CONSOLIDATED STATEMENTS OF INCO
| CONSOLIDATED STATEMENTS OF INCOME (USD $) | ||
| In Thousands, except Share data | 3 Months Ended
Apr. 04, 2010 | 3 Months Ended
Apr. 05, 2009 |
| Net Sales | $1,407,843 | $1,236,031 |
| Costs and Expenses | ||
| Cost of sales | 813,863 | 795,803 |
| Selling, marketing and administrative | 340,646 | 274,456 |
| Business realignment and impairment charges, net | 0 | 12,838 |
| Total costs and expenses | 1,154,509 | 1,083,097 |
| Income before Interest and Income Taxes | 253,334 | 152,934 |
| Interest expense, net | 23,749 | 23,896 |
| Income before Income Taxes | 229,585 | 129,038 |
| Provision for income taxes | 82,191 | 53,144 |
| Net Income | $147,394 | $75,894 |
| Earnings Per Share - Basic - Common Stock | 0.66 | 0.34 |
| Earnings Per Share - Diluted - Common Stock | 0.64 | 0.33 |
| Average Shares Outstanding - Basic - Common Stock | 167,257 | 166,767 |
| Average Shares Outstanding - Diluted | 229,551 | 228,284 |
| Cash Dividends Paid Per Share | ||
| Common Stock | 0.32 | 0.2975 |
| Common Class B [Member] | ||
| Costs and Expenses | ||
| Earnings Per Share - Basic - Common Stock | 0.6 | 0.31 |
| Earnings Per Share - Diluted - Common Stock | 0.6 | 0.31 |
| Average Shares Outstanding - Basic - Common Stock | 60,709 | 60,711 |
| Cash Dividends Paid Per Share | ||
| Common Stock | 0.29 | 0.2678 |
CONSOLIDATED BALANCE SHEETS
| CONSOLIDATED BALANCE SHEETS (USD $) | ||
| In Thousands | Apr. 04, 2010
| Dec. 31, 2009
|
| Assets | ||
| Cash and cash equivalents | $303,786 | $253,605 |
| Accounts receivable - trade | 411,245 | 410,390 |
| Inventories | 481,854 | 519,712 |
| Deferred income taxes | 56,884 | 39,868 |
| Prepaid expenses and other | 159,263 | 161,859 |
| Total current assets | 1,413,032 | 1,385,434 |
| Property, Plant and Equipment, at cost | 3,236,902 | 3,242,868 |
| Less-accumulated depreciation and amortization | (1,842,224) | (1,838,101) |
| Net property, plant and equipment | 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 | ||
| Accounts Payable | 294,223 | 287,935 |
| Accrued liabilities | 466,288 | 546,462 |
| Accrued income taxes | 85,836 | 36,918 |
| Short-term debt | 42,162 | 24,066 |
| Current portion of long-term debt | 13,786 | 15,247 |
| 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 | 0 |
| Total liabilities | 2,909,622 | 2,914,692 |
| Stockholders' Equity | ||
| Preferred Stock, shares issued: none in 2010 and 2009 | 0 | 0 |
| Common Stock, shares issued: 299,192,836 in 2010 and 299,192,836 in 2009 | 299,192 | 299,192 |
| Class B Common Stock, shares issued: 60,708,908 in 2010 and 60,708,908 in 2009 | 60,709 | 60,709 |
| Additional paid-in capital | 399,511 | 394,678 |
| Retained earnings | 4,224,841 | 4,148,353 |
| Treasury-Common Stock shares at cost: 132,699,107 in 2010 and 131,903,468 in 2009 | (4,014,954) | (3,979,629) |
| Accumulated other comprehensive loss | (217,082) | (202,844) |
| The Hershey Company stockholders' equity | 752,217 | 720,459 |
| Noncontrolling interests in subsidiaries | 36,848 | 39,880 |
| Total stockholders' equity | 789,065 | 760,339 |
| Total liabilities and stockholders' equity | $3,698,687 | $3,675,031 |
PARENTHETICAL DATA FOR CONSOLID
| PARENTHETICAL DATA FOR CONSOLIDATED BALANCE SHEETS | ||
| Apr. 04, 2010
| Dec. 31, 2009
| |
| STOCKHOLDERS' EQUITY | ||
| Preferred Stock, shares issued | 0 | 0 |
| Common Stock, shares issued | 299,192,836 | 299,192,836 |
| Class B Common Stock, shares issued | 60,708,908 | 60,708,908 |
| Treasury-Common Stock shares held at cost | 132,699,107 | 131,903,468 |
CONSOLIDATED STATEMENTS OF CASH
| CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
| In Thousands | 3 Months Ended
Apr. 04, 2010 | 3 Months Ended
Apr. 05, 2009 |
| Cash Flows Provided from (Used by) Operating Activities | ||
| Net Income | $147,394 | $75,894 |
| Adjustments to Reconcile Net Income to Net Cash Provided from Operations | ||
| Depreciation and amortization | 47,330 | 46,877 |
| Stock-based compensation expense, net of tax of $5,017 and $4,760, respectively | 8,996 | 6,601 |
| Excess tax benefits from exercise of stock options | (1,293) | (653) |
| Deferred Income Taxes | 1,836 | 8,966 |
| Business realignment initiatives, net of tax of $8,874 | 0 | 10,098 |
| Contributions to pension plans | (1,317) | (1,250) |
| Changes in assets and liabilities, net of effects from business acquisitions and divestitures | ||
| Accounts receivable - trade | (855) | 125,847 |
| Inventories | 75,658 | 6,345 |
| Accounts payable | 6,288 | (11,041) |
| Other assets and liabilities | (102,851) | 9,492 |
| Net Cash Flows Provided from Operating Activities | 181,186 | 277,176 |
