• First-quarter net sales
increased 2.8% including the impact of acquisitions and foreign
currency exchange rates
The Hershey Company (NYSE:HSY) today announced sales and earnings
for the first quarter ended April 2, 2017. Consolidated net sales
were $1,879.7 million compared with $1,828.8 million for the first
quarter of 2016. Reported net income for the first quarter of 2017
was $125.0 million or $0.58 per share-diluted, compared with $229.8
million or $1.06 per share-diluted for the comparable period of
2016.
“I’m pleased with our first-quarter results,
which were driven by seasonal sales growth, the roll-out of
Hershey’s Cookie Layer Crunch bars and our continued focus on cost
control,” said Michele Buck, President and Chief Executive Officer,
The Hershey Company. “Net sales increased 2.8%, slightly less than
our forecast and reflective of the broader soft U.S. food-industry
retail trends to start the year. Gross margin expansion was solid,
which contributed to strong operating profit growth. First quarter
U.S. retail takeaway was primarily impacted by the timing of
Easter, however, our market share gains were solid. The launch of
Hershey’s Cookie Layer Crunch bars got off to a good start and
we’re following that up with the roll out of Hershey’s Crunchers
candy and Reese’s Crunchy Cookie Cups. Importantly, while
preliminary, our Easter sell through is in line with our estimate
and we anticipate Hershey U.S. candy, mint and gum (CMG) April
year-to-date retail takeaway will be about 2.5%.”
As described in the Note below, for the
first-quarter of 2017, these results, prepared in accordance with
U.S. generally accepted accounting principles (GAAP), included
items impacting comparability of $216.6 million, or $0.73 per
share-diluted. For the first quarter of 2016, items impacting
comparability totaled $27.8 million, or $0.04 per share-diluted. As
described in the Note, adjusted net income, which excludes these
items, was $282.1 million, or $1.31 per share-diluted, for the
first quarter of 2017, compared with $238.9 million, or $1.10 per
share-diluted, for the same period of 2016. Reported gross margin
was 48.2% in the first quarter of 2017 versus 44.7% in the first
quarter of 2016. Reported operating profit was $191.9 million in
the first quarter of 2017, a decline of 43.5% versus the first
quarter of 2016, resulting in operating profit margin of 10.2%.
The following table presents a summary of items impacting
comparability in each period (see Appendix I for additional
information):
|
Pre-Tax (millions) |
|
Earnings Per Share-Diluted |
|
Three Months Ended |
|
Three Months Ended |
|
April 2, 2017 |
|
April 3, 2016 |
|
April 2, 2017 |
|
April 3, 2016 |
Derivative
Mark-to-Market (Gains) Losses |
$ |
(17.1 |
) |
|
$ |
34.9 |
|
|
$ |
(0.09 |
) |
|
$ |
0.10 |
|
Business Realignment
Activities |
47.0 |
|
|
14.4 |
|
|
0.17 |
|
|
0.05 |
|
Acquisition Integration
Costs |
0.3 |
|
|
— |
|
|
— |
|
|
— |
|
Non-Service Related
Pension Expense |
4.4 |
|
|
5.1 |
|
|
0.01 |
|
|
0.01 |
|
Long-Lived Asset
Impairment Charges |
208.7 |
|
|
— |
|
|
0.76 |
|
|
— |
|
Noncontrolling Interest
Share of Business Realignment and Impairment Charges (After-Tax)
|
(26.7 |
) |
|
— |
|
|
(0.12 |
) |
|
— |
|
Settlement of Shanghai
Golden Monkey (SGM) Liability |
— |
|
|
(26.6 |
) |
|
— |
|
|
(0.12 |
) |
|
$ |
216.6 |
|
|
$ |
27.8 |
|
|
$ |
0.73 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2017, the company expects reported earnings
per share-diluted of $3.31 to $3.55, including items impacting
comparability of approximately $1.26 to $1.41 per share-diluted.
