and requires the noncontrolling interest to be reported as a component of equity.In addition, changes in a parents ownership interest while the parent retains its controlling interest will be accounted for as equity transactions, and any retained noncontrolling equity investment upon the deconsolidation of a subsidiary will be measured initially at fair value. In May 2007, we entered into an agreement with Godrej Beverages and Foods, Ltd., one of Indias largest consumer goods, confectionery and food companies, to manufacture and distribute confectionery products, snacks and beverages across India.Under the agreement, we own a 51% controlling interest in Godrej Hershey Ltd.In January 2009, the Company contributed cash of approximately $8.7 million to Godrej Hershey Ltd. and owners of the noncontrolling interests in Godrej Hershey Ltd. contributed approximately $7.3 million.The ownership interest percentages in Godrej Hershey Ltd. did not change significantly as a result of these contributions.The noncontrolling interests in Godrej Hershey Ltd. are included in the equity section of the Consolidated Balance Sheets. We also own a 51% controlling interest in Hershey do Brasil under the cooperative agreement with Bauducco.The noncontrolling interest in Hershey do Brasil is included in the equity section of the Consolidated Balance Sheets. The increase in noncontrolling interests in subsidiaries from $31.7 million as of December 31, 2008 to $39.4 million as of July 5, 2009 reflected the $7.3 million contribution from the noncontrolling interests in Godrej Hershey Ltd. and the impact of currency translation adjustments, partially offset by a reduction resulting from the recordingof the share of losses pertaining to the noncontrolling interests.The recording of the share of losses pertaining to the noncontrolling interests in subsidiaries increased income by $2.4 million for the six months ended July 5, 2009 and by $3.2 million for the six months ended June 29, 2008 and was included in selling, marketing and administrative expenses.

6030 - STOCK COMPENSATION PLAN

6030 - STOCK COMPENSATION PLAN
	6 Months Ended Jul. 05, 2009 USD / shares
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS	4.STOCK COMPENSATION PLANS The Hershey Company Equity and Incentive Compensation Plan (EICP) is the plan under which grants using shares for compensation and incentive purposes are made.The following table summarizes our stock compensation costs: For the Three Months Ended For the Six Months Ended July 5, 2009 June 29, 2008 July 5, 2009 June 29, 2008 (in millions of dollars) Total compensation amount charged against income for stock options, performance stock units (PSUs) and restricted stock units $ 20.3 $ 9.0 $ 31.5 $ 17.8 Total income tax benefit recognized in the Consolidated Statements of Income for share-based compensation $ 6.4 $ 3.4 $ 11.1 $ 6.4 The increase in share-based compensation expense for the second quarter and first six months of 2009 resulted from higher performance expectations for our PSU awards. We estimated the fair value of each stock option grant on the date of the grant using a Black-Scholes option-pricing model and the weighted-average assumptions set forth in the following table: For the Six Months Ended July 5, 2009 June 29, 2008 Dividend yields 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 Stock Options A summary of the status of our stock options as of July 5, 2009, and the change during 2009 is presented below: For the Six Months Ended July 5, 2009 Stock Options Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Outstanding at beginning of the period 16,671,643 $42.08 6.6 years Granted 3,145,970 $34.90 Exercised (227,972) $26.50 Forfeited (353,653) $44.58 Outstanding as of July 5, 2009 19,235,988 $41.04 6.5 years Options exercisable as of July 5, 2009 10,599,968 $42.27 5.0 years For the Six Months Ended July 5, 2009 June 29, 2008 Weighted-average fair value of options granted (per share) $5.31 $6.21 Intrinsic value of options exercised (in millions of dollars) $2.1 $4.9 As of July 5, 2009, the aggregate intrinsic value of options outstanding was $25.7 million and the aggregate intrinsic value of options exercisable was $18.9 million. As of July 5, 2009, there was $37.0 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 2.6 years. Performance Stock Units and Restricted Stock Units A summary of the status of our performance stock units and restricted stock units as of July 5, 2009, and the change during 2009 is presented below: Performance Stock Units and Restricted Stock Units For the Six Months Ended July 5, 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 559,939 $35.00 Performance assumption change 561,420 $37.76 Vested (243,027) $34.55 Forfeited