| Cash Flows Provided from (Used by) Investing Activities | ||
| Capital Additions | (30,603) | (32,972) |
| Capitalized Software Additions | (4,946) | (4,496) |
| Proceeds from sales of property, plant and equipment | 172 | 117 |
| Business acquisition | 0 | (15,220) |
| Net Cash Flows (Used by) Investing Activities | (35,377) | (52,571) |
| Cash Flows Provided from (Used by) Financing Activities | ||
| Net increase (decrease) in short-term debt | 18,845 | (125,252) |
| Repayment of long-term debt | (1,833) | (1,561) |
| Cash dividends paid | (70,906) | (65,729) |
| Exercise of stock options | 21,125 | 3,109 |
| Excess tax benefits from exercise of stock options | 1,293 | 653 |
| Contributions from noncontrolling interests in subsidiaries | 0 | 7,322 |
| Repurchase of Common Stock | (64,152) | (9,314) |
| Net Cash Flows (Used by) Financing Activities | (95,628) | (190,772) |
| Increase in Cash and Cash Equivalents | 50,181 | 33,833 |
| Cash and Cash Equivalents, beginning of period | 253,605 | 37,103 |
| Cash and Cash Equivalents, end of period | 303,786 | 70,936 |
| Interest Paid | 45,029 | 45,791 |
| Income Taxes Paid | $29,576 | $16,655 |
1_PARENTHETICAL DATA FOR CONSOL
| PARENTHETICAL DATA FOR CONSOLIDATATED STATEMENTS OF CASH FLOWS (USD $) | ||
| In Thousands | 3 Months Ended
Apr. 04, 2010 | 3 Months Ended
Apr. 05, 2009 |
| Cash Flows Provided from (Used by) Operating Activities | ||
| Tax on Stock-based compensation expense | $5,017 | $4,760 |
| Tax on Business realignment initiatives | $0 | $8,874 |
BASIS OF PRESENTATION
| BASIS OF PRESENTATION | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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 majority of the outstanding voting common stock and the noncontrolling shareholders 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 2010 presentation.Operating results for the three months ended April4, 2010 may not be indicative of the results that may be expected for the year ending December 31, 2010, because of the seasonal effects of our business. For more information, refer to the consolidated financial statements and notes included in our 2009 Annual Report on Form 10-K. |
BUSINESS ACQUISITIONS AND DIVES
| BUSINESS ACQUISITIONS AND DIVESTITURES | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| BUSINESS ACQUISITIONS AND DIVESTITURES | 2.BUSINESS ACQUISITION 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. We included results subsequent to the acquisition datein the consolidated financial statements.If we had included the results of the acquisition in the consolidated financial statements for each of the periods presented, the effect would not have been material. |
NONCONTROLLING INTERESTS IN SUB
| NONCONTROLLING INTERESTS IN SUBSIDIARIES | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| NONCONTROLLING INTEREST IN SUBSIDIARIES | 3.NONCONTROLLING INTERESTS IN SUBSIDIARIES 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 a cooperative agreement with Pandurata Alimentos LTDA (Bauducco), a leading manufacturer of baked goods in Brazil whose primary brand is Bauducco.The noncontrolling interest in Hershey do Brasil is included in the equity section of the Consolidated Balance Sheets. The decrease in noncontrolling interests in subsidiaries from $39.9 million as of December31, 2009 to $36.8 million as of April4, 2010 reflectedthe noncontrolling interests share of losses of these entities, partially offset by the impact of currency translation adjustments.The noncontrolling interests share of losses in subsidiaries increased income by $3.7 million for the three months ended April4, 2010 and by $1.2 million for the three months ended April5, 2009 and was included in selling, marketing and administrative expenses. |
STOCK COMPENSATION PLAN
| STOCK COMPENSATION PLAN | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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 April 5, 2010 April 5, 2009 In millions of dollars Total compensation amount charged against income for stock options, performancestock units (PSUs) and restricted stock units $14.0 $11.2 Total income tax benefit recognized in the Consolidated Statements of Income for share-based compensation $ 5.0 $ 4.7 The increase in share-based compensation for the first quarter of 2010 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 Three Months Ended April 4, 2010 April 5, 2009 Dividend yields 3.2 % 3.3 % Expected volatility 21.7 % 21.6 % Risk-free interest rates 3.1 % 2.0 % Expected lives in years 6.5 6.6 Stock Options A summary of the status of our stock options as of April4, 2010, and the change during 2010 