This projection, prepared in accordance with GAAP, assumes business
realignment costs of $0.35 to $0.50 per share-diluted, including
Margin for Growth Program costs of $0.25 to $0.40 per
share-diluted, long-lived asset impairment charges of $0.85 per
share-diluted relating to the Margin for Growth Program, and
non-service related pension expense (NSRPE) of about $0.06 per
share-diluted. The total per share-diluted impact relating to
the Margin for Growth Program, included in the amounts above, is
currently estimated to be $1.10 to $1.25.
First-Quarter Performance
Consolidated net sales were $1,879.7 million in
the first quarter of 2017, an increase of 2.8% versus the first
quarter of 2016. Excluding favorable foreign currency translation,
a 0.1 point benefit, net sales increased 2.7% versus the year ago
period. Net price realization was a 2.0 point benefit due to lower
levels of trade. Net volume increased 0.7 points, including a
contribution from the barkTHINS brand acquisition of 0.9
points.
Adjusted gross margin was 47.5% in the first
quarter of 2017 compared to 46.8% in the first quarter of 2016. The
70 basis point increase was primarily driven by favorable trade,
supply chain productivity and costs savings initiatives and lower
input costs, partially offset by other higher supply chain
costs.
As expected, total advertising and related
consumer marketing expense was about the same as the first quarter
of 2016. Selling, marketing and administrative expenses, excluding
advertising and related consumer marketing, declined about 1% in
the quarter, as the cost savings and efficiency initiatives
discussed last quarter were partially offset by investments in
go-to-market capabilities and increased depreciation and
amortization. As a result, consolidated adjusted operating profit
of $435.2 million in the first quarter of 2017 increased 10.5%
versus the first quarter of 2016.
Outlook
“In 2017, we remain focused on driving our North America core
brands forward and achieving trial and repeat targets related to
the launches of Hershey’s Cookie Layer Crunch bars, Reese’s and
Hershey’s Crunchers candy and Reese’s Crunchy Cookie Cups,” said
Buck. “Additionally, the branded snack mix and snack bites products
that launched last year continue to do well, enabling us to expand
our breadth across the snack wheel and capture new usage occasions.
We anticipate that our innovation, as well as our consumer
marketing plans, will enable us to build on our first-quarter U.S.
CMG market share gains. April year-to-date marketplace performance,
driven by our seasonal business, is tracking in line with our
estimates. We expect non-seasonal U.S. CMG trends to improve over
the remainder of the year, although the growth rate is expected to
be slightly lower than our previous forecast. Additionally,
macroeconomic challenges persist in China and we expect net sales
for the full year to be lower there than 2016. Therefore, we
estimate that full-year 2017 net sales growth will most likely be
around the low end of our 2.0% to 3.0% outlook, including a net
benefit from acquisitions of about 0.5 points. We expect the impact
of foreign currency exchange rates to be minimal versus our
previous estimate of a 0.25 point headwind.
“The company’s multiyear Margin for Growth
Program is on track and progressing. We continue to forecast strong
productivity and cost savings initiatives in 2017 and don't expect
input cost inflation, which should result in adjusted gross margin
expansion slightly greater than our previous estimate. Our brands
typically respond positively to marketplace investments and we
continue to expect that advertising and related consumer marketing
expense, as well as selling, general and administrative costs, will
increase for the full year 2017 versus 2016. We believe these
investments in marketing, technology, IT capabilities and analytic
approaches will be enablers of profitable growth. Additionally, the
company anticipates its effective tax rate will be slightly lower
than its original forecast. As a result, the company expects the
full year increase in adjusted earnings per share-diluted to be
around the high end of its outlook of $4.72 to $4.81, a 7% to 9%
increase versus last year,” Buck concluded.
Business Segment Results
The following are comments about segment
performance for the first quarter of 2017 versus the year ago
period. See the attached schedule of supplementary information for
additional information on segment net sales and profit.
