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Hershey Foods Corporation Bitter Times in a Sweet Place

VIEWS: 418 PAGES: 13

									              This spreadsheet supports STUDENT analysis of the
              case, "Hershey Foods Corporation:
              Bitter Times in an Sweet Place" (Case 44)




Copyright (C) 2008, by the University of Virginia Darden School Foundation.
Boards of Directors for Hershey Trust and Hershey Foods Corporation (1990)
   1990 Hershey Trust Board of Directors                   1990 Hershey Foods Board of Directors
               Chairman of the Board of Hershey
Kenneth V.                                            Richard. A.
               Trust Co. & Milton Hershey School
Hatt                                                  Zimmerman
               Board of Managers
Richard. A.    Chairman and CEO of Hershey Foods      Kenneth V.
Zimmerman      Corporation                            Hatt
Kenneth L      President and Chief Operating Oficer   Kenneth L.
Wolfe          Hershey Foods Corporation              Wolfe
               President of the Milton Hershey
William R.                                            Howard O.
               School and board of directors of The
Fisher                                                Beaver, Jr.
               Hershey Bank
               Managing partner in the Harrisburg
               law firm of McNees, Wallace &          John F.
Rod J Pera
               Nurick, counsel to all Hershey         Burlingame
               entities.
John F.        Executive vice president of the        Thomas C.
Rineman        Pennsylvania Medical Society           Graham
               President, CEO and chairman of the
J. Bruce                                              John. C.
               board of Hershey Entertainment &
McKinney                                              Jamison
               Resort Co. (HERCO)
               Chairman of H. B. Alexander
               Construction Company. Director of
William H                                             Dr. Sybil C.
               family business programs at Snider
Alexander                                             Mobley
               Entrepreneurial Center, Wharton
               School, University of Pennsylvania.

Ronald D.                                             Francine I.
               President of Hershey Trust Co
Glosser                                               Neff

C. McCollister Dean, Penn State Milton S. Hershey     John. M.
Evarts         Medical College                        Pietruski
Juliet C                                              H. Robert
               President and CEO, Ohio United Way
Rowland                                               Sharbaugh
                                                      Joseph P.
                                                      Viviano
Hershey Foods Corporation (1990)
 1990 Hershey Foods Board of Directors
         Chairman and CEO Hershey Foods
         Corporation
         Chairman of the Board Hershey Trust
         Company
         President and Chief Operating Officer
         Hershey Foods Corporation
         Retired Chairman of the Board Carpenter
         Technology Corporation Reading, PA

         Retired Vice Chairman of the Board and
         Executive Officer GE Company
         Stamford, Connecticut
         President USS a division of USX
         Corporation Pittsburgh, PA
         Dean of the Graduate School of Business
         Administration College of William and
         Mary, Williamsburg, VA
         Dean of the School of Business and
         Industry Florida Agricultural and
         Mechanical University Tallahassee,
         Florida

         Vice President and Director NETS Inc.
         privately held investment management
         company Albuquerque, NM
         Retired Chairman of the Board and CEO
         Sterling Drug Inc. New York, NY
         Retired Chairman and CEO Sun
         Company, Radnor, PA
         President Hershey Chocolate USA
  Boards of Directors for Hershey Trust and Hershey Foods Corporation (2001)

   2001 Hershey Trust Board of Directors                    2001 Hershey Foods Board of Directors
                   President and CEO, Hershey Trust      Richard H.
Robert C. Vowler
                   Company                               Lenny
J. Robert Hillier, Chairman and Founder of Hillier       J. Robert
FAIA               Group (architects)                    Hillier, FAIA
A. John Gabig,
                   Chairman of MHS Board of Managers     Jon A. Bosia
Esq.
William L.         President and CEO of Milton Hershey   Robert H.
Lepley             School                                Campbell
                   Chairman of H. B. Alexander
                   Construction Company. Director of
William H.                                               Gary P.
                   family business programs at Snider
Alexander                                                Coughlan
                   Entrepreneurial Center, Wharton
                   School, University of Pennsylvania.
Lucy D.            Former Policy adviser, General
                                                         Bonnie Hill
Hackney, Esq.      Services Admin
Wendy D.                                                 John C.
                   Public Education Network
Puriefoy                                                 Jamison
                                                         Mackey J.
W. Don Cornwell Granite Broadcasting Co.
                                                         McDonald
A. Morris                                                John M.
                   President, Williams & Company
Williams, Jr.                                            Pietruski
Michael W.         Institutional Research & Planning,
Matier             Cornell U.
Rev. John S.
                   St. James the Less Episcopal Church
McDowell, Jr.
Anthony J.         Superintendent, Cumberland Valley
Colistra           School Dist.
Robert F.          Managing director, DLJ Real Estate
Cavanaugh          Partners
Joan S. Lipsitz,
                   Independent education consultant
Ph.D.
Hilary C.
                   Co-founder, Jobs for the Future
Pennington
Juliet C. Rowland President and CEO, Ohio United Way
Hershey Foods Corporation (2001)

2001 Hershey Foods Board of Directors
         Chairman, President and CEO, Hershey
         Foods Corporation
         Chairman and Founder, The Hillier
         Group (architects)
         Chairman and CEO, Lincoln National
         Corporation
         Chairman and CEO (ret.), Sunoco Inc.