is presented below: For the Three Months Ended April4, 2010 Stock Options Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Outstanding at beginning of the period 18,230,439 $41.63 6.2 years Granted 2,727,600 $39.26 Exercised (634,534 ) $33.29 Forfeited (135,398 ) $42.84 Outstanding as of April4, 2010 20,188,107 $41.56 6.6 years Options exercisable as of April4, 2010 12,029,557 $43.39 5.1 years For the Three Months Ended April 4, 2010 April 5, 2009 Weighted-average fair value of options granted (per share) $ 6.84 $ 5.31 Intrinsic value of options exercised (in millions of dollars) $ 4.4 $ 1.0 As of April4, 2010, the aggregate intrinsic value of options outstanding was $98.0million and the aggregate intrinsic value of options exercisable was $53.4million; and As of April4, 2010, there was $37.7million 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 2.8years. Performance Stock Units and Restricted Stock Units A summary of the status of our performance stock units and restricted stock units as of April4, 2010, and the change during 2010 is presented below: Performance Stock Units and Restricted Stock Units For the Three Months Ended April 4, 2010 Weighted-average grant date fair value for equity awards or market value for liability awards Outstanding at beginning of year 1,530,464 $ 37.11 Granted 546,086 $ 37.79 Performance assumption change 309,422 $ 35.72 Vested (257,731 ) $ 37.84 Forfeited (4,319 ) $ 35.71 Outstanding as of April4, 2010 2,123,922 $ 37.22 As of April4, 2010, there was $49.5 million of unrecognized compensation cost relating to no |
INTEREST EXPENSE
| INTEREST EXPENSE | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| INTEREST EXPENSE | 5.INTEREST EXPENSE Net interest expense consisted of the following: For the Three Months Ended April 4, 2010 April5, 2009 In thousands of dollars Interest expense $ 24,476 $ 24,770 Interest income (215 ) (277 ) Capitalized interest (512 ) (597 ) Interest expense, net $ 23,749 $ 23,896 |
BUSINESS REALIGNMENT INITIATIVE
| BUSINESS REALIGNMENT INITIATIVES | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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).Total pre-tax charges and non-recurring project implementation costs were $629.1 million for the GSCT which was essentially complete as of December 31, 2009.Total costs of $99.1 million were recorded during 2009, costs of $130.0 million were recorded in 2008 and costs of $400.0 million were recorded in 2007 for this program.The current trends of employee lump sum withdrawals from the defined benefit pension plans could result in additional non-cash pension settlement losses of $12 million to $18 million in 2010.In addition, the manufacturing facilities in Naugatuck, Connecticut; Reading, Pennsylvania; and Smiths Falls, Ontario have been closed and are being held for sale.The carrying value of these facilities was $11.7 million at April 4, 2010.Actual proceeds from the sale of these facilities could differ from expected proceeds which could cause additional charges or credits in 2010. A charge of $4.1 million was recorded in cost of sales during the first quarter of 2009 related primarily to the accelerated depreciation of fixed assets over a reduced estimated remaining useful life and start-up costs associated with the GSCT.A charge of $2.1 million recorded in selling, marketing and administrative expenses in the first quarter of 2009 related primarily to project administration for the GSCT.In determining the costs related to fixed asset impairments, fair value was estimated based on the expected sales proceeds.Fixed asset impairments and plant closure expenses of $10.5 million were recorded in the first quarter of 2009 related primarily to the preparation of plants for sale and production line removal costs. Employee separation costs of $2.3 million for the GSCT in the first quarter of 2009 were related to involuntary terminations at the manufacturing facilities of Artisan Confections Company which were closed.Certain real estate with a carrying value of $20.3 million was being held for sale as of April5,2009.As of April 5, 2009, manufacturing facilities located in Dartmouth, Nova Scotia; Oakdale, California; and Montreal, Quebec were closed and sold.The facilities located in Naugatuck, Connecticut; Reading, Pennsylvania; and Smiths Falls, Ontario had been closed and were being held for sale as of April5, 2009. The April 4, 2010 liability balance relating to the global supply chain transformation program was $5.5 million for employee separation costs to be paid during the remainder of 2010.During the first three months of 2010, we made payments against the liabilities recorded for the GSCT of $3.7 million principally related to employee separation costs. |
