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The Hershey Company Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 11, 2011 11:19AM
The Hershey Company (HSY) filed Quarterly Report for the period ended 2011-04-03. The Hershey Company has a market cap of $12.87 billion; its shares were traded at around $56.64 with a P/E ratio of 21.5 and P/S ratio of 2.2. The dividend yield of The Hershey Company stocks is 2.5%. The Hershey Company had an annual average earning growth of 5.1% over the past 10 years.
Highlight of Business Operations:
Earnings per share-diluted in the first quarter of 2011 increased $0.06 as compared with the first quarter of 2010. Net income was reduced by $6.1 million, or $0.02 per share-diluted, in the first quarter of 2011 as a result of business realignment and impairment charges. Excluding the impact of business realignment and impairment charges, earnings per share-diluted increased $0.08 per share, or 12.5%, in 2011 compared with 2010.
Net cash provided from operating activities was $159.4 million in 2011 and $181.2 million in 2010. The decrease was primarily the result of the change in cash (used by) provided from working capital, partially offset by lower cash used by other assets and liabilities and higher net income in 2011. Cash used by changes in other assets and liabilities was $32.1 million for the first three months of 2011 compared with $102.9 million for the same period of 2010. The decrease in the amount of cash used by other assets and liabilities from 2010 to 2011 primarily reflected the effect of changes in income taxes of $29.2 million as well as the effect of hedging transactions of $28.9 million. Cash used by working capital was $30.0 million in 2011 as compared with cash provided of $81.1 million in 2010. The change in cash (used by) provided from working capital was principally related to lower cash provided by inventories related to seasonal sales patterns and an increase in inventories in the first quarter of 2011 associated with an anticipated buy-in related to price increases, as well as higher cash used by accounts receivable resulting from higher sales in 2011.
Interest paid was $41.9 million during the first three months of 2011 versus $45.0 million for the comparable period of 2010. Income taxes paid were $15.7 million during the first three months of 2011 versus $29.6 million for the comparable period of 2010. The decrease in taxes paid in 2011 was primarily related to reduced extension payments in the first quarter of 2011 compared with the first quarter of 2010.
In 2010, the Company recorded GAAP charges of $53.9 million, or $0.14 per share-diluted, attributable to the Project Next Century program. Additionally, in the second quarter of 2010, the Company recorded a non-cash goodwill impairment charge of $44.7 million, or $0.20 per share-diluted, related to the Godrej Hershey Ltd. joint venture. In 2011, the Company expects to record total GAAP charges of about $45 million to $55 million, or $0.13 to $0.16 per share-diluted, attributable to Project Next Century.
In June 2010, we announced Project Next Century as part of our ongoing efforts to create an advantaged supply chain and competitive cost structure. We continue to expect total pre-tax charges and non-recurring project implementation costs for the Project Next Century program of $140 million to $170 million. During 2011, we expect to record $45 million to $55 million in program charges. During 2011, we expect capital expenditures for Project Next Century to be approximately $180 million to $190 million. Depreciation and amortization for 2011 is estimated to be $175 million to $185 million, excluding accelerated depreciation of $20 million to $25 million related to Project Next Century.
The potential net loss in fair value of interest rate swap agreements of ten percent resulting from a hypothetical near-term adverse change in market rates was $3.6 million as of April 3, 2011 and was $3.5 million as of December 31, 2010. The potential net loss in fair value of foreign exchange forward contracts and options resulting from a hypothetical near-term adverse change in market rates of ten percent was $28.0 million as of April 3, 2011 and was $24.7 million as of December 31, 2010. The market risk resulting from a hypothetical adverse market price movement of ten percent associated with the estimated average fair value of net commodity positions decreased from $49.0 million as of December 31, 2010, to $46.3 million as of April 3, 2011. Market risk represents ten percent of the estimated average fair value of net commodity positions at four dates prior to the end of each period.
Stocks Discussed: HSY,