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HSY » Topics » 13. EMPLOYEE STOCK OWNERSHIP TRUST

This excerpt taken from the HSY 10-K filed Feb 23, 2007.

13. EMPLOYEE STOCK OWNERSHIP TRUST

Our Company’s employee stock ownership trust (“ESOP”) serves as the primary vehicle for employer contributions to The Hershey Company 401(k) Plan (formerly known as The Hershey Company Employee Savings Stock Investment and Ownership Plan) for participating domestic salaried and hourly employees. In December 1991, we funded the ESOP by providing a 15-year, 7.75% loan of $47.9 million. The ESOP used the proceeds of the loan to purchase our Common Stock. During 2006 and 2005, the ESOP received a combination of dividends on unallocated shares of our Common Stock and contributions from us. This equals the amount required to meet principal and interest payments under the loan. Simultaneously, the ESOP allocated to participants 318,351 shares of our Common Stock each year. As of December 31, 2006 all shares had been allocated. We consider all ESOP shares as outstanding for income per share computations.

The following table summarizes our ESOP expense and dividends:

 

For the years ended December 31,

    2006     2005    2004  
In millions of dollars                  

Compensation (income) expense related to ESOP

    $ (.3 )   $ .4    $ (.1 )

Dividends paid on unallocated ESOP shares

      .3       .5      .7  

 

  •  

We recognized net compensation expense equal to the shares allocated multiplied by the original cost of $10.03 per share less dividends received by the ESOP on unallocated shares.

 

  •  

We reflect dividends paid on all ESOP shares as a reduction to retained earnings.

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