EARNINGS PER SHARE
| EARNINGS PER SHARE | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| EARNINGS PER SHARE | 7.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 April 4, 2010 April 5, 2009 In thousands except per share amounts Net income $ 147,394 $ 75,894 Weighted-average shares - Basic Common Stock 167,257 166,767 Class B Common Stock 60,709 60,711 Total weighted-average shares - Basic 227,966 227,478 Effect of dilutive securities: Employee stock options 1,007 593 Performance and restricted stock units 578 213 Weighted-average shares - Diluted 229,551 228,284 Earnings Per Share - Basic Class B Common Stock $ .60 $ .31 Common Stock $ .66 $ .34 Earnings Per Share - Diluted Class B Common Stock $ .60 $ .31 Common Stock $ .64 $ .33 The Class B Common Stock is convertible into Common Stock on a share for share basis at any time.The calculation of earnings per share-diluted for 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-month period ended April4, 2010, 8.7 million stock options were not included in the diluted earnings per share calculation because the effect would have been antidilutive.In the first quarter of 2009, 17.1million stock options were not included in the diluted earnings per share calculation because the effect would have been antidilutive. |
DERIVATIVE INSTRUMENTS AND HEDG
| DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We account for derivative instruments in accordance with Financial Accounting Standards Board accounting standards, which require us to recognize all derivative instruments at fair value.We classify derivatives as assets or liabilities on the balance sheet. As of April4, 2010 and December31, 2009, all of our derivative instruments were classified as cash flow hedges. The fair value of derivative instruments in the Consolidated Balance Sheet as of April4, 2010 was as follows: 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 $ 0 $ 874 $ 1 Other assets $ 6,893 $ 1,399 $ 0 Accrued liabilities $ 0 $ 7,752 $ 0 Other long-term liabilities $ 0 $ 1,832 $ 0 The fair value of derivative instruments in the Consolidated Balance Sheet as of December 31, 2009 was as follows: 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 $ 0 $ 2,872 $ 11,835 Other assets $ 9,171 $ 0 $ 0 Accrued liabilities $ 0 $ 7,708 $ 3,228 The fair value of the interest rate swap agreements represents the difference in the present values of cash flows calculated at the contracted interest rates and at current market interest rates at the end of the period.We calculate the fair value of interest rate swap agreements quarterly based on the quoted market price for the same or similar financial instruments. We define the fair value of foreign exchange forward contracts and options as the amount of the difference between the contracted and current market foreign currency exchange rates at the end of the period.We estimate the fair value of foreign exchange forward contracts and options on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences.As of April4, 2010, the fair value of foreign exchange forward contracts with gains totaled $2.3 million and the fair value of foreign exchange forward contracts with losses totaled $9.6 million. As of April4, 2010, prepaid expense and other current assets associated with commodity contracts were related to cash transfers receivable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.We make or receive cash transfers to or from commodity futures brokers on a daily basis reflecting changes in the value of futures contracts on the IntercontinentalExchange or various other exchanges.These changes in value represent unrealized gains and losses. The effect of derivative instruments on the Consolidated Statements of Income for the three months ended April4, 2010 was as follows: Cash Flow Hedging Derivatives Interest Rate Swap Agreements Foreign Exchange Forward Contracts and Options Commodities Futures and Option |
COMPREHENSIVE INCOME
