Exhibit 99
HERSHEY FOODS ANNOUNCES
FOURTH QUARTER AND FULL YEAR RESULTS
HERSHEY, Pa., January 29, 2003--Hershey Foods Corporation (NYSE:HSY) today
announced sales and earnings for the fourth quarter ended December 31, 2002.
Consolidated net sales for the fourth quarter were $1,156,028,000 compared with
$1,152,980,000 for the fourth quarter of 2001. Net income was $130,320,000, or
$.96 per share-diluted, compared with a loss of ($44,951,000), or ($.33) per
share-diluted, in 2001.
The results for the fourth quarter of 2002 included a pre-tax charge of $13.3
million, or $.06 per share-diluted, associated with the business realignment
initiatives announced in October 2001. The results for the fourth quarter of
2001 included a one-time charge of $278.4 million, or $1.25 per share-diluted,
related to the realignment process, as well as the amortization of goodwill.
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Excluding the one-time items, net income for the fourth quarter of 2002 was
$138,690,000, or $1.02 per share-diluted, compared with $130,523,000, or $.95
per share-diluted, a gain of 7.4 percent.
For the full year 2002, consolidated net sales were $4,120,317,000 compared with
$4,137,217,000 for 2001. Net income for 2002 was $403,578,000, or $2.93 per
share- diluted, compared with $207,156,000, or $1.50 per share diluted, the
prior year.
Results for 2002 included cumulative pre-tax realignment charges of $34.0
million, or $.16 per share-diluted, and pre-tax expenses of $17.2 million, or
$.08 per share-diluted, related to the exploration of the sale of the Company;
and in 2001, results included the pre-tax charge of $278.4 million, or $1.25 per
share-diluted, related to the realignment initiatives, the gain on the sale of
the Luden's business in the third quarter, and the amortization of goodwill.
Excluding one-time items, net income for 2002 was $435,994,000, or $3.17 per
share- diluted, compared with $391,482,000, or $2.84 per share-diluted, for
2001, an increase of 11.6 percent. A pro forma income statement reflecting these
adjustments accompanies this press release.
Net sales for the fourth quarter of 2002 increased by 0.3 percent on a nominal
basis. On a comparable basis, net sales increased by about 1.0 percent spurred
by a customer buy-in related to the price increase announced on December 10,
2002. Fourth quarter sales were one to two percent higher than they would have
been
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absent the buy-in. This increase in sales was offset somewhat by higher trade
promotion expense, lower domestic seasonal sales, and weakness in the Canadian
market. Gross margin improved by 60 basis points as a result of improved mix and
enhanced supply chain efficiencies. Selling, Marketing, and Administrative
expenses decreased by 30 basis points as a percentage of sales resulting from
significantly lower general and administrative costs, which were only partially
offset by higher selling and marketing expenses.
For the year, sales were off slightly, but the mix of revenues was significantly
strengthened as we focused on higher margin products, packtypes, and channels of
trade. The improved sales mix, price increases on the packaged candy line, and
supply chain efficiencies led to a 130 basis point improvement in gross margin.
For the year, Selling, Marketing and Administrative expenses declined 30 basis
points as a percentage of sales, due to lower general and administrative costs,
which more than offset higher selling and marketing expenses.
"Hershey's fourth quarter results were in line with expectations, achieving a
balance of improved marketplace performance and profitability," said Richard H.
Lenny, Chairman, President, and Chief Executive Officer. "Despite a sluggish
retail environment, Hershey's consumer takeaway increased, resulting in a 0.4
point gain in market share. Equally as important, supply chain productivity and
tight expense control continued to deliver solid gains during the quarter.
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"For the full year, we made good progress against our value-enhancing strategy.
Profitability, margins, and returns delivered strong growth versus 2001,
reflecting improved mix, productivity gains across the supply chain, and lower
general and administrative spending. Although net sales were flat in the U.S.
business, retail takeaway in all food, drug, mass, and convenience channels,
increased by three percent. This performance reflects our disciplined focus on
building Hershey's core brands (+8 %), expanding our leadership position in the
key chocolate category (+5 %), and significantly improving performance in the
high growth convenience store channel (+9 %).
"Overall, I'm most pleased with the Company's results in 2002. Our ability to
deliver solid performance, despite numerous challenges, positions us well as we
continue to implement Hershey's long-term growth initiatives," Lenny concluded.
SAFE HARBOR STATEMENT
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This release contains statements which are forward-looking. These statements are
made based upon current expectations which are subject to risk and uncertainty.
Actual results may differ materially from those contained in the forward-looking
statements. Factors which could cause results to differ materially include, but
are not limited to: changes in the confectionery and grocery business
environment, including actions of competitors and changes in consumer
preferences; changes in governmental laws and regulations
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including taxes; market demand for new and existing products; changes in raw
material and other costs; and pension cost factors, such as actuarial
assumptions and market performance, as discussed in the Company's annual report
on Form 10-K for 2001.
LIVE WEBCAST
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As previously announced, the Company will hold a conference call with analysts
today at 10 a.m. EST. The conference call will be webcast live via Hershey's
corporate web site www.hersheys.com. Please go to the Investor Relations Section
of the Web site for further details.
