This excerpt taken from the HSY 8-K filed Jul 21, 2005.
Program To Further Enhance Value
The Hershey Company also announced a new program to further advance its value-enhancing strategy. This program includes three components: (1) voluntary workforce reduction through an Early Retirement Program and an Enhanced Mutual Separation Program; (2) streamlining and creating new capabilities in Hersheys North American operations; and (3) closure of the Companys under-utilized Las Piedras, Puerto Rico manufacturing facility. Employees at this facility will receive severance support as well as assistance with career decisions and transition leading up to the plant closing in late 2005.
Hershey estimates that the cost to implement the program will result in a pre-tax charge of approximately $140 million to $150 million, or $.41 to $.44 per share-diluted on an after-tax basis. The cash portion of the charge is $85 million to $90 million. About 80 percent of the charge will be recorded in the second half of 2005, and the final 20 percent in the first half of 2006. The program, when fully implemented, is expected to generate ongoing annual savings of approximately $45 million to $50 million. A substantial portion of these savings will be invested in key growth efforts in the US snack market as well as in selected international markets principally through global customer alliances.
The changes announced today are necessary for Hershey to remain competitive in the years ahead, Lenny said. They will enable us to streamline our business, increase the investment in our consumer and customer initiatives, and build new organization capabilities. Our value-enhancing strategy implemented in late 2001 has served Hershey shareholders well. This strategy has accelerated profitable organic growth, strengthened Hersheys leadership position, and delivered record profitability. We anticipate similar benefits into the future. Based on our 2005 expected performance and the impact of todays announcement, we believe that, in 2006, net sales will increase at a rate somewhat above our 3 to 4 percent expectations, and diluted earnings per share, excluding the charge related to our new value-enhancing program, will be slightly above the 9 to 11 percent long-term range.
Note: In this sales and earnings release, Hershey has provided income measures excluding certain items described above, in addition to income determined in accordance with GAAP. These non-GAAP financial measures, as shown in the attached pro forma income statements, 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.