| COMPREHENSIVE INCOME | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| COMPREHENSIVE INCOME | 9. COMPREHENSIVE INCOME A summary of the components of comprehensive income (loss) is as follows: For the Three Months Ended April4, 2010 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount In thousands of dollars Net income $ 147,394 Other comprehensive income (loss): Foreign currency translation adjustments $ 12,268 $ 0 12,268 Pension and post-retirement benefit plans 7,125 (2,761 ) 4,364 Cash flow hedges: Losses on cash flow hedging derivatives (33,628 ) 11,932 (21,696 ) Reclassification adjustments (14,853 ) 5,679 (9,174 ) Total other comprehensive loss $ (29,088 ) $ 14,850 (14,238 ) Comprehensive income $ 133,156 For the Three Months Ended April5, 2009 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount In thousands of dollars Net income $ 75,894 Other comprehensive income (loss): Foreign currency translation adjustments $ (1,767 ) $ 0 (1,767 ) Pension and post-retirement benefit plans 8,145 (3,135 ) 5,010 Cash flow hedges: Gains on cash flow hedging derivatives 21,044 (6,971 ) 14,073 Reclassification adjustments 226 (88 ) 138 Total other comprehensive income $ 27,648 $ (10,194 ) 17,454 Comprehensive income $ 93,348 The components of accumulated other comprehensive income (loss) as shown on the Consolidated Balance Sheets are as follows: April 4, 2010 December 31, 2009 In thousands of dollars Foreign currency translation adjustments $ 20,817 $ 8,549 Pension and post-retirement benefit plans, net of tax (271,346 ) (275,710 ) Cash flow hedges, net of tax 33,447 64,317 Total accumulated other comprehensive loss $ (217,082 ) $ (202,844 ) |
INVENTORIES
| INVENTORIES | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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: April 4, 2010 December 31, 2009 In thousands of dollars Raw materials $ 246,916 $ 246,572 Goods in process 77,594 84,000 Finished goods 313,728 376,573 Inventories at FIFO 638,238 707,145 Adjustment to LIFO (156,384 ) (187,433 ) Total inventories $ 481,854 $ 519,712 The decrease in finished goods inventories was primarily associated with seasonal sales patterns. |
SHORT-TERM DEBT
| SHORT-TERM DEBT | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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 unsecured revolving credit agreement contains certain financial and other covenants, customary representations, warranties and events of default. As of April4, 2010, 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 2009 Annual Report on Form 10-K. |
LONG-TERM DEBT
| LONG-TERM DEBT | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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").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. |
FINANCIAL INSTRUMENTS
| FINANCIAL INSTRUMENTS | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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 April4, 2010 and December31, 2009, because of the relatively short maturity of these instruments. The carrying value of long-term debt, including the current portion, was $1,516.0million as of April4, 2010, compared with a fair value of $1,668.2million, an increase of $152.2 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 expected to 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 $6.9 million as of April4, 2010.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 and Hedging Activities. Foreign Exchange Forward Contracts The following table summarizes our foreign exchange activity: April4, 2010 Contract Amount Primary Currencies In millions of dollars Foreign exchange forward contracts to purchase foreign currencies $ 18.7 Euros Foreign exchange forward contracts to sell foreign currencies $ 123.3 Canadian dollars Our foreign exchange forward contracts mature in 2010 and 2011.For more information, see Note 8. Derivative Instruments and Hedging Activities. |
FAIR VALUE ACCOUNTING
| FAIR VALUE ACCOUNTING | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| FAIR VALUE ACCOUNTING | 14.FAIR VALUE ACCOUNTING 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 April4, 2010, is as follows: Description Fair Value as of April 4, 2010 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 $ 9,167 $ 1 $ 9,166 $ 0 Liabilities Cash flow hedging derivatives $ 9,584 $ 0 $ 9,584 $ 0 As of April4,2010, cash flow hedging derivative Level 1 assets were related to cash transfers receivable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.As of April4,2010, 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 and refer to the consolidated financial statements and notes included in our 2009 Annual Report on Form 10-K. A summary of our cash flow hedging derivative assets and liabilities measured at fair value on a recurring basis as of December 31, 2009, is as follows: Description Fair Value as of December 31, 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 $ 23,878 $ 11,835 $ 12,043 $ 0 Liabilities Cash flow hedging derivatives $ 10,936 $ 3,228 $ 7,708 $ 0 As of December 31, 2009, cash flow hedging derivative Level 1 assets were associated with the fair value of commodity options contracts.As of December 31, 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 last trading day for the period.We make or receive cash transfers to or from commodity futures brokers on a daily basis reflecting changes in the value of futures contracts on the IntercontinentalExchange or various other exchanges.These changes in value represent unrealized gains and losses. As of December 31, 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.We define the fair value of foreign exchange forward contracts as the amount of the difference between the contracted and current marke |
