Hershey Co. Reports Improved Sales And Earnings In Fourth Quarter

The Hershey Co. announced sales and earnings for the fourth quarter and year ended Dec. 31, 2011. Consolidated net sales were $1,567,145,000 compared with $1,482,809,000 for the fourth quarter of 2010. Reported net income for the fourth quarter of 2011 was $142,133,000 or $0.62 per share-diluted, compared with $135,513,000 or $0.59 per share-diluted for the comparable period of 2010.

These results, prepared in accordance with U.S. generally accepted accounting principles (GAAP), included net pre-tax charges of $27.7 million or $0.08 per share-diluted. These charges were primarily related to the Project Next Century program announced in June 2010. As a result, reported gross margin and reported income before interest and income taxes (EBIT) margin of 40.3 percent and 14.6 percent, declined 150 basis points and 80 basis points versus last year, respectively.

For the fourth quarter of 2010, GAAP results included net pre-tax charges of $7.9 million, or $0.02 per share-diluted, which were related to Project Next Century. Adjusted net income, which excludes these net charges, was $159,636,000 or $0.70 per share-diluted in the fourth quarter of 2011, compared with $140,375,000 or $0.61 per share-diluted in the fourth quarter of 2010, an increase of 14.8 percent in adjusted earnings per share-diluted.

For the full year 2011, consolidated net sales were $6,080,788,000 compared with $5,671,009,000 in 2010, an increase of 7.2 percent. Reported net income for 2011 was $628,962,000 or $2.74 per share-diluted, compared with $509,799,000 or $2.21 per share-diluted for 2010.

For the full years 2011 and 2010, these results, prepared in accordance with GAAP, included net pre-tax charges of $32.1 million and $98.6 million, or $0.08 and $0.34 per share-diluted, respectively. The 2011 charges were primarily associated with Project Next Century and a gain on sale of non-core trademark licensing rights recorded in the third quarter. The 2010 charges were associated with Project Next Century and a non-cash goodwill impairment charge.

Adjusted net income for each year, which excludes these net charges, was $648,728,000 or $2.82 per share-diluted in 2011, compared with $587,734,000 or $2.55 per share-diluted in 2010, an increase of 10.6 percent in adjusted earnings per share-diluted.

“In 2011, Hershey continued to make good progress against its business model and strategy of investing in core brands and capabilities in the U.S. and key international markets,” said John P. Bilbrey, president and chief executive officer in a prepared statement. “Our success is reflected in our solid net sales growth and market share gains, giving us flexibility to make broad-based investments while delivering on our earnings objectives.

“Hershey’s fourth quarter represents a solid finish to 2011 and we expect to carry our momentum into 2012. In the fourth quarter, net sales increased 5.7 percent. Net price realization, primarily in the U.S., was a 5.9 point benefit. As expected, volume improved from last quarter, slightly greater than our expectations, increasing 0.4 points. New product introductions in the U.S. and our international markets, along with seasonal volume gains, were partially offset by volume declines, in line with our modeling, due to price elasticity. The impact of unfavorable foreign currency exchange rates in the quarter was about 0.6 points.

“For both the quarterly and year-to-date periods, U.S. CMG – candy, mint and gum – category and Hershey marketplace performance continued to outpace the historical category growth rate of about 3 to 4 percent. Specifically, Hershey U.S. CMG retail takeaway for the 12-weeks and year ended Dec. 31, 2011, in channels that account for over 80 percent of our retail business, was up 6.5 percent and 7.8 percent, respectively. In the channels measured by syndicated data, U.S. market share for the fourth quarter and year increased 0.4 points and 0.8 points, respectively.