How did the 1994 restructuring charge affect earnings?

The company recorded a pre-tax restructuring charge of $106.1 million in the fourth quarter of 1994, resulting in an after-tax charge of $80.2 million, or $.92 per share. The charge included $34.3 million of severance for about 500 positions, $39.1 million of anticipated losses on business disposals, $17.5 million for product line discontinuations, and $15.2 million for consolidating operations. Approximately 60% of the charge was non-cash.

What drove the change in gross margin?

Cost of sales increased to 58.2% of net sales in 1994 from 57.2% in 1993. The filing attributes the decline mainly to higher costs for certain major raw materials, particularly semolina, higher depreciation, and lower margins in international businesses, partially offset by manufacturing efficiency improvements and pasta price increases.

How strong is the company's financial position and liquidity?

At December 31, 1994, the capitalization ratio was 25% (versus 27% in 1993) and the current ratio was 1.2:1. Cash provided from operating activities was $337,306 thousand. Short-term borrowings consisted of commercial paper and bank loans, with $316.8 million outstanding at a weighted average rate of 6.0%. A $200 million share repurchase program was in place, with 3,451,139 shares acquired to date.

What are the company's capital spending plans and dividend policy?

The company anticipates capital expenditures of $125 million to $175 million per year over the next several years for facility modernization and capacity expansion, versus $138.7 million in 1994. On February 7, 1995, the board declared a quarterly Common Stock dividend of $.325 per share, the 261st consecutive quarterly dividend.

Who controls the company's voting power?

Common Stock carries one vote per share and Class B Common Stock carries ten votes per share. The Hershey Trust Company, as trustee for Milton Hershey School and other holders, was entitled to cast approximately 77% of the total votes of both classes as of December 31, 1994. The Common Stock, voting separately, elects one-sixth of the Board of Directors.

HSY 10-K FY1994 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 10, 1995. Cited figures are marked; the original filing is the authoritative source.

Hershey Foods Corporation, a Delaware company engaged in the manufacture, distribution and sale of consumer food products, reported net sales of $3,606,271 thousand^a ($3.61 billion) for 1994, up from $3,488,249 thousand in 1993.

Net income fell to $184,219 thousand^b from $193,325 thousand, reflects a pre-tax restructuring charge of $106.1 million recorded in the fourth quarter of 1994 that reduced net income by $80.2 million, or $.92 per share. Excluding that charge, the filing's own eleven-year summary shows 1994 income per share from continuing operations of $3.04, versus $2.12 reported. Net income per share was $2.12 in 1994 compared with $2.15 in 1993, which included a $1.16 per share charge for accounting changes and a $.45 per share gain on the sale of the Freia investment.

The balance sheet remained solid: total assets were $2,890,981 thousand^c, stockholders' equity was $1,441,100 thousand, and the company's current ratio was 1.2:1 at year-end, with a capitalization ratio of 25%. Cash flow from operations was $337,306 thousand, and capital additions were $138,711 thousand. The company expects capital expenditures of $125 million to $175 million per year and anticipates restructuring savings of approximately $18.0 million annually starting in 1996.

Gross margin deteriorated, with cost of sales rising to 58.2%^d of net sales in 1994 from 57.2% in 1993, driven mainly by higher semolina and other raw material costs. The Hershey Trust controls roughly 77% of the total votes, and the filing notes that Class B stock carries ten votes per share. The filing describes a broad portfolio of chocolate, confectionery, grocery and pasta brands, with international operations in Canada, Mexico, Germany, Italy and the Netherlands/Belgium.

Wal-Mart Stores, Inc. accounted for approximately 10% of 1994 net sales. The company reports no material pending legal proceedings, and cocoa and sugar exposure is managed through forward purchasing and futures contracts.

02—Key points

Key Highlights

Net sales of $3,606,271 thousand in 1994, up from $3,488,249 thousand in 1993.
Pre-tax restructuring charge of $106.1 million in Q4 1994 reduced net income by $80.2 million, or $.92 per share; restructuring is expected to be completed in 1995 with annual savings of about $18.0 million starting in 1996.
Net income of $184,219 thousand in 1994 versus $193,325 thousand in 1993, which included a $103.9 million accounting change charge and an $80.6 million pre-tax gain on the Freia investment sale.
Cost of sales rose to 58.2% of net sales in 1994 from 57.2% in 1993, mainly due to higher semolina and other raw material costs.
Total assets of $2,890,981 thousand and stockholders' equity of $1,441,100 thousand at December 31, 1994; current ratio of 1.2:1.
Cash dividends paid on Common and Class B stock totaled $107.0 million in 1994; the annual Common Stock dividend rate is $1.30 per share, an 8% increase, the 20th consecutive year of increases.
Wal-Mart Stores, Inc. accounted for approximately 10% of 1994 net sales, and the Hershey Trust holds about 77% of total voting power.

03—Questions

Frequently Asked Questions

How did the 1994 restructuring charge affect earnings?
The company recorded a pre-tax restructuring charge of $106.1 million in the fourth quarter of 1994, resulting in an after-tax charge of $80.2 million, or $.92 per share. The charge included $34.3 million of severance for about 500 positions, $39.1 million of anticipated losses on business disposals, $17.5 million for product line discontinuations, and $15.2 million for consolidating operations. Approximately 60% of the charge was non-cash.
What drove the change in gross margin?
Cost of sales increased to 58.2% of net sales in 1994 from 57.2% in 1993. The filing attributes the decline mainly to higher costs for certain major raw materials, particularly semolina, higher depreciation, and lower margins in international businesses, partially offset by manufacturing efficiency improvements and pasta price increases.
How strong is the company's financial position and liquidity?
At December 31, 1994, the capitalization ratio was 25% (versus 27% in 1993) and the current ratio was 1.2:1. Cash provided from operating activities was $337,306 thousand. Short-term borrowings consisted of commercial paper and bank loans, with $316.8 million outstanding at a weighted average rate of 6.0%. A $200 million share repurchase program was in place, with 3,451,139 shares acquired to date.
What are the company's capital spending plans and dividend policy?
The company anticipates capital expenditures of $125 million to $175 million per year over the next several years for facility modernization and capacity expansion, versus $138.7 million in 1994. On February 7, 1995, the board declared a quarterly Common Stock dividend of $.325 per share, the 261st consecutive quarterly dividend.
Who controls the company's voting power?
Common Stock carries one vote per share and Class B Common Stock carries ten votes per share. The Hershey Trust Company, as trustee for Milton Hershey School and other holders, was entitled to cast approximately 77% of the total votes of both classes as of December 31, 1994. The Common Stock, voting separately, elects one-sixth of the Board of Directors.

04—Continue

← View all 10-K filings