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Hershey Annual Report, Year Ended Dec 31, 2003

Filing Date
Filed March 12, 2004
Period End
December 31, 2003
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 12, 2004. Cited figures are marked; the original filing is the authoritative source.

Hershey Foods Corporation, now The Hershey Company, reported a strong 2003 in its 10-K for the fiscal year ended December 31, 2003.

Net sales were $4,172.6 milliona, up about 1.3% from $4,120.3 million in 2002, driven by a January 2003 selling price increase and new product introductions. Gross margin rose to 39.0% from 37.8%, and net income increased to $457.6 million from $403.6 million. Diluted earnings per share were $3.46, up 18% from $2.93, and income before the cumulative effect of an accounting change was $3.52 per diluted share, 20% higher than in 2002.

Management cited share repurchases as a contributor to per-share growth. The company also described several items affecting comparability. A business realignment program in 2003 produced a net charge of about $17.2 millionb, offset by an $8.3 million pre-tax gain on the sale of gum brands to Farley's & Sathers for $20.0 million.

Adoption of FIN 46 led to consolidation of three special-purpose trusts tied to warehouse leases, adding $107.7 millionc to property, plant and equipment and $115.5 million to long-term debt, with a $7.4 million after-tax cumulative effect charge. The filing states that cocoa costs will increase substantially in 2004, and management expects 2004 results to fall within its long-term targets of 3-4% revenue growth and 9-11% diluted EPS growth despite higher raw material costs. Financial condition remained solid.

Operating cash flow was $592.9 milliond in 2003, and the company repurchased $329.4 million of common stock. Total assets were $3,582.5 million and long-term debt was $968.5 million.

Sales to McLane Company, formerly a Wal-Mart subsidiary, were about 22% of total sales. The Milton Hershey School Trust controlled about 78.3% of total voting power.

02—Key points

Key Highlights

  1. Net sales of $4.17 billion, up about 1.3% from $4.12 billion in 2002, reflecting a January 2003 price increase and new products.
  2. Gross margin improved to 39.0% from 37.8% in 2002 and 35.5% in 2001.
  3. Net income rose to $457.6 million from $403.6 million; diluted EPS was $3.46, up 18% from $2.93.
  4. Income before cumulative effect of accounting change was $3.52 per diluted share, 20% higher than 2002.
  5. Operating cash flow was $592.9 million, with $329.4 million used for share repurchases.
  6. Cocoa costs are expected to increase substantially in 2004; the company targets 3-4% revenue growth and 9-11% EPS growth in 2004 and beyond.
  7. Consolidation of three special-purpose trusts under FIN 46 added $107.7 million to property, plant and equipment and $115.5 million to long-term debt.

03—Questions

Frequently Asked Questions

  1. How did Hershey perform financially in 2003?

    Net sales were $4,172.6 million, up about 1.3%. Net income was $457.6 million, or $3.46 per diluted share, compared with $403.6 million, or $2.93, in 2002. Gross margin expanded to 39.0% from 37.8%, reflecting the price increase, improved sales mix and lower supply chain costs.

  2. What one-time items affected 2003 results?

    A business realignment program produced a net charge of about $17.2 million, or $.07 per diluted share. This was partly offset by an $8.3 million pre-tax gain on the September 2003 sale of gum brands for $20.0 million. A $7.4 million after-tax cumulative effect charge arose from consolidating three lease-related special-purpose trusts.

  3. What does the company expect for 2004?

    Management expects its long-term goals of 3-4% revenue growth and 9-11% EPS growth to be achieved in 2004, despite a substantial increase in raw material costs. Gross margin is expected to improve but at the lower end of the long-term target, and cocoa costs will increase substantially.

  4. How concentrated is the company's customer base and ownership?

    Sales to McLane Company, formerly a Wal-Mart subsidiary, were approximately 22% of total 2003 sales. The Milton Hershey School Trust was entitled to cast about 78.3% of the total votes of both common stock classes as of December 31, 2003.

  5. How much did the company spend returning cash to shareholders?

    Cash dividends paid on common and Class B stock totaled $184.7 million in 2003, and the company repurchased $329.4 million of common stock. The quarterly dividend declared in February 2004 was $.395 per share of Common Stock.

04—Continue

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