North America (U.S. and
Canada)
Hershey’s North America net sales were $1,677.1
million in the first quarter of 2017, an increase of 2.7% versus
the same period last year. Volume was a 0.3 point contribution to
sales growth driven by seasonal growth and, as anticipated, net
price realization was a 1.2 point benefit due to lower direct
trade. The barkTHINS brand acquisition and foreign currency
exchange rates were a 1.0 and 0.2 point benefit, respectively.
As expected, due to the timing of Easter, which
was three weeks later in 2017 than 2016, first-quarter net sales
were greater than retail takeaway. Specifically, total Hershey U.S.
retail takeaway1 for the 12 weeks ended April 8, 2017, in the
expanded all outlet combined plus convenience store channels
(xAOC+C-store) declined 7.9%. Importantly, Hershey U.S. CMG market
share increased 0.4 points in the first quarter to an
industry-leading 31.5%. While Easter results are preliminary, our
sell through is on track and we estimate that our U.S. CMG April
year-to-date retail takeaway will be about 2.5%.
North America segment income increased 4.5% to
$553.1 million in the first quarter of 2017, compared to $529.4
million in the first quarter of 2016. The increase in segment
income was driven by a gross profit increase of about 3.5% versus
the first quarter of 2016, partially offset by higher levels of
selling expense, investments in greater go-to-market capabilities
and increased depreciation and amortization.
1Includes candy, mint, gum, salty snacks, snack
bars, meat snacks and grocery items.
International and Other
First-quarter net sales for Hershey’s
International and Other segment increased 3.7% to $202.5 million.
Net price realization was an 8.7 point benefit and volume declined
by 4.5 points. Excluding the 0.5 point impact of unfavorable
foreign exchange rates, net sales increased 4.2%. Constant currency
net sales growth in Mexico, Brazil and India was about 15%. China
net sales increased mid-single digits on a percentage basis versus
last year. The increase was driven by lower direct trade expense as
gross sales declined versus the first quarter of 2016. China
chocolate category retail sales in the first quarter of 2017 were
about the same as last year. International and Other segment income
of $1.7 million compares to a segment loss of $13.2 million in the
first quarter of 2016. Combined income in Latin America and export
markets improved versus the prior year and performance in China
benefited primarily from lower direct trade.
Unallocated Corporate
Expense
Hershey's unallocated adjusted corporate expense was $119.7
million in the first quarter of 2017 versus $122.2 million in the
first quarter of 2016. Savings from the previously mentioned
productivity and cost savings initiatives were partially offset by
higher employee-related costs and increased depreciation and
amortization.
Live Webcast
At 8:30 a.m. ET today, Hershey will host a
conference call to elaborate on first-quarter results. To access
this call as a webcast, please go to Hershey’s web site at
http://www.thehersheycompany.com.
Note: In this release,
Hershey references income measures that are not in accordance with
GAAP because they exclude business realignment activities,
impairment of long-lived assets, acquisition integration costs,
settlement of the SGM liability, NSRPE and gains and losses
associated with mark-to-market commodity derivatives. These
non-GAAP financial measures are used in evaluating results of
operations for internal purposes and are not intended to replace
the presentation of financial results in accordance with GAAP.
Rather, the company believes exclusion of such items provides
additional information to investors to facilitate the comparison of
past and present operations. A reconciliation of the non-GAAP
financial measures referenced in this release to their nearest
comparable GAAP financial measures as presented in the Consolidated
Statements of Income is provided below.