         Sr. VP Finance and CFO (ret.), Abbott
         Laboratories Inc.


         President and CEO, The Times Mirror
         Foundation
         Chairman, Mallardee Associates
         Chairman, President and CEO, VF
         Corporation
         Chairman, Texas Biotechnology
         Corporation
                               Bidding Companies’ Financial Data


                                                                      Cadbury
                                 Hershey   Wrigley       Nestle      Schwepes
 Beta                              0.55      0.70         0.70           0.60
 Credit rating                     A+        N/A          AAA           BBB
 Stock price 9/17/2002             73.8      49.5         51.9           28.5
 Shares outstanding (millions)    134.2     225.0        1550.6         502.5
 Book value of debt ($ millions) 884.9        0.0       19500.0        3543.0




US Treasuries
Historical Yield Curve

                                            8/19/2002    9/17/2002
                              5 year        3.38%        2.90%
                              10 year       4.28%        3.82%
                              30 year       5.05%        4.73%




Corporate Bonds1

                              Hershey
                               Maturity      Price       Yield
                               8/15/2012    117.71       4.691
                               2/15/2021    137.07       5.557
                               2/15/2027    119.37       5.730

                              Wrigley
                              No debt

                              Nestle
                               Maturity      Price       Yield
                               6/15/2025    125.39       5.835

                              Cadbury Scweppes*
                               Maturity    Price         Yield
                              12/15/2005 100.569         4.306
1
    Cadbury Schweppes bonds in British Sterling. All other bonds denominated in US dollars.
                               Hershey Foods Corp. Historical Financial Statements

Income Statement
                                                   ($ millions)

                                            1996          1997          1998          1999          2000          2001
Sales                                     $ 3,989.3     $ 4,302.2     $ 4,435.6     $ 3,970.9     $ 4,221.0     $ 4,137.2
Cost of sales                               2,302.1       2,488.9       2,625.1       2,354.7       2,471.2       2,668.5
Gross profit                                1,687.2       1,813.3       1,810.6       1,616.2       1,749.8       1,468.7
Gross margin                                   42.29%        42.15%        40.82%        40.70%        41.46%        35.50%


Selling, marketing, and administrative        1,124.1       1,183.1       1,167.8       1,057.8       1,127.2       1,056.1
Operating income                                563.1         630.2         642.8         558.4         622.7         412.6
Operating margin                               14.12%        14.65%        14.49%        14.06%        14.75%         9.97%


Gain (loss) on sale of business                (35.4)          -             -           243.8           -             -
Earnings before interest and tax               527.8         630.2         642.8         802.1         622.7         412.6

Interest expense                                48.0          76.3          85.7          74.3          76.0          69.1
Pretax income                                  479.7         554.0         557.1         727.9         546.6         343.5

Income taxes                                206.6            217.7         216.1         267.6         212.1         136.4
Net income                                $ 273.2       $    336.3    $    341.0    $    460.3    $    334.5    $    207.1




Balance Sheet


                                            1996          1997          1998          1999          2000          2001
Cash and cash equivalents                 $    61.4     $    54.2     $    39.0     $   118.1     $    32.0     $   134.1
Accounts receivable trade                     294.6         360.8         451.3         352.8         379.7         361.7
Inventories                                   475.0         505.5         493.2         602.2         605.2         512.1
Other current assets                          155.2         114.2         150.4         207.0         278.5         159.5
Total current assets                          986.2       1,034.8       1,134.0       1,280.0       1,295.3       1,167.5
Property, plant, and equipment, net         1,601.9       1,648.2       1,648.1       1,510.5       1,585.4       1,534.9
Goodwill                                      566.0         551.8         530.5         450.2         474.4         388.7
Other tangible assets                          30.7          56.3          91.6         106.0          92.6         156.3
Total assets                              $ 3,184.8     $ 3,291.2     $ 3,404.1     $ 3,346.7     $ 3,447.8     $ 3,247.4