# # #
Media Contact: Christine M. Dugan (717) 508-3238
Financial Contact: James A. Edris (717) 534-7556
Hershey Foods Corporation
Summary of Consolidated Statements of Income
for the periods ended December 31, 2002 and December 31, 2001
(in thousands of dollars except per share amounts)
Fourth Quarter Twelve Months
2002 2001 2002 2001
Net Sales $1,156,028 $1,152,980 $4,120,317 $4,137,217
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Costs and Expenses:
Cost of Sales 709,840 759,914 2,561,052 2,668,530
Selling, Marketing and Administrative 216,758 224,049 833,426 846,976
Business Realignment Charge, net 8,278 228,314 27,552 228,314
Gain on Sale of Business --- --- --- (19,237)
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Total Costs and Expenses 934,876 1,212,277 3,422,030 3,724,583
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Income Before Interest and Income Taxes 221,152 (59,297) 698,287 412,634
Interest Expense, net 15,274 16,722 60,722 69,093
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Income Before Income Taxes 205,878 (76,019) 637,565 343,541
Provision for Income Taxes 75,558 (31,068) 233,987 136,385
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Net Income $130,320 ($44,951) $403,578 $207,156
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Net Income Per Share - Basic $0.96 ($0.33) $2.96 $1.52
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- Diluted $0.96 ($0.33) $2.93 $1.50
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Shares Outstanding - Basic 135,409 135,953 136,538 136,245
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- Diluted 136,337 135,953 137,714 137,696
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Hershey Foods Corporation
Pro Forma Summary of Consolidated Statements of Income
for the periods ended December 31, 2002 and December 31, 2001
(in thousands of dollars except per share amounts)
Fourth Quarter Twelve Months
2002 2001 2002 2001
Net Sales $1,156,028 $1,152,980 $4,120,317 $4,137,217
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Costs and Expenses:
Cost of Sales 704,821 (a) 709,812 (d) 2,554,625 (a) 2,618,428 (d)
Selling, Marketing and Administrative 216,834 (b) 220,575 (e) 816,196 (b) 832,217 (e)
Business Realignment Charge, net --- (c) --- (f) --- (c) --- (f)
Gain on Sale of Business --- --- --- --- (g)
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Total Costs and Expenses 921,655 930,387 3,370,821 3,450,645
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Income Before Interest and Income Taxes 234,373 222,593 749,496 686,572
Interest Expense, net 15,274 16,722 60,722 69,093
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Income Before Income Taxes 219,099 205,871 688,774 617,479
Provision for Income Taxes 80,409 75,348 252,780 225,997
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Net Income $138,690 $130,523 $435,994 $391,482
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Net Income Per Share - Basic $1.02 $0.96 $3.19 $2.87
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- Diluted $1.02 $0.95 $3.17 $2.84
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Shares Outstanding - Basic 135,409 135,953 136,538 136,245
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- Diluted 136,337 137,450 137,714 137,696
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(a) Excludes business realignment charges of $5.0 million for the fourth quarter and $6.4 million for the twelve
months.
(b) Excludes an adjustment to expenses of $(0.1) million in the fourth quarter and total expenses of $17.2 million,
or $.08 per share-diluted, for the twelve months, related to the exploration of the possible sale of the Corporation.
(c) Excludes business realignment charges of $8.3 million, or $.04 per share-diluted, for the fourth quarter and
$27.6 million, or $.13 per share-diluted, for the twelve months.
(d) Excludes business realignment charges of $50.1 million, or $30.9 million after-tax, for both the fourth quarter
and twelve months.
(e) Excludes goodwill amortization of $3.5 million for the fourth quarter and $14.8 million for the twelve months.
(f) Excludes business realignment charges of $228.3 million, or $140.9 million after-tax, for both the fourth quarter
and twelve months.
(g) Excludes gain on Luden's sale of $19.2 million pre-tax, $1.1 million after-tax, or $.01 per share-diluted,
for the twelve months.
Hershey Foods Corporation
Consolidated Balance Sheets
as of December 31, 2002 and December 31, 2001
(in thousands of dollars)
Assets 2002 2001
Cash and Cash Equivalents $297,743 $134,147
Accounts Receivable - Trade (Net) 370,976 361,726
Deferred Income Taxes --- 96,939
Inventories 503,291 512,134
Prepaid Expenses and Other 91,608 62,595
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Total Current Assets 1,263,618 1,167,541
Net Plant and Property 1,486,055 1,534,901
Goodwill 378,453 388,702
Other Intangibles 39,898 40,426
Other Assets 312,527 115,860
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Total Assets $3,480,551 $3,247,430
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Liabilities and Stockholders' Equity
Loans Payable $28,124 $7,926
Accounts Payable 124,507 133,049
Accrued Liabilities 356,716 462,901
Taxes Payable 12,731 2,568
Deferred Income Taxes 24,768 ---
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Total Current Liabilities 546,846 606,444
Long-Term Debt 851,800 876,972
Other Long-Term Liabilities 362,162 361,041
Deferred Income Taxes 348,040 255,769
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Total Liabilities 2,108,848 2,100,226
Total Stockholders' Equity 1,371,703 1,147,204
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Total Liabilities and Stockholders' Equity $3,480,551 $3,247,430
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