6040 - INTEREST EXPENSE

6040 - INTEREST EXPENSE
	6 Months Ended Jul. 05, 2009 USD / shares
INTEREST EXPENSE
INTEREST EXPENSE	5.INTEREST EXPENSE Net interest expense consisted of the following: For the Six Months Ended July 5, 2009 June 29, 2008 (in thousands of dollars) Interest expense $ 48,466 $ 51,943 Interest income (545 ) (1,047 ) Capitalized interest (1,291 ) (2,900 ) Interest expense, net $ 46,630 $ 47,996

6050 - BUSINESS REALIGNMENT INI

6050 - BUSINESS REALIGNMENT INITIATIVES
	6 Months Ended Jul. 05, 2009 USD / shares
BUSINESS REALIGNMENT INITIATIVES
BUSINESS REALIGNMENT INITIATIVES	6.BUSINESS REALIGNMENT INITIATIVES In February 2007, we announced a comprehensive, three-year supply chain transformation program (the global supply chain transformation program or GSCT) and, in December 2007, we initiated a business realignment program associated with our business in Brazil (together, the 2007 business realignment initiatives).In December2008, we approved a modest expansion in the scope of the global supply chain transformation program to include the closure of two subscale manufacturing facilities of Artisan Confections Company, a wholly-owned subsidiary, and consolidation of the associated production into existing U.S. facilities, along with rationalization of other select portfolio items.The affected facilities are located in Berkeley and San Francisco, California.The additional business realignment charges relatedto the expansion in scope will be recorded in 2009 and include severance for approximately 150 impacted employees. The original estimated pre-tax cost of the program announced in February 2007 was from $525 million to $575 million over three years.The total included from $475 million to $525 million in business realignment costs and approximately $50 million in project implementation costs.The increase in scope approved in December 2008 increased the total expected cost by about $25 million.In addition, the current trends of employee lump sum withdrawals from the defined benefit pension plans are expected to result in non-cash pension settlement charges of up to $65 million in 2009 and 2010.Therefore, we now expect total pre-tax charges and non-recurring project implementation costs of $640 million to $665 million for the GSCT.Total costs of $61.7 million were recorded during the first six months of 2009,costs of $130.0 million were recorded in 2008 and costs of $400.0 million were recorded in 2007 for this program. In an effort to improve the performance of our business in Brazil, in January 2008 Hershey do Brasil entered into a cooperative agreement with Bauducco.Business realignment and impairment charges of $4.9 million were recorded in 2008 and charges of $12.6 million were recorded in 2007. Charges (credits) associated with business realignment initiatives recorded during the three-month and six-month periods ended July 5, 2009 and June 29, 2008 were as follows: For the Three Months Ended For the Six Months Ended July 5, 2009 June 29, 2008 July 5, 2009 June 29, 2008 (in thousands of dollars) Cost of sales 2007 business realignment initiatives $ 3,116 $ 15,027 $ 7,167 $ 40,181 Selling, marketing and administrative 2007 business realignment initiatives 1,671 2,443 3,754 3,877 Business realignment and impairment charges, net: Global supply chain transformation program Losses (gains) on sale of fixed assets 7,110 (6,790 ) Fixed asset impairments and plant closure expenses 6,546 5,488 16,889 15,265 Employee separation costs 383 3,242 2,878 7,131 Pension settlement loss 30,555 4,743 30,555 4,743 Contract termination costs 420 1

