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Hershey Annual Report, Year Ended Dec 31, 1996

Filing Date
Filed March 17, 1997
Period End
December 31, 1996
Security
HSY
In the record · 2016–202610-K1110-Q358-K142

HSY filed 11 annual reports (10-K), 35 quarterly reports (10-Q) and 142 current reports (8-K) between 2016 and 2026.

  1. Restructuring8-K · Feb ’17Feb ’17
  2. Material agreement8-K · Nov ’18Nov ’18
  3. Leadership change8-K · Feb ’21Feb ’21
  4. Material agreement8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed March 17, 1997. Cited figures are marked; the original filing is the authoritative source.

Hershey Foods Corporation's 1996 annual report reports net sales of $3,989,308 thousanda, up from $3,690,667 thousand in 1995, and net income of $273,186 thousand, down from $281,919 thousand in 1995.

The filing attributes the 1996 result to a $35.4 millionb after-tax loss on the sale of the Gubor and Sperlari businesses, which the company says was not offset by a tax benefit. Excluding that loss and the 1995 restructuring effects, the company states income increased $28.6 million, or 10%. Net income per share was $1.77 in 1996 versus $1.70 in 1995, and the company describes its financial position as strong, with a capitalization ratio of 46% at year-end 1996 versus 42% in 1995.

The major growth driver cited was the December 1996 acquisition of Huhtamaki's Leaf North America confectionery operations for $437.2 millionc, plus $17.0 million of assumed debt. Total assets rose to $3,184,796 thousand from $2,830,623 thousand, and long-term debt increased to $655,289 thousand from $357,034 thousand, largely reflecting commercial paper borrowings used to fund the acquisition. The company also issued $150 million of 6.95% Notes due 2007 in March 1997 to repay part of those borrowings.

Management expects capital expenditures of $175 million to $225 milliond per year over the next several years. The company's principal exposure is to commodity costs, particularly cocoa, sugar, milk, peanuts, almonds and durum semolina, which it manages through forward purchasing and futures contracts.

Management reported higher 1996 raw material costs, mainly cocoa, milk, almonds and semolina, which were offset in part by price increases. Wal-Mart Stores accounted for approximately 12% of 1996 net sales, and the Milton Hershey School Trust held about 77% of the total votes of both common stock classes as of December 31, 1996.

02—Key points

Key Highlights

  1. Net sales were $3,989,308 thousand in 1996, compared with $3,690,667 thousand in 1995 and $3,606,271 thousand in 1994.
  2. Net income was $273,186 thousand, or $1.77 per share, versus $281,919 thousand, or $1.70 per share, in 1995; 1996 included a $35.4 million after-tax loss on the sale of Gubor and Sperlari.
  3. Acquired Huhtamaki's Leaf North America confectionery operations in December 1996 for $437.2 million, plus $17.0 million of assumed debt.
  4. Total assets were $3,184,796 thousand at December 31, 1996, up from $2,830,623 thousand, and long-term debt rose to $655,289 thousand from $357,034 thousand.
  5. Cash dividends paid on common stock were $.76 per share in 1996 versus $.685 in 1995, and the company declared its 269th consecutive quarterly common dividend in February 1997.
  6. Operating return on average stockholders' equity was 27.5% in 1996, and the capitalization ratio was 46% versus 42% a year earlier.
  7. Wal-Mart Stores accounted for approximately 12% of 1996 total net sales, and the company reported 14,000 full-time and 1,300 part-time employees.

03—Questions

Frequently Asked Questions

  1. What drove the change in net income in 1996?

    Net income declined to $273,186 thousand from $281,919 thousand. The filing attributes this mainly to a $35.4 million after-tax loss on the sale of the Gubor and Sperlari businesses, for which no tax benefit was recorded. Excluding that loss and the 1995 restructuring effects, income increased $28.6 million, or 10%.

  2. How was the Leaf North America acquisition financed?

    The company acquired Leaf for $437.2 million plus $17.0 million of assumed debt. The filing states that commercial paper borrowings were used, and that long-term debt increased by $298.3 million, partly as a result. In March 1997 the company issued $150 million of 6.95% Notes due 2007 and used the proceeds to repay part of the commercial paper borrowings tied to Leaf.

  3. What raw material costs does the company face?

    The most significant raw materials are cocoa, sugar, milk, peanuts, flour and almonds, and durum semolina is the major input for pasta. The company says it manages price risk through forward purchasing, generally for 3 to 24 months, and through futures and options contracts for cocoa, sugar and corn sweeteners. Higher 1996 costs for cocoa beans, milk, almonds and durum semolina reduced gross margin, which was partly offset by price increases.

  4. What are the company's capital spending plans?

    Management anticipates capital expenditures of $175 million to $225 million per year during the next several years. These are expected to support continued modernization of existing facilities and capacity expansion for new products and line extensions. Capital additions were $159,433 thousand in 1996.

  5. Is the company concentrated in any customer or shareholder?

    Sales to Wal-Mart Stores, Inc. and its subsidiaries were approximately 12% of total net sales in 1996, and about 11% in 1995. The Milton Hershey School Trust held about 77% of the total votes of both classes of common stock as of December 31, 1996, and must approve any issuance of common stock or other action that would end its voting control.

04—Continue

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