HERSHEY CO — Interim / Quarterly Report 2001

Nov 7, 2001

10-Q 1 thirdqtr01_10q.htm FORM 10Q - QUARTER ENDED SEPTEMBER 30, 2001 coverpage_10q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __to_

Commission file number: 1-183

HERSHEY FOODS CORPORATION 100 Crystal A Drive Hershey, PA 17033 Registrant's telephone number: 717-534-6799

State of Incorporation Delaware IRS Employer Identification No. 23-0691590

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $1 par value - 105,182,056 shares, as of October 31, 2001. Class B Common Stock, $1 par value - 30,433,808 shares, as of October 31, 2001

Exhibit Index - Page 18

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PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

HERSHEY FOODS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share amounts) For the Three Months Ended -------------------------- September 30, October 1, 2001 2000 --------- ------- Net Sales $ 1,304,184 $ 1,196,755 ------------ ------------ Costs and Expenses: Cost of sales 752,575 696,431 Selling, marketing and administrative 342,622 303,688 Gain on sale of business (19,237) -- ------------ ------------ Total costs and expenses 1,075,960 1,000,119 ------------ ------------ Income before Interest and Income Taxes 228,224 196,636 Interest expense, net 18,147 21,152 ------------ ------------ Income before Income Taxes 210,077 175,484 Provision for income taxes 89,315 68,079 ------------ ------------ Net Income $ 120,762 $ 107,405 ============ ============ Net Income Per Share-Basic $ .89 $ .78 ============ ============ Net Income Per Share-Diluted $ .88 $ .78 ============ ============ Average Shares Outstanding-Basic 135,869 136,836 ============ ============ Average Shares Outstanding-Diluted 137,213 137,690 ============ ============ Cash Dividends Paid per Share: Common Stock $ .3025 $ .2800 ============ ============ Class B Common Stock $ .2725 $ .2525 ============ ============ The accompanying notes are an integral part of these statements.

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HERSHEY FOODS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share amounts) For the Nine Months Ended ------------------------- September 30, October 1, 2001 2000 ------- ------- Net Sales $ 3,283,324 $ 3,026,074 ------------ ------------ Costs and Expenses: Cost of sales 1,906,719 1,803,598 Selling, marketing and administrative 923,911 808,210 Gain on sale of business (19,237) -- ------------ ------------ Total costs and expenses 2,811,393 2,611,808 ------------ ------------ Income before Interest and Income Taxes 471,931 414,266 Interest expense, net 52,371 56,525 ------------ ------------ Income before Income Taxes 419,560 357,741 Provision for income taxes 167,453 139,160 ------------ ------------ Net Income $ 252,107 $ 218,581 ============ ============ Net Income Per Share-Basic $ 1.85 $ 1.59 ============ ============ Net Income Per Share-Diluted $ 1.83 $ 1.58 ============ ============ Average Shares Outstanding-Basic 136,343 137,568 ============ ============ Average Shares Outstanding-Diluted 137,768 138,480 ============ ============ Cash Dividends Paid per Share: Common Stock $ .8625 $ .8000 ============ ============ Class B Common Stock $ .7775 $ .7225 ============ ============ The accompanying notes are an integral part of these statements.