6060 - EARNINGS PER SHARE

6060 - EARNINGS PER SHARE
	6 Months Ended Jul. 05, 2009 USD / shares
EARNINGS PER SHARE
EARNINGS PER SHARE	7.EARNINGS PER SHARE In accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share, we compute Basic and Diluted Earnings Per Share based on the weighted-average number of shares of the Common Stock and the Class B Common Stock outstanding as follows: For the Three Months Ended For the Six Months Ended July 5, 2009 June 29, 2008 July 5, 2009 June 29, 2008 (in thousands except per share amounts) Net income $ 71,298 $ 41,467 $ 147,192 $ 104,712 Weighted-average shares - Basic Common Stock 166,846 166,624 166,817 166,701 Class B Common Stock 60,710 60,806 60,710 60,806 Total weighted-average shares - Basic 227,556 227,430 227,527 227,507 Effect of dilutive securities: Employee stock options 648 937 620 956 Performance and restricted stock units 285 297 249 335 Weighted-average shares - Diluted 228,489 228,664 228,396 228,798 Earnings Per Share - Basic Class B Common Stock $ .29 $ .17 $ .60 $ .43 Common Stock $ .32 $ .19 $ .66 $ .47 Earnings Per Share - Diluted Class B Common Stock $ .29 $ .17 $ .60 $ .43 Common Stock $ .31 $ .18 $ .64 $ .46 The Class B Common Stock is convertible into Common Stock on a share for share basis at any time. In accordance with proposed FASB Staff Position No. FAS 128-a, Computational Guidance for Computing Diluted EPS under the Two-Class Method, the calculation of earnings per share-dilutedfor the Class B Common Stock was performed using the two-class method and the calculation of earnings per share-diluted for the Common Stock was performed using the if-converted method. For the Three Months Ended For the Six Months Ended July 5, 2009 June 29, 2008 July 5, 2009 June 29, 2008 (in millions) Stock options excluded from diluted earnings per share calculation because the effect would have been antidilutive 15.6 12.8 17.1 12.8

6070 - DERIVATIVE INSTRUMENTS A

6070 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
	6 Months Ended Jul. 05, 2009 USD / shares
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES	8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We account for derivative instruments in accordance with FASB Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS No. 133). SFAS No.133 requires us to recognize all derivative instruments at fair value. We classify derivatives as assets or liabilities on the balance sheet. Accounting for the change in fair value of the derivative depends on: whether the instrument qualifies for, and has been designated as, a hedging relationship; and the type of hedging relationship. There are three types of hedging relationships: cash flow hedge; fair value hedge; and hedge of foreign currency exposure of a net investment in a foreign operation. As of July 5, 2009 and December 31, 2008, we classified all of our derivative instruments as cash flow hedges. The amount of net losses on cash flow hedging derivatives, including foreign exchange forward contracts, interest rate swap agreements and commodities futures contracts, expected to be reclassified into earnings in the next twelve months was approximately $9.6 million after tax as of July 5, 2009.This amount was primarily associatedwith commodities futures contracts. For more information, refer to the consolidated financial statements and notes included in our 2008 Annual Report on Form 10-K. Objectives, Strategies and Accounting Policies Associated with Derivative Instruments We use certain derivative instruments, from time to time, to manage interest rate, foreign currency exchange rate and commodity market price risk exposures. We enter into interest rate swap agreements and foreign currency forward contracts and options for periods consistent with their related underlying exposures. We enter into commodities futures and options contracts for varying periods. Our commodities futures and options contracts are effective as hedges of market price risks associated with anticipated raw material purchases, energy requirements and transportation costs. We do not hold or issue derivative instruments for trading purposes and are not a party to any instruments with leverage or prepayment features. In entering into these contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts.We mitigate this risk byperforming financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties.We do not expect any significant losses from counterparty defaults. Interest Rate Swaps In order to minimize financing costs and to manage interest rate exposure, from time to time, we enter into interest rate swap agreements. We include gains and losses on interest rate swap agreements in other comprehensive income. We recognize gains and losses on interest rate swap agreements as an adjustment to interest expense in the sameperiod as the hedged interest payments affect earnings.We classify cash flows from interest rate swap agreements as net cash provided from operating activities on the

