Hershey Announces First Quarter Results and Reaffirms 2008 Outlook

25/04/08 The Hershey Company announced sales and earnings for the first quarter ended March 30, 2008. Consolidated net sales were $1,160,342,000 compared with $1,153,109,000 for the first quarter of 2007. Net income for the first quarter of 2008 was $63,245,000, or $0.28 per share-diluted, compared with $93,473,000, or $0.40 per share-diluted, for the comparable period of 2007.

For the first quarters of 2008 and 2007, these results, prepared in accordance with generally accepted accounting principles ("GAAP"), include net pre-tax charges of $30.7 million and $40.4 million, or $0.09 and $0.11 per share, respectively. The majority of the 2008 charges were associated with the Global Supply Chain Transformation program announced in February 2007. Net income from operations, which excludes the net charges for the first quarters of 2008 and 2007, was $83,915,000 or $0.37 per share-diluted in 2008, compared with $118,786,000, or $0.51 per share-diluted in 2007.

First-Quarter Performance

"Net sales increased slightly in the first quarter and were in line with our expectations," said David J. West, President and Chief Executive Officer. "As we previously communicated, the current period was adversely impacted by an unusually early Easter and the mid-January decision to discontinue the roll-out of Ice Breakers PACS. Operating profit targets were achieved in a rising input cost environment. We invested behind our core brands in the first quarter and will continue to do so throughout 2008 to strengthen our position in the marketplace.

"During the first quarter, Hershey made significant progress on growth initiatives that will benefit net sales and earnings throughout the remainder of the year. The Hershey's Bliss and Starbucks product launches shipped to customers on schedule in mid-March. Consumer investment, including advertising, sampling and merchandising, will accelerate in the second quarter to ensure the success of these launches.

"The expansion of our businesses in Asia is moving ahead steadily. We are focusing on the launch of Hershey's branded products manufactured in and for the Indian market. In China, we continue to make progress and have full manufacturing capabilities to support our portfolio roll-out.

"U.S. retail takeaway in the first quarter was up 14.8 percent in channels that account for over 80 percent of our retail business. However, this period benefited from an early Easter season. Excluding seasonal activity, Hershey's retail takeaway increased 1.8 percent. In the channels measured by syndicated data, market share was off 0.8 points. Improvements in certain channels, customers and core brands indicate that marketplace plans, including higher levels of consumer investment and increased retail coverage, are starting to take hold. The price increase announced in late January had a minimal impact during the quarter.

Outlook

"As we look ahead to the balance of 2008, plans are in place to deliver our sales and earnings objectives. Specifically, the launch of new products, increased levels of brand support, consumer investment, retail coverage and merchandising will continue to build throughout the year. We expect this to result in a sequential improvement in net sales. Additionally, we have good visibility into our full-year cost structure. In Monterrey, Mexico, the construction of our new manufacturing facility is progressing and initial production is underway. We are encouraged by the development of our international investments and will continue to follow a disciplined approach to growth opportunities in emerging markets. Therefore, for the full-year 2008, we continue to expect net sales growth of 3-4 percent and earnings per share-diluted from operations of $1.85 to $1.90," West concluded.

Note: In this earnings release, Hershey has provided income measures excluding certain items described above, in addition to net income determined in accordance with GAAP. These non-GAAP financial measures, as shown in the attached pro forma summary of consolidated statements of income, are used in evaluating results of operations for internal purposes. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the Company believes exclusion of such items provides additional information to investors to facilitate the comparison of past and present operations. The aforementioned items relate to the Global Supply Chain Transformation program announced in February 2007 and the business realignment in Brazil announced in December 2007. The Global Supply Chain Transformation program is expected to result in pre-tax charges and non- recurring project implementation costs of $525 million - $575 million. Total charges include project management and start-up costs of approximately $50 million. In 2007, the Company recorded GAAP charges related to the Global Supply Chain Transformation program of $400.0 million, or $1.10 per share- diluted. Additionally, in the fourth quarter of 2007 the Company recorded business realignment and impairment charges of $12.6 million, or $0.05 per share-diluted, related to its business in Brazil. In 2008, the Company expects to record total GAAP charges of about $140 million - $160 million, or $0.37 - $0.42 per share-diluted.

As previously announced, the Company will hold a conference call with analysts. The conference call will be web cast live via Hershey's corporate website www.hersheys.com Please go to the Investor Relations section of the website for further details.