|
Reconciliation of Certain Non-GAAP Financial
Measures |
Consolidated
results |
Three Months Ended |
In thousands
except per share data |
April 2, 2017 |
|
April 3, 2016 |
Reported gross
profit |
$ |
906,560 |
|
|
$ |
817,376 |
|
Derivative
mark-to-market (gains) losses |
(17,088 |
) |
|
34,946 |
|
Business realignment
activities |
490 |
|
|
(487 |
) |
NSRPE |
2,860 |
|
|
3,241 |
|
Non-GAAP gross
profit |
$ |
892,822 |
|
|
$ |
855,076 |
|
|
|
|
|
Reported operating
profit |
$ |
191,931 |
|
|
$ |
339,509 |
|
Derivative
mark-to-market (gains) losses |
(17,088 |
) |
|
34,946 |
|
Business realignment
activities |
46,988 |
|
|
14,430 |
|
Acquisition integration
costs |
300 |
|
|
— |
|
NSRPE |
4,368 |
|
|
5,101 |
|
Long-lived asset
impairment charges |
208,712 |
|
|
— |
|
Non-GAAP operating
profit |
$ |
435,211 |
|
|
$ |
393,986 |
|
|
|
|
|
Reported provision for
income taxes |
$ |
70,113 |
|
|
$ |
109,897 |
|
Derivative
mark-to-market (gains) losses* |
1,199 |
|
|
13,245 |
|
Business realignment
activities* |
11,417 |
|
|
3,538 |
|
Acquisition integration
costs* |
114 |
|
|
— |
|
NSRPE* |
1,664 |
|
|
1,953 |
|
Long-lived asset
impairment charges* |
45,201 |
|
|
— |
|
Non-GAAP provision for
income taxes |
$ |
129,708 |
|
|
$ |
128,633 |
|
|
|
|
|
Reported net
income |
$ |
125,044 |
|
|
$ |
229,832 |
|
Derivative
mark-to-market (gains) losses |
(18,287 |
) |
|
21,701 |
|
Business realignment
activities |
35,571 |
|
|
10,860 |
|
Acquisition integration
costs |
186 |
|
|
— |
|
NSRPE |
2,704 |
|
|
3,148 |
|
Long-lived asset
impairment charges |
163,511 |
|
|
— |
|
Noncontrolling interest
share of business realignment and impairment charges |
(26,666 |
) |
|
— |
|
Settlement of SGM
liability |
— |
|
|
(26,650 |
) |
Non-GAAP net
income |
$ |
282,063 |
|
|
$ |
238,891 |
|
|
|
|
|
Reported EPS -
Diluted |
$ |
0.58 |
|
|
$ |
1.06 |
|
Derivative
mark-to-market (gains) losses |
(0.09 |
) |
|
0.10 |
|
Business realignment
activities |
0.17 |
|
|
0.05 |
|
NSRPE |
0.01 |
|
|
0.01 |
|
Long-lived asset
impairment charges |
0.76 |
|
|
— |
|
Noncontrolling interest
share of business realignment and impairment charges |
(0.12 |
) |
|
— |
|
Settlement of SGM
liability |
— |
|
|
(0.12 |
) |
Non-GAAP EPS -
Diluted |
$ |
1.31 |
|
|
$ |
1.10 |
|
* The tax effect for each adjustment is determined by
calculating the tax impact of the adjustment on the Company's
quarterly effective tax rate.
In the assessment of our results, we review and discuss the
following financial metrics that are derived from the reported and
non-GAAP financial measures presented above:
|
Three Months Ended |
|
April 2, 2017 |
|
April 3, 2016 |
As reported gross
margin |
48.2 |
% |
|
44.7 |
% |
Non-GAAP gross margin
(1) |
47.5 |
% |
|
46.8 |
% |
|
|
|
|
As reported operating
profit margin |
10.2 |
% |
|
18.6 |
% |
Non-GAAP operating
profit margin (2) |
23.2 |
% |
|
21.5 |
% |
|
|
|
|
As reported effective
tax rate |
41.6 |
% |
|
32.3 |
% |
Non-GAAP effective tax
rate (3) |
31.5 |
% |
|
35.0 |
% |
(1) Calculated as non-GAAP gross profit as a percentage of net
sales for each period presented.(2) Calculated as non-GAAP
operating profit as a percentage of net sales for each period
presented.(3) Calculated as non-GAAP provision for income taxes as
a percentage of non-GAAP income before taxes (calculated as
non-GAAP operating profit minus non-GAAP interest expense, net plus
or minus non-GAAP other (income) expense, net).