6080 - COMPREHENSIVE INCOME

6080 - COMPREHENSIVE INCOME
	6 Months Ended Jul. 05, 2009 USD / shares
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME	9.COMPREHENSIVE INCOME A summary of the components of comprehensive income (loss) is as follows: For the Three Months Ended July 5, 2009 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount (in thousands of dollars) Net income $ 71,298 Other comprehensive income (loss): Foreign currency translation adjustments $ 18,371 $ 18,371 Pension and post-retirement benefit plans 39,953 (15,571 ) 24,382 Cash flow hedges: Losses on cash flow hedging derivatives (8,172 ) 3,320 (4,852 ) Reclassification adjustments 5,755 (2,253 ) 3,502 Total other comprehensive income $ 55,907 $ (14,504 ) 41,403 Comprehensive income $ 112,701 For the Six Months Ended June 29, 2008 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount (in thousands of dollars) Net income $ 41,467 Other comprehensive income (loss): Foreign currency translation adjustments $ 3,787 $ 3,787 Pension and post-retirement benefit plans 4,830 (1,918 ) 2,912 Cash flow hedges: Gains on cash flow hedging derivatives 63,561 (22,877 ) 40,684 Reclassification adjustments (18,767 ) 6,761 (12,006 ) Total other comprehensive income $ 53,411 $ (18,034 ) 35,377 Comprehensive income $ 76,844 For the Six Months Ended July 5, 2009 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount (in thousands of dollars) Net income $ 147,192 Other comprehensive income (loss): Foreign currency translation adjustments $ 16,604 $ 16,604 Pension and post-retirement benefit plans 48,098 (18,706 ) 29,392 Cash flow hedges: Gains on cash flow hedging derivatives 12,872 (3,651 ) 9,221 Reclassification adjustments 5,981 (2,341 ) 3,640 Total other comprehensive income $ 83,555 $ (24,698 ) 58,857 Comprehensive income $ 206,049 For the Six Months Ended June 29, 2008 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount (in thousands of dollars) Net income $ 104,712 Other comprehensive income (loss): Foreign currency translation adjustments $ (95 ) $ (95 ) Pension and post-retirement benefit plans 4,924 (1,961 ) 2,963 Cash flow hedges: Gains on cash flow hedging derivatives 97,300 (35,020 ) 62,280 Reclassification adjustments (28,964 ) 10,452 (18,512 ) Total other comprehensive income $ 73,165 $ (26,529 ) 46,636 Comprehensive income $ 151,348 The components of accumulated other comprehensive income (loss) as shown on the Consolidated Balance Sheets are as follows: July 5, 2009 December 31, 2008 (in thousands of dollars) Foreign currency translation adjustments $ (13,149 ) $ (29,753 ) Pension and post-retirement benefit plans, net of tax (284,961 ) (314,353 ) Cash flow hedges, net of tax (2,941 ) (15,802 ) Total accumulated other comprehensive loss $ (301,051 ) $ (359,908 )

6090 - INVENTORIES

6090 - INVENTORIES
	6 Months Ended Jul. 05, 2009 USD / shares
INVENTORIES
INVENTORIES	10.INVENTORIES We value the majority of our inventories under the last-in, first-out (LIFO) method and the remaining inventories at the lower of first-in, first-out (FIFO) cost or market. Inventories were as follows: July 5, 2009 December 31, 2008 (in thousands of dollars) Raw materials $ 281,960 $ 215,309 Goods in process 102,025 95,986 Finished goods 454,431 419,016 Inventories at FIFO 838,416 730,311 Adjustment to LIFO (195,911 ) (137,781 ) Total inventories $ 642,505 $ 592,530 The increase in raw material inventories as of July 5, 2009 resulted from the timing of deliveries to support manufacturing requirements and higher prices in 2009. The increase in finished goods inventories was primarily associated with seasonal sales patterns.

TERM DEBT

TERM DEBT
	6 Months Ended Jul. 05, 2009 USD / shares
SHORT-TERM DEBT
SHORT-TERM DEBT	11.SHORT-TERM DEBT As a source of short-term financing, we utilize commercial paper or bank loans with an original maturity of three months or less. Our five-year unsecured revolving credit agreement expires in December 2012. The credit limit is $1.1 billion with an option to borrow an additional $400 million with the concurrence of the lenders. The unsecuredrevolving credit agreement contains certain financial and other covenants, customary representations, warranties and events of default. As of July 5, 2009, we complied with all covenants pertaining to the credit agreement. There were no significant compensating balance agreements that legally restricted these funds. For more information, refer to the consolidated financial statements and notes included in our 2008 Annual Report on Form 10-K.

