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Hershey Announces Third Quarter Results; Updates Outlook For 2012

“Gross margin increased in the quarter, in line with our estimates, as net price realization, supply chain efficiencies and productivity gains more than offset higher input costs. Selling, marketing and administrative (SM&A) expenses, excluding advertising, increased 12 percent in the third quarter, less than our estimate of a 15 to 20 percent increase, and is up about 9 percent year-to-date. We would expect another meaningful increase, in the fourth quarter, resulting in a low double-digit percentage increase for the full year, in line with our initial estimates. These investments in go-to-market capabilities in both the U.S. and international markets will benefit the Company over the near and long term. In both the third quarter and year-to-date periods advertising is up about 12 percent versus 2011. Additionally, as communicated last quarter, the third quarter tax rate was greater than the year ago period due to the timing of certain discrete tax items. We continue to expect the full-year tax rate to be about 35 percent.

“We're growing sales and profitability despite macroeconomic challenges and have delivered on our financial commitments. The Company continues to generate substantial free cash flow and has a strong balance sheet. Therefore, we are pleased to announce an increase to our quarterly dividend. This action reflects our confidence in Hershey's marketplace position and long-term growth potential.

“I'm very pleased with our quarterly and year-to-date results. We're positioned to carry our marketplace momentum into the fourth quarter and gain market share for the fourth consecutive year. Organic volume trends should continue to improve into the fourth quarter and our Halloween and Holiday seasonal businesses are off to a good start. Additionally, the Brookside acquisition will be about a 1.75 to 2.0 point benefit in 2012. Therefore, we've narrowed our full-year net sales growth outlook and expect it to increase 8 to 9 percent, including the impact of foreign currency exchange rates.

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