Accounts payable                          $ 134.2       $   146.9     $   156.9     $   136.6     $   149.2     $   133.0
Accrued liabilities                           368.1         391.2         311.9         364.7         359.5         465.5
Short-term debt                               315.0         257.5         346.0         211.6         258.1           7.9
Total current liabilities                     817.3         795.7         814.8         712.8         766.9         606.4
Long-term debt                                655.3       1,029.1         879.1         878.2         877.7         877.0
Other long-term liabilities                   327.2         346.5         346.8         330.9         327.7         361.0
Deferred income taxes                         224.0         267.1         321.1         326.0         300.5         255.8
Total liabilities                           2,023.8       2,438.4       2,361.8       2,248.0       2,272.7       2,100.2
Stockholders' equity                        1,161.0         852.8       1,042.3       1,098.6       1,175.0       1,147.2
Total liabilities and equity              $ 3,184.8     $ 3,291.2     $ 3,404.1     $ 3,346.7     $ 3,447.8     $ 3,247.4
                                     Hershey Foods Corp. Forecasted Financial Statements as a Standalone
                                                                  ($ millions)

Income Statement                              2002     2003     2004     2005     2006     2007
Sales                                       $4,343.9 $4,561.0 $4,789.1 $5,028.5 $5,280.0 $5,544.0
Cost of sales                               $2,541.2 $2,622.6 $2,705.8 $2,841.1 $2,983.2 $3,132.3
Selling, general, & administrative          $1,164.2 $1,222.4 $1,283.5 $1,347.7 $1,415.0 $1,485.8
   Operating income (EBIT)                    $638.5   $716.1   $799.8   $839.8   $881.8   $925.8
   Taxes                                      $252.2   $282.9   $315.9   $331.7   $348.3   $365.7
   Net operating profit after tax (NOPAT)     $386.3   $433.2   $483.9   $508.1   $533.5   $560.1

   Sales Growth                                5.0%     5.0%     5.0%       5.0%    5.0%     5.0%
   EBIT/Sales                                 14.7%    15.7%    16.7%      16.7%   16.7%    16.7%

Balance Sheet
Total current assets                        $1,194.6 $1,254.3 $1,317.0 $1,382.9 $1,452.0 $1,524.6
Goodwill                                      $388.7   $388.7   $388.7   $388.7   $388.7   $388.7
Net property, plant, equipment and other    $1,737.5 $1,824.4 $1,915.6 $2,011.4 $2,112.0 $2,217.6

Non-interest bearing current liabilities     $543.0   $570.1   $598.6     $628.6   $660.0   $693.0
      Curr assets/Sales                       27.5%    27.5%    27.5%      27.5%   27.5%    27.5%
      NIBCL/Sales                             12.5%    12.5%    12.5%      12.5%   12.5%    12.5%
      NPPE, other/Sales                       40.0%    40.0%    40.0%      40.0%   40.0%    40.0%
tements as a Standalone


            2008       2009       2010       2011
          $5,821.2   $6,112.2   $6,417.8   $6,738.7
          $3,289.0   $3,453.4   $3,626.1   $3,807.4
          $1,560.1   $1,638.1   $1,720.0   $1,806.0
            $972.1   $1,020.7   $1,071.8   $1,125.4
            $384.0     $403.2     $423.4     $444.5
            $588.1     $617.5     $648.4     $680.8

             5.0%       5.0%       5.0%       5.0%
            16.7%      16.7%      16.7%      16.7%


          $1,600.8 $1,680.9 $1,764.9 $1,853.2
            $388.7   $388.7   $388.7   $388.7
          $2,328.5 $2,444.9 $2,567.1 $2,695.5

           $727.6     $764.0     $802.2     $842.3
            27.5%      27.5%      27.5%      27.5%
            12.5%      12.5%      12.5%      12.5%
            40.0%      40.0%      40.0%      40.0%
                            Hershey Foods Corp. Industry Comparables
                                             Book        Common
                                            Value of      Shares                Market
                                              debt     Outstanding Stock Price    Cap
Company Name                   Exchange    ($million)    (millions)  (9/17/02) ($million)
Cadbury Schweppes PLC -ADS NYSE               3,543         503         28.5     14,296
Hershey Foods Corp             NYSE            885          134         73.8      9,905
Jm Smucker Co                  NYSE            150           50         37.6      1,862
Nestle S A -Spon ADR           OTC           19,500        1,551        51.9     80,399
Sanfilippo John B & Son        NSDQ             52            9          6.7       61
Sherwood Brands Inc            AMEX              1            4          4.5       17
Tootsie Roll Industries Inc    NYSE              8           52         31.0      1,610
Wrigley (Wm) Jr Co             NYSE              0          225         49.5     11,135
                    Enterprise
Debt/    EBIT       Value/EBIT
Equity ($million)    Multiple
 0.25    1,501         11.9
 0.09     413          26.1
 0.08      59          33.9
 0.24    3,007         33.2
 0.85      18           6.1
 0.07       1          17.2
 0.00     101          16.1
 0.00     583          19.1

								
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