1_TERM DEBT

TERM DEBT
	6 Months Ended Jul. 05, 2009 USD / shares
LONG-TERM DEBT
LONG-TERM DEBT	12.LONG-TERM DEBT In May 2006, we filed a shelf registration statement on Form S-3 that registered an indeterminate amount of debt securities. This registration statement was effective immediately upon filing under Securities and Exchange Commission regulations governing well-known seasoned issuers (the WKSI Registration Statement). In March 2008, theCompany issued $250 million of 5.0% Notes due April 1, 2013 under the WKSI Registration Statement. The net proceeds of this debt issuance were used to repay a portion of the Companys outstanding indebtedness under its short-term commercial paper program.The May 2006 WKSI Registration Statement expired in May 2009.Accordingly, in May 2009, we filed a new registration statement on Form S-3 to replace the May 2006 WKSI Registration Statement.The May 2009 WKSI Registration Statement registered an indeterminate amount of debt securities and was effective immediately.

6120 - FINANCIAL INSTRUMENTS

6120 - FINANCIAL INSTRUMENTS
	6 Months Ended Jul. 05, 2009 USD / shares
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS	13.FINANCIAL INSTRUMENTS The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair value as of July 5, 2009 and December 31, 2008, because of the relatively short maturity of these instruments. The carrying value of long-term debt, including the current portion, was $1,521.0million as of July 5, 2009, compared with a fair value of $1,634.8million, an increase of $113.8 million over the carrying value, based on quoted market prices for the same or similar debt issues. Interest Rate Swaps In order to minimize financing costs and to manage interest rate exposure, the Company, from time to time, enters into interest rate swap agreements.In March 2009, the Company entered into forward starting interest rate swap agreements to hedge interest rate exposure related to the anticipated $250 million of term financing expectedto be executed during 2011 to repay $250 million of 5.3% Notes maturing in September 2011.The weighted-average fixed rate on the forward starting swap agreements was 3.5%.The fair value of interest rate swap agreements was a net asset of $8.6 million as of July 5, 2009.The Companys risk related to interest rate swap agreements is limited to the cost of replacing such agreements at prevailing market rates.For more information see Note 8. Derivative Instruments andHedging Activities. Foreign Exchange Forward Contracts The following table summarizes our foreign exchange activity: July 5, 2009 Contract Amount Primary Currencies (in millions of dollars) Foreign exchange forward contracts to purchase foreign currencies $ 9.7 Euros Foreign exchange forward contracts to sell foreign currencies $ 65.3 Canadian dollars Our foreign exchange forward contracts mature in 2009 and 2010.For more information, see Note 8. Derivative Instruments and Hedging Activities.

6130 - FAIR VALUE ACCOUNTING

6130 - FAIR VALUE ACCOUNTING
	6 Months Ended Jul. 05, 2009 USD / shares
FAIR VALUE ACCOUNTING
FAIR VALUE ACCOUNTING	14.FAIR VALUE ACCOUNTING As of January 1, 2008, we adopted certain provisions of FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157).SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures aboutfair value measurements.SFAS No. 157 applies when another standard required or permits assets or liabilities to be measured at fair value.Accordingly, SFAS No. 157 does not require any new fair value measurements.As of January 1, 2009, we adopted the remaining provisions of SFAS No. 157 relating to nonfinancial assets and liabilities that are not recognized or disclosed at fair value on a recurring basis.The adoption of SFAS No. 157 did not materially impact ourconsolidated financial statements. We use certain derivative instruments, from time to time, to manage interest rate, foreign currency exchange rate and commodity market price risk exposures, all of which are recorded at fair value based on quoted market prices or rates. A summary of our cash flow hedging derivative assets and liabilities measured at fair value on a recurring basis as of July 5, 2009, is as follows: Description Fair Value as of July 5, 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 $ 20,405 $ 4,621 $ 15,784 $ Liabilities Cash flow hedging derivatives $ 11,126 $ 8,851 $ 2,275 $ As of July 5, 2009, cash flow hedging derivative Level 1 assets were associated with the fair value of commodity options contracts.As of July 5, 2009, cash flow hedging derivative Level 1 liabilities were related to cash transfers payable on commodities futures contracts reflecting the change in quoted market prices on the lasttrading day for the period.As of July 5, 2009, cash flow hedging derivative Level 2 assets were related to the fair value of interest rate swap agreements and foreign exchange forward contracts with gains.Cash flow hedging Level 2 liabilities were related to the fair value of foreign exchange forward contracts with losses.For more information, see Note 8. Derivative Instruments and Hedging Activities.