We present certain percentage changes in net
sales on a constant currency basis, which excludes the impact of
foreign currency exchange. To present this information for
historical periods, current period net sales for entities reporting
in other than the U.S. dollar are translated into U.S. dollars at
the average monthly exchange rates in effect during the
corresponding period of the prior fiscal year, rather than at the
actual average monthly exchange rates in effect during the current
period of the current fiscal year. As a result, the foreign
currency impact is equal to the current year results in local
currencies multiplied by the change in average foreign currency
exchange rate between the current fiscal period and the
corresponding period of the prior fiscal year.
A reconciliation between reported and constant
currency growth rates is provided below:
|
|
|
Three Months Ended April 2, 2017 |
|
Percentage Change as
Reported |
|
Impact of Foreign Currency
Exchange |
|
Percentage Change on Constant Currency
Basis |
North America
segment |
|
|
|
|
|
Canada |
5.4 |
% |
|
3.6 |
% |
|
1.8 |
% |
Total North America
segment |
2.7 |
% |
|
0.2 |
% |
|
2.5 |
% |
|
|
|
|
|
|
International and Other
segment |
|
|
|
|
|
Mexico |
(0.2 |
)% |
|
(13.2 |
)% |
|
13.0 |
% |
Brazil |
48.1 |
% |
|
30.0 |
% |
|
18.1 |
% |
India |
16.6 |
% |
|
0.9 |
% |
|
15.7 |
% |
Greater
China |
4.1 |
% |
|
(3.3 |
)% |
|
7.4 |
% |
Total International and
Other segment |
3.7 |
% |
|
(0.5 |
)% |
|
4.2 |
% |
|
|
|
|
|
|
Total Company |
2.8 |
% |
|
0.1 |
% |
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
We also present the percentage change in
projected 2017 net sales on a constant currency basis. To
determine this, projected 2017 net sales for entities reporting in
currencies other than the U.S. dollar are translated into U.S.
dollars at the company's average monthly exchange rates in effect
during the corresponding period of the prior fiscal year, and are
compared to the 2016 results translated into U.S. dollars using the
same 2016 average monthly exchange rates.
Below is a reconciliation of projected 2017 and full-year 2016
earnings per share-diluted calculated in accordance with GAAP to
non-GAAP adjusted earnings per share-diluted:
|
2017 (Projected) |
|
2016
|
Reported EPS –
Diluted |
$3.31
- $3.55 |
|
$3.34 |
Derivative
mark-to-market losses |
— |
|
0.66 |
Business realignment
costs (including Margin for Growth Program costs) |
0.35 -
0.50 |
|
0.42 |
Acquisition and
integration costs |
— |
|
0.02 |
Non-service related
pension expense |
0.06 |
|
0.08 |
Settlement of SGM
liability |
— |
|
(0.12) |
Long-lived asset
impairment charges |
0.85 |
|
0.01 |
Adjusted EPS –
Diluted |
$4.72 - $4.81 |
|
$4.41 |
|
|
|
|
Our 2017 projected earnings per share-diluted,
as presented above, does not include the impact of mark-to-market
gains and losses on our commodity derivative contracts that will be
reflected within corporate unallocated expenses in our segment
results until the related inventory is sold, since we are not able
to forecast the impact of the market changes.
Appendix I
Details of the charges included in GAAP results,
as summarized in the press release (above), are as follows:
Mark-to-Market (Gains) Losses on Commodity
Derivatives: Commensurate with our discontinuance of hedge
accounting treatment for commodity derivatives, we are adjusting
the mark-to-market (gains) losses on such commodity derivatives,
until such time as the related inventory is sold. Since we often
purchase commodity contracts to price inventory requirements in
future years, we make this adjustment to facilitate the
year-over-year comparison of cost of sales on a basis that reflects
the derivative gains and losses with the underlying economic
exposure being hedged for the period.
Business Realignment Activities: We
periodically undertake restructuring and cost reduction activities
as part of ongoing efforts to enhance long-term profitability.
