Hershey earnings fall on charges

by Eric Schroeder
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HERSHEY, PA. — Net income at The Hershey Co. in the second quarter ended July 4 totaled $46,723,000, equal to 21c per share on the common stock, down 34% from $71,298,000, or 32c per share, in the same period a year ago. The most recent quarter was adversely affected by $41.5 million in charges related to Project Next Century and a non-cash goodwill impairment charge of $44.7 million associated with the Godrej Hershey Ltd. joint venture in India. Adjusted non-GAAP net income, meanwhile, rose 8% to $117,047,000 during the second quarter, up from $97,965,000 in the same period a year ago.

The company had sales of $1,233,242,000 during the quarter, up 5% from $1,171,183,000 during the same quarter of the previous year.

“Hershey delivered solid results in the second quarter driven by our strategy of increasing advertising, consumer investment and U.S. retail coverage on our core brands,” said David J. West, president and chief executive officer. “Net sales increased by 5.3% driven by volume, including improvements in our international business, an approximate one point benefit from foreign currency exchange rates, as well as some net price realization.”

Mr. West said advertising expense increased about 50% in the second quarter, as Hershey supported its core brands, kicked off its annual Hershey’s S’mores promotion and launched Hershey’s Special Dark, Almond Joy and York Pieces new products. Mr. West said Hershey is planning additional increases in advertising for the full year, and expects advertising expense to increase about 45% to 50% in 2010, up from an earlier estimate of 35% to 40%. He added that most of the impact on sales won’t be felt until 2011, though.

For the six months ended July 4, the company had income of $194,117,000, or 87c per share, up 32% from $147,192,000, or 66c per share, during the same period of the previous year. Sales for the quarter were $2,641,085,000, up 10% from $2,407,214,000 during the same period of the previous year.

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