6140 - INCOME TAXES

6140 - INCOME TAXES
	6 Months Ended Jul. 05, 2009 USD / shares
INCOME TAXES
INCOME TAXES	15.INCOME TAXES The number of years with open tax audits varies depending on the tax jurisdiction.Our major taxing jurisdictions include the United States (federal and state) and Canada.During the second quarter of 2009, the U.S. Internal Revenue Service completed its audit of our U.S. income tax returns for 2005 and 2006, resultingin the resolution of tax contingencies associated with the 2004, 2005 and 2006 tax years.

RETIREMENT BENEFIT PLANS

RETIREMENT BENEFIT PLANS
	6 Months Ended Jul. 05, 2009 USD / shares
PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS	16.PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS Components of net periodic benefits cost (income) consisted of the following: Pension Benefits Other Benefits For the Three Months Ended July 5, 2009 June 29, 2008 July 5, 2009 June 29, 2008 (in thousands of dollars) Service cost $ 6,421 $ 6,739 $ 381 $ 390 Interest cost 14,699 14,886 4,513 4,748 Expected return on plan assets (17,852 ) (26,575 ) Amortization of prior service cost 302 324 (118 ) (114 ) Recognized net actuarial loss (gain) 8,246 (240 ) (47 ) (55 ) Administrative expenses 93 91 Net periodic benefits cost (income) 11,909 (4,775 ) 4,729 4,969 Special termination benefits 147 Settlement losses 30,555 4,843 Total amountreflected in earnings $ 42,464 $ 215 $ 4,729 $ 4,969 We made contributions of $.8million and $5.6 million to the pension plans and other benefits plans, respectively, during the second quarter of 2009.In the second quarter of 2008, we made contributions of $.5million and $6.0million to our pension and other benefits plans, respectively.The contributions in 2009 and 2008 primarily reflected benefit payments from our non-qualified pension plans and post-retirement benefit plans. In the second quarter of 2009, there was net periodic pension benefits expense of $11.9million, compared with net periodic benefits income of $4.8million in the second quarter of 2008.The higher net periodic pension benefits expense primarily reflected the significant decline in the value of pension assets during 2008reflecting the unprecedented volatility and deterioration in financial market and economic conditions.The special termination benefits and settlement losses recorded in the second quarter of 2009 and 2008 related to the 2007 business realignment initiatives. Components of net periodic benefits cost (income) consisted of the following: Pension Benefits Other Benefits For the Six Months Ended July 5, 2009 June 29, 2008 July 5, 2009 June 29, 2008 (in thousands of dollars) Service cost $ 12,889 $ 14,764 $ 764 $ 877 Interest cost 29,282 29,899 9,330 10,170 Expected return on plan assets (35,382 ) (53,908 ) Amortization of prior service cost 601 643 (238 ) (228 ) Recognized net actuarial loss (gain) 16,691 (287 ) (73 ) (2 ) Administrative expenses 187 179 Net periodic benefits cost (income) 24,268 (8,710 ) 9,783 10,817 Special termination benefits 147 Settlement losses 30,555 4,843 Total amountreflected in earnings $ 54,823 $ (3,720 ) $ 9,783 $ 10,817 We made contributions of $2.0million and $12.2 million to the pension plans and other benefits plans, respectively, during the first six months of 2009.In the first six months of 2008, we made contributions of $3.8million and $11.9million to our pension and other benefits plans, respectively.The contributionsin 2009 and 2008 also included benefit payments from our non-qualified pension plans and post-retire

6160 - SHARE REPURCHASES

6160 - SHARE REPURCHASES
	6 Months Ended Jul. 05, 2009 USD / shares
SHARE REPURCHASES
SHARE REPURCHASES	17.SHARE REPURCHASES Repurchases and Issuances of Common Stock A summary of cumulative share repurchases and issuances is as follows: For the Six Months Ended July 5, 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 (341 ) (11,125 ) Net change (89 ) $ (1,811 ) In December 2006, our Board of Directors approved a $250 million share repurchase program. As of July 5, 2009, $100.0 million remained available for repurchases of Common Stock under this program.