INCOME TAXES
| INCOME TAXES | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| 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), Canada and Mexico.During the second quarter of 2009, the U.S. Internal Revenue Service (IRS) completed its audit of our U.S. income tax returns for 2005 and 2006, resulting in the resolution of tax contingencies associated with the 2004, 2005 and 2006 tax years.During the fourth quarter 2009, the IRS commenced its audit of our U.S. income tax returns for 2007 and 2008.Tax examinations by various state taxing authorities could generally be conducted for years beginning in 2004.We are no longer subject to Canadian federal income tax examinations by the Canada Revenue Agency (CRA) for years before 1999, and we are no longer subject to Mexican federal income tax examinations by Servicio de Administracion Tributaria (SAT) for years before 2004.U.S., Canadian and Mexican federal audit issues typically involve the timing of deductions and transfer pricing adjustments.We work with the IRS, the CRA and the SAT to resolve proposed audit adjustments and to minimize the amount of adjustments.We do not anticipate that any potential tax adjustments will have a significant impact on our financial position or results of operations. |
PENSION AND OTHER POST-RETIREME
| PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS | 16.PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS Components of net periodic benefit cost consisted of the following: Pension Benefits Other Benefits For the Three Months Ended April4, 2010 April 5, 2009 April4, 2010 April 5, 2009 In thousands of dollars Service cost $ 6,929 $ 6,468 $ 363 $ 383 Interest cost 13,118 14,583 4,418 4,817 Expected return on plan assets (18,760 ) (17,530 ) 0 0 Amortization of prior service cost 285 299 (69 ) (120 ) Recognized net actuarial loss (gain) 7,098 8,445 (25 ) (26 ) Administrative expenses 117 94 0 0 Net periodic benefit cost $ 8,787 $ 12,359 $ 4,687 $ 5,054 We made contributions of $1.3million and $6.0 million to the pension plans and other benefits plans, respectively, during the first quarter of 2010.In the first quarter of 2009, we made contributions of $1.3million and $6.6million to our pension and other benefits plans, respectively.The contributions in 2010 and 2009 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans. For 2010, there are no significant minimum funding requirements for our pension plans and planned voluntary funding of our pension plans in 2010 is not material. For more information, refer to the consolidated financial statements and notes included in our 2009 Annual Report on Form 10-K. |
SHARE REPURCHASES
| SHARE REPURCHASES | |
| 3 Months Ended
Apr. 04, 2010 | |
| Notes to Financial Statements [Abstract] | |
| SHARE REPURCHASES | 17.SHARE REPURCHASES Repurchases and Issuances of Common Stock A summary of cumulative share repurchases and issuances is as follows: For the Three Months Ended April4, 2010 In thousands Shares Dollars Shares repurchased in the open market under pre-approved share repurchase programs 0 $ 0 Shares repurchased to replace Treasury Stock issued for stock options and incentive compensation 1,680 64,152 Total share repurchases 1,680 64,152 Shares issued for stock options and incentive compensation (884 ) (28,827 ) Net change 796 $ 35,325 In December 2006, our Board of Directors approved a $250 million share repurchase program. As of April4, 2010, $100.0 million remained available for repurchases of Common Stock under this program. |
Document Information
| Document Information | |
| 3 Months Ended
Apr. 04, 2010 | |
| Document Information [Text Block] | |
| Document Type | 10-Q |
| Amendment Flag | false |
| Document Period End Date | 2010-04-04 |
Entity Information
| Entity Information (USD $) | ||
| 3 Months Ended
Apr. 04, 2010 | Jul. 05, 2009
| |
| Entity [Text Block] | ||
| Entity Registrant Name | HERSHEY CO | |
| 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 | $5,587,746,188 | |
| Entity Common Stock, Shares Outstanding | 227,202,637 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q1 |