During the first quarter of 2017, we commenced the Margin for
Growth Program to drive continued net sales, operating income and
earnings per share-diluted growth over the next several
years. This program is focused on improving global efficiency
and effectiveness, optimizing the Company’s supply chain,
streamlining the Company’s operating model and reducing
administrative expenses to generate long-term savings.
During the first quarter of 2017, business realignment
charges related primarily to severance expenses related to this
program, in addition to severance expenses incurred under a
voluntary separation plan included within the Operational
Optimization Program, a program commenced in 2016 to optimize our
production and supply chain network, including the integration of
the China sales force and consolidation of production within
certain facilities in China and North America. During the
first quarter of 2016, we incurred initial costs relating primarily
to severance and other third party charges in connection with the
Operational Optimization Program, coupled with some minor revisions
to severance benefits and related costs in connection with the
productivity initiative announced in June 2015.
Acquisition Integration Costs: Costs
incurred during the first quarter of 2017 relate to the integration
of the 2016 acquisition of Ripple Brand Collective, LLC as we
incorporate this business into our operating practices and
information systems.
Non-Service Related Pension Expense:
Non-service related pension expense (NSRPE) includes interest
costs, the expected return on pension plan assets, the amortization
of actuarial gains and losses, and certain curtailment and
settlement losses or credits. The NSRPE can fluctuate from
year-to-year as a result of changes in market interest rates and
market returns on pension plan assets. We believe that the service
cost component of our total pension benefit costs closely reflects
the operating costs of our business and provides for a better
comparison of our operating results from year-to-year.
Therefore, we exclude the NSRPE from our internal performance
measures. Our most significant defined benefit pension plans have
been closed to new participants for a number of years, resulting in
ongoing service costs that are stable and predictable.
Long-Lived Asset Impairment Charges:
During the first quarter of 2017, in conjunction with the Margin
for Growth Program, we wrote-down certain intangible assets and
property, plant and equipment.
Noncontrolling Interest Share of Business
Realignment and Impairment Charges: Certain of the business
realignment and impairment charges recorded in connection with the
Margin for Growth Program related to a joint venture in which we
own a 50% controlling interest. Therefore, we have also
adjusted for the portion of these charges included within the loss
attributed to the noncontrolling interest.
Settlement of SGM Liability: In the fourth
quarter of 2015, we reached an agreement with the SGM selling
shareholders to reduce the originally-agreed purchase price for the
remaining 20% of SGM, and we completed the purchase on February 3,
2016. In the first quarter of 2016, we recorded a $26.7 million
gain relating to the settlement of the SGM liability, representing
the net carrying amount of the recorded liability in excess of the
cash paid to settle the obligation for the remaining 20% of the
outstanding shares.
Safe Harbor Statement
This release contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Many of these forward-looking statements can be identified
by the use of words such as “intend,” “believe,” “expect,”
“anticipate,” “should,” “planned,” “projected,” “estimated,” and
“potential,” among others. These statements are made based upon
current expectations that are subject to risk and uncertainty.
Because actual results may differ materially from those contained
in the forward-looking statements, you should not place undue
reliance on the forward-looking statements when deciding whether to
buy, sell or hold the company's securities. Factors that could
cause results to differ materially include, but are not limited to:
issues or concerns related to the quality and safety of our
products, ingredients or packaging; changes in raw material and
other costs, along with the availability of adequate supplies of
raw materials; selling price increases, including volume declines
associated with pricing elasticity; market demand for our new and
existing products; increased marketplace competition; disruption to
our manufacturing operations or supply chain; failure to
successfully execute and integrate acquisitions, divestitures and
joint ventures; changes in governmental laws and regulations,
including taxes; political, economic, and/or financial market
conditions; risks and uncertainties related to our international
operations; disruptions, failures or security breaches of our
information technology infrastructure; our ability to hire, engage
and retain a talented global workforce; our ability to realize
expected cost savings and operating efficiencies associated with
strategic initiatives or restructuring programs; and such other
matters as discussed in our Annual Report on Form 10-K for the year
ended December 31, 2016. All information in this press release is
as of April 26, 2017. The company undertakes no duty to update any
forward-looking statement to conform the statement to actual
results or changes in the company's expectations.