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HERSHEY FOODS CORPORATION CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2001 AND DECEMBER 31, 2000 (in thousands of dollars) ASSETS 2001 2000 ------- ------- Current Assets: Cash and cash equivalents $ 49,168 $ 31,969 Accounts receivable - trade 548,409 379,680 Inventories 725,703 605,173 Deferred income taxes 68,950 76,136 Prepaid expenses and other 75,985 202,390 ------------- -------------- Total current assets 1,468,215 1,295,348 ------------- -------------- Property, Plant and Equipment, at cost 2,858,974 2,764,845 Less-accumulated depreciation and amortization (1,282,028) (1,179,457) ------------- -------------- Net property, plant and equipment 1,576,946 1,585,388 ------------- -------------- Intangibles Resulting from Business Acquisitions, net 438,875 474,448 Other Assets 127,303 92,580 ------------- -------------- Total assets $ 3,611,339 $ 3,447,764 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 162,998 $ 149,232 Accrued liabilities 365,238 358,067 Accrued income taxes 94,022 1,479 Short-term debt 237,203 257,594 Current portion of long-term debt 1,095 529 ------------- -------------- Total current liabilities 860,556 766,901 Long-term Debt 876,981 877,654 Other Long-term Liabilities 332,602 327,674 Deferred Income Taxes 299,590 300,499 ------------- -------------- Total liabilities 2,369,729 2,272,728 ------------- -------------- Stockholders' Equity: Preferred Stock, shares issued: none in 2001 and 2000 --- --- Common Stock, shares issued: 149,515,564 in 2001 and 149,509,014 in 2000 149,515 149,508 Class B Common Stock, shares issued: 30,435,308 in 2001 and 30,441,858 in 2000 30,435 30,442 Additional paid-in capital 5,759 13,124 Unearned ESOP compensation (16,766) (19,161) Retained earnings 2,840,437 2,702,927 Treasury-Common Stock shares at cost: 44,420,608 in 2001 and 43,669,284 in 2000 (1,693,706) (1,645,088) Accumulated other comprehensive loss (74,064) (56,716) ------------- -------------- Total stockholders' equity 1,241,610 1,175,036 ------------- -------------- Total liabilities and stockholders' equity $ 3,611,339 $ 3,447,764 ============= ============== The accompanying notes are an integral part of these balance sheets.

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HERSHEY FOODS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) For the Nine Months Ended ------------------------- September 30, October 1, 2001 2000 ------- ------- Cash Flows Provided from (Used by) Operating Activities Net Income $ 252,107 $ 218,581 Adjustments to Reconcile Net Income to Net Cash Provided from Operations: Depreciation and amortization 141,699 131,122 Deferred income taxes 10,415 (21,883) Gain on sale of business, net of tax of $18,134 (1,103) -- Changes in assets and liabilities, net of effects from business acquisition and divestiture: Accounts receivable - trade (168,729) (212,502) Inventories (127,659) (47,653) Accounts payable 13,766 (881) Other assets and liabilities 170,206 (59,228) ------------ ------------ Net Cash Flows Provided from Operating Activities 290,702 7,556 ------------ ------------ Cash Flows Provided from (Used by) Investing Activities Capital additions (114,608) (100,627) Capitalized software additions (6,003) (4,204) Business acquisition (17,143) -- Proceeds from divestiture 59,900 -- Other, net 9,704 (2,402) ------------ ------------ Net Cash Flows (Used by) Investing Activities (68,150) (107,233) ------------ ------------ Cash Flows Provided from (Used by) Financing Activities Net (decrease) increase in short-term debt (20,391) 248,846 Long-term borrowings 354 144 Repayment of long-term debt (578) (2,517) Cash dividends paid (114,597) (107,514) Exercise of stock options 21,509 5,579 Incentive plan transactions (51,328) (18,698) Repurchase of Common Stock (40,322) (99,931) ------------ ------------ Net Cash Flows (Used by) Provided from Financing Activities (205,353) 25,909 ------------ ------------ Increase (Decrease) in Cash and Cash Equivalents 17,199 (73,768) Cash and Cash Equivalents, beginning of period 31,969 118,078 ------------ ------------ Cash and Cash Equivalents, end of period $ 49,168 $ 44,310 ============ ============ Interest Paid $ 63,105 $ 69,278 ============ ============ Income Taxes Paid $ 53,818 $ 209,456 ============ ============ The accompanying notes are an integral part of these statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended ------------------------- September 30, 2001 October 1, 2000 ------------------ ---------------- (in thousands of dollars) Interest expense $ 55,666 $ 59,973 Interest income (1,862) (3,428) Capitalized interest (1,433) (20) --------- -------- Interest expense, net $ 52,371 $ 56,525 ========= ========