Hershey Co. Reports 5 Percent Net Sales Gain In Third Quarter

The Hershey Co. announced sales and earnings for the third quarter ended Oct. 2, 2011. Consolidated net sales were $1,624,249,000 compared with $1,547,115,000 for the third quarter of 2010. Reported net income for the third quarter of 2011 was $196,695,000 or $0.86 per share-diluted, compared with $180,169,000 or $0.78 per share-diluted for the comparable period of 2010.

For the third quarter of 2011, these results, prepared in accordance with generally accepted accounting principles (GAAP), include net pre-tax charges of $13.5 million or $0.03 per share-diluted. These charges were related to the Project Next Century program announced in June 2010. Additionally, the company recorded a pre-tax gain of $17.0 million, or $0.05 per share-diluted, on the sale of a non-core trademark license. Despite these charges and gain on sale, reported income before interest and income taxes (EBIT) increased 7.2 percent resulting in reported EBIT margin of 19.8 percent.

For the third quarter of 2010, GAAP results included net pre-tax charges of $4.5 million, or $0.01 per share-diluted, which were related to the Project Next Century program.

Adjusted net income, which excludes these net charges and the gain on sale, was $193,820,000 or $0.84 per share-diluted in the third quarter of 2011, compared with $182,918,000 or $0.79 per share-diluted in the third quarter of 2010, an increase of 6.3 percent in adjusted earnings per share-diluted.

For the first nine months of 2011, consolidated net sales were $4,513,643,000 compared with $4,188,200,000 for the first nine months of 2010. Reported net income for the first nine months of 2011 was $486,829,000 or $2.12 per share-diluted, compared with $374,286,000 or $1.63 per share-diluted, for the first nine months of 2010.

For the first nine months of 2011, these results, prepared in accordance with GAAP, include net pre-tax charges related to Project Next Century of $21.4 million or $0.06 per share-diluted, as well as the previously mentioned pre-tax gain on sale of non-core trademark licensing rights of $17.0 million, or $0.05 per share-diluted.

For the first nine months of 2010, these results, prepared in accordance with GAAP, include net pre-tax charges, of $90.7 million or $0.31 per share-diluted related to Project Next Century and a non-cash goodwill impairment charge.

Adjusted net income for the first nine months of 2011, which excludes these net charges and the gain on sale, was $489,092,000, or $2.13 per share-diluted, compared with $447,359,000 or $1.94 per share-diluted in 2010, an increase of 9.8 percent in adjusted earnings per share-diluted.

In 2011, reported gross margin, reported EBIT margin and reported earnings per share-diluted will be impacted by charges associated with Project Next Century. Therefore, the company expects reported earnings per share-diluted to increase around 25 percent, including business realignment and impairment charges of $0.11 to $0.12 per share-diluted and the previously mentioned gain on sale of $0.05, and be in the $2.72 to $2.76 range. The forecast for total pre-tax GAAP charges and non-recurring project implementation costs related to the Project Next Century program remains at $140 million to $160 million.

"Hershey's third quarter financial and U.S. marketplace results were solid as our core brands continue to perform well in all retail channels," said John P. Bilbrey, president and chief executive officer in a prepared statement. "Results were slightly better than our expectations as both U.S. chocolate and non-chocolate candy categories continue to grow greater than the historical average despite macroeconomic challenges. We continue to leverage our intellectual insights and proprietary tools to drive overall category growth that benefits both Hershey and our retail partners.