|
The Hershey Company |
Consolidated Statements of
Income |
for the three months ended April 2, 2017 and
April 3, 2016 |
(unaudited) (in thousands except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
Net
sales |
|
|
$ |
1,879,678 |
|
|
$ |
1,828,812 |
|
Cost of sales |
|
973,118 |
|
|
1,011,436 |
|
Gross
profit |
|
|
906,560 |
|
|
817,376 |
|
|
|
|
|
Selling, marketing and administrative expense |
461,900 |
|
|
471,734 |
|
Long-lived asset impairment charges |
208,712 |
|
|
— |
|
Business realignment costs |
44,017 |
|
|
6,133 |
|
|
|
|
|
|
Operating
profit |
191,931 |
|
|
339,509 |
|
Interest
expense, net |
|
23,741 |
|
|
21,005 |
|
Other
(income) expense, net |
|
(171 |
) |
|
(21,225 |
) |
|
|
|
|
|
Income
before income taxes |
|
168,361 |
|
|
339,729 |
|
Provision
for income taxes |
|
70,113 |
|
|
109,897 |
|
|
|
|
|
|
|
Net income
including noncontrolling interest |
98,248 |
|
|
229,832 |
|
|
|
|
|
|
|
Less: Net loss attributable to noncontrolling interest
|
(26,796 |
) |
|
— |
|
Net income
attributable to The Hershey Company |
$ |
125,044 |
|
|
$ |
229,832 |
|
|
|
|
|
|
|
Net income
per share |
- Basic |
- Common |
$ |
0.60 |
|
|
$ |
1.09 |
|
|
- Diluted |
- Common |
$ |
0.58 |
|
|
$ |
1.06 |
|
|
- Basic |
- Class B |
$ |
0.55 |
|
|
$ |
0.99 |
|
|
|
|
|
|
|
Shares
outstanding |
- Basic |
- Common |
152,313 |
|
|
155,675 |
|
|
- Diluted |
- Common |
214,522 |
|
|
217,487 |
|
|
- Basic |
- Class B |
60,620 |
|
|
60,620 |
|
|
|
|
|
|
|
Key
margins: |
|
|
|
|
|
Gross margin |
|
48.2 |
% |
|
44.7 |
% |
Operating profit margin |
|
10.2 |
% |
|
18.6 |
% |
Net margin |
|
6.7 |
% |
|
12.6 |
% |
|
|
|
|
|
|
|
|
The Hershey Company |
Supplementary Information – Segment
Results |
for the three months ended April 2, 2017 and
April 3, 2016 |
(unaudited) (in thousands of dollars) |
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2017 |
|
2016 |
|
% Change |
Net
sales: |
|
|
|
|
|
|
North America |
|
$ |
1,677,146 |
|
|
$ |
1,633,471 |
|
|
2.7 |
% |
International and Other |
|
202,532 |
|
|
195,341 |
|
|
3.7 |
% |
Total |
|
$ |
1,879,678 |
|
|
$ |
1,828,812 |
|
|
2.8 |
% |
|
|
|
|
|
|
|
Segment
income (loss): |
|
|
|
|
|
|
North America |
|
$ |
553,138 |
|
|
$ |
529,390 |
|
|
4.5 |
% |
International and Other |
|
1,723 |
|
|
(13,233 |
) |
|
NM |
|
Total
segment income |
|
554,861 |
|
|
516,157 |
|
|
7.5 |
% |
Unallocated
corporate expense (1) |
|
119,650 |
|
|
122,171 |
|
|
(2.1 |
)% |
Mark-to-market adjustment for commodity derivatives (2) |
|
(17,088 |
) |
|
34,946 |
|
|
NM |
|
Long-lived
asset impairment charges |
|
208,712 |
|
|
— |
|
|
NM |
|
Costs
associated with business realignment initiatives |
|
46,988 |
|
|
14,430 |
|
|
NM |
|
Non-service
related pension |
|
4,368 |
|
|
5,101 |
|
|
(14.4 |
)% |
Acquisition
integration costs |
|
300 |
|
|
— |
|
|
NM |
|
Operating
profit |
|
191,931 |
|
|
339,509 |
|
|
(43.5 |
)% |
Interest
expense, net |
|
23,741 |
|
|
21,005 |
|
|
13.0 |
% |
Other
expense, net |
|
(171 |
) |
|
(21,225 |
) |
|
NM |
|
Income
before income taxes |
|
$ |
168,361 |
|
|
$ |
339,729 |
|
|
(50.4 |
)% |
(1) Includes centrally-managed (a) corporate functional costs
relating to legal, treasury, finance, and human resources, (b)
expenses associated with the oversight and administration of our
global operations, including warehousing, distribution and
manufacturing, information systems and global shared services, (c)
non-cash stock-based compensation expense, and (d) other gains or
losses that are not integral to segment performance.