6170 - PENDING ACCOUNTING PRONO

6170 - PENDING ACCOUNTING PRONOUNCEMENTS
	6 Months Ended Jul. 05, 2009 USD / shares
PENDING ACCOUNTING PRONOUNCEMENTS
PENDING ACCOUNTING PRONOUNCEMENTS	18. PENDING ACCOUNTING PRONOUNCEMENTS In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assetsan amendment of FASB Statement No. 140 (SFAS No. 166). SFAS No. 166 addresses how information should be provided about transfers of financial assets; theeffects of a transfer on a companys financial position, performance and cash flows; and a transferors continuing involvement in transferred financial assets. SFAS No. 166 removes the concept of a qualifying special-purpose entity and modifies or eliminates certain other provisions related to transfers of financial assets. It also establishes additional requirements, including a requirement for enhanced disclosures to provide financial statement users with greater transparency. In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS No. 167). SFAS No. 167 amends certain requirements of FASB Interpretation No. 46 (revised December 2003), Consolidationof Variable Interest Entities, to improve financial reporting by enterprises involved with variable interest entities, and to provide more relevant and reliable information to users of financial statements. SFAS Nos. 166 and 167 are effective for us as of January 1, 2010 and we are currently evaluating the impact on our consolidated financial statements upon adoption. In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted AccountingPrinciples a replacement of FASB Statement No. 162 (SFAS No. 168). SFAS No. 168 becomes the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. It identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 168 is effective for us in our third quarter of 2009. There will be no impact on our consolidated financialstatements upon adoption; however, this standard will impact our financial reporting as we begin to use the new codification when referring to GAAP in our financial statements.

6180 - Schedule of Subsequent E

6180 - Schedule of Subsequent Events
	6 Months Ended Jul. 05, 2009 USD / shares
SCHEDULE OF SUBSEQUENT EVENTS
SUBSEQUENT EVENT	19.SUBSEQUENT EVENT Arnold G. Langbo and Charles B. Strauss resigned from the Board of Directors of The Hershey Company effective August 10, 2009.Following a decision by the Board of Directors to establish a Finance and Risk Management Committee that also delegated to such Committee responsibilities with respect to reviewing and monitoring the Companysannual plan and certain strategic matters including but not limited to acquisitions and dispositions, Messrs. Langbo and Strauss decided to resign from the Board of Directors based on their views, expressed before the committee was established, that retaining responsibility for these matters with the Board of Directors as a whole was a better corporate governance structure for the Company. Mr. Langbo served as chair of the Compensation and Executive Organization Committee of the Board of Directors and was a member of the Executive Committee of the Board at the time of his resignation.Mr. Strauss was chair of the Audit Committee of the Board of Directors and was a member of the Compensation and Executive OrganizationCommittee and the Executive Committee of the Board at the time of his resignation.The Board of Directors has appointed Robert F. Cavanaugh, a current independent member of the Board, as chair of the Compensation and Executive Organization Committee and David L. Shedlarz, a current independent member of the Board, as chair of the Audit Committee. Pursuant to their appointments as chairs of Board committees, Messrs. Cavanaugh and Shedlarz will also become members of the Executive Committee.

Document Information

Document Information
	6 Months Ended Jul. 05, 2009 USD / shares
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Amendment Description	none
Document Period End Date	2009-07-05

Entity Information

Entity Information (USD $)
	6 Months Ended Jul. 05, 2009
Entity Information [Line Items]
Entity Registrant Name	The Hershey Company
Entity Central Index Key	0000047111
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float	$4,971,158,971
Entity Common Stock, Shares Outstanding	227,124,313