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Hershey Announces Fourth Quarter And Full-Year 2012 Results; Updates Outlook For 2013

Note: In this release, Hershey references income measures that are not in accordance with U.S. generally accepted accounting principles (GAAP) because they exclude business realignment and impairment charges, business acquisition closing and integration costs, certain gains and losses, and non-service-related pension costs. These non-GAAP financial measures are used in evaluating results of operations for internal purposes. These non-GAAP measures 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 is provided below of earnings per share-diluted in accordance with GAAP as presented in the Consolidated Statements of Income to non-GAAP financial measures, which exclude business realignment and impairment charges as well as non-service-related pension expense in 2012 and 2011, closing and integration costs primarily related to the Brookside acquisition in 2012 and a gain on the sale of trademark licensing rights recorded in the third quarter of 2011.

 
Fourth Quarter Ended

 

December 31, 2012   December 31, 2011
  Percent   Percent
of Net of Net
In thousands except per share amounts Dollars   Sales Dollars   Sales
 
Gross Profit/Gross Margin $ 755,208 43.1 % $ 631,206 40.3 %
GSCT charges included in cost of sales 5,816
Project Next Century (credits)/charges included in cost of sales (1,658 ) 15,934
NSRPE included in cost of sales 1,680
Acquisition (credits) included in cost of sales   (57 )    
Adjusted non-GAAP Gross Profit/Gross Margin $ 755,173   43.1 % $ 652,956   41.7 %
 
EBIT/EBIT Margin $ 252,617 14.4 % $ 229,009 14.6 %
(Credits)/charges included in cost of sales (35 ) 21,750
Project Next Century charges included in SM&A 308 941
NSRPE included in SM&A 5,873 993
Acquisition costs included in SM&A 1,400
Business Realignment & Impairment charges, net   16,734     5,041  
Adjusted non-GAAP EBIT/EBIT Margin $ 276,897   15.8 % $ 257,734   16.4 %
 
Net Income/Net Margin $ 149,879 8.6 % $ 142,133 9.1 %
(Credits)/charges included in cost of sales (35 ) 21,750
Charges included in SM&A 7,581 1,934
Business Realignment & Impairment charges, net 16,734 5,041
Tax impact of net charges/(credits)   (4,973 )   (10,533 )
Adjusted non-GAAP Net Income/Net Margin $ 169,186   9.7 % $ 160,325   10.2 %
 
EPS - Diluted $ 0.66 $ 0.62
Charges included in cost of sales 0.06
Charges included in SM&A 0.02
Business Realignment & Impairment charges, net   0.06     0.02  
Adjusted non-GAAP EPS - Diluted $ 0.74   $ 0.70  
 
Twelve Months Ended
December 31, 2012   December 31, 2011
  Percent   Percent
of Net of Net
In thousands except per share amounts Dollars   Sales Dollars   Sales
 
Gross Profit/Gross Margin $ 2,859,882 43.0 % $ 2,531,892 41.6 %
GSCT charges included in cost of sales 5,816
Project Next Century charges included in cost of sales 36,383 39,280
NSRPE included in cost of sales 8,607
Acquisition costs included in cost of sales   4,080      
Adjusted non-GAAP Gross Profit/Gross Margin $ 2,908,952   43.8 % $ 2,576,988   42.4 %
 
EBIT/EBIT Margin $ 1,111,148 16.7 % $ 1,055,028 17.4 %
Charges included in cost of sales 49,070 45,096
Project Next Century charges included in SM&A 2,446 4,961
NSRPE included in SM&A 11,965 2,849
Gain on sale of trademark rights included in SM&A (17,034 )
Acquisition costs included in SM&A 9,294

Business Realignment & Impairment charges/(credits), net

  44,938     (886 )
Adjusted non-GAAP EBIT/EBIT Margin $ 1,228,861   18.5 % $ 1,090,014   17.9 %
 
Net Income/Net Margin $ 660,931 9.9 % $ 628,962 10.3 %
Charges included in cost of sales 49,070 45,096
Charges/(credits) included in SM&A 23,705 (9,224 )

Business Realignment & Impairment charges/(credits), net

44,938 (886 )
Tax impact of net charges/(credits)   (38,604 )   (13,242 )
Adjusted non-GAAP Net Income/Net Margin $ 740,040   11.1 % $ 650,706   10.7 %
 
EPS - Diluted $ 2.89 $ 2.74
Charges included in cost of sales 0.14 0.12
Charges/(credits) included in SM&A 0.07 (0.03 )
Business Realignment & Impairment charges, net   0.14      
Adjusted non-GAAP EPS - Diluted $ 3.24   $ 2.83  
 

In 2011, the Company recorded GAAP charges of $43.4 million, or $0.11 per share-diluted, attributable to Project Next Century and $5.8 million, or $0.02 per share-diluted, related to the Global Supply Chain Transformation (GSCT) program and $2.8 million, or $0.01 per share-diluted, of non-service-related pension expense (NSRPE). Additionally, in the third quarter of 2011, the Company recorded a pre-tax gain on the sale of certain trademark licensing rights of $17.0 million, or $0.05 per share-diluted. In 2012, the Company recorded GAAP charges of $76.3 million, or $0.22 per share-diluted, attributable to the Project Next Century program and $20.6 million, or $0.06 per share-diluted, of NSRPE. Additionally, 2012 results were impacted by acquisition and integration costs related to the Brookside acquisition of $13.4 million, or $0.04 per share-diluted and the aforementioned non-cash goodwill impairment of $7.5 million, or $0.03 per share-diluted. In 2013 the Company expects to record total GAAP charges of about $10 million to $15 million, or $0.03 to $0.05 per share-diluted, attributable to Project Next Century and $13.2 million, or $0.04 per share-diluted, of non-service related pension expenses (NSRPE).

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