(2) Includes gains and losses on commodity derivative
instruments which have been excluded from segment income until the
related inventory is sold.
NM - not meaningful
|
|
|
|
|
|
|
First Quarter |
|
|
|
2017 |
|
2016 |
Segment
income as a percent of net sales: |
|
|
|
|
North America |
|
33.0 |
% |
|
32.4 |
% |
International and Other |
|
0.9 |
% |
|
(6.8 |
)% |
|
|
|
|
|
|
|
|
The Hershey Company |
Consolidated Balance Sheets |
as of April 2, 2017 and December 31,
2016 |
(in thousands of dollars) |
|
|
|
|
Assets |
2017 |
|
2016 |
|
(unaudited) |
|
|
Cash and cash
equivalents |
$ |
235,031 |
|
|
$ |
296,967 |
|
Accounts receivable -
trade, net |
595,779 |
|
|
581,381 |
|
Inventories |
795,404 |
|
|
745,678 |
|
Prepaid expenses and
other |
247,647 |
|
|
192,752 |
|
|
|
|
|
Total current
assets |
1,873,861 |
|
|
1,816,778 |
|
|
|
|
|
Property, plant and
equipment, net |
2,050,439 |
|
|
2,177,248 |
|
Goodwill |
814,882 |
|
|
812,344 |
|
Other intangibles |
381,716 |
|
|
492,737 |
|
Other assets |
163,661 |
|
|
168,365 |
|
Deferred income
taxes |
57,826 |
|
|
56,861 |
|
|
|
|
|
Total assets |
$ |
5,342,385 |
|
|
$ |
5,524,333 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
|
|
|
Accounts payable |
$ |
499,149 |
|
|
$ |
522,536 |
|
Accrued
liabilities |
646,879 |
|
|
750,986 |
|
Accrued income
taxes |
77,244 |
|
|
3,207 |
|
Short-term debt |
487,487 |
|
|
632,471 |
|
Current portion of
long-term debt |
158 |
|
|
243 |
|
|
|
|
|
Total current
liabilities |
1,710,917 |
|
|
1,909,443 |
|
|
|
|
|
Long-term debt |
2,350,941 |
|
|
2,347,455 |
|
Other long-term
liabilities |
399,575 |
|
|
400,161 |
|
Deferred income
taxes |
35,499 |
|
|
39,587 |
|
|
|
|
|
Total liabilities |
4,496,932 |
|
|
4,696,646 |
|
|
|
|
|
Total stockholders'
equity |
845,453 |
|
|
827,687 |
|
|
|
|
|
Total liabilities and
stockholders' equity |
$ |
5,342,385 |
|
|
$ |
5,524,333 |
|
FINANCIAL CONTACT:
Mark Pogharian
717-534-7556
MEDIA CONTACT:
Jennifer Sniderman
717-534-6275
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