The Hershey Company (NYSE:HSY) Files An 8-K Costs Associated with Exit or Disposal Activities

On February 22, 2017, the Board of Directors of The Hershey
Company (the Company) unanimously approved several initiatives
under a single program designed to drive continued net sales,
operating income and earnings per-share diluted growth over the
next several years. This Margin for Growth program will focus on
improving global efficiency and effectiveness, optimizing the
Companys supply chain, streamlining the Companys operating model
and reducing administrative expenses to generate long-term
savings. It is anticipated that a portion of the savings will be
re-invested in growth initiatives intended to help ensure the
Company meets its net sales and earnings per share-diluted
objectives and generates operating profit margin expansion over
the long-term.

The Company estimates that the Margin for Growth program will
result in total pre-tax charges of $375 million to $425 million
over the next three years. This estimate includes plant and office
closure expenses of $100 million to $115 million, net intangible
asset impairment charges of $100 million to $110 million, employee
separation costs of $80 million to $100 million, contract
termination costs of approximately $25 million, and other business
realignment costs of $70 million to $75 million. The cash portion
of the total charge is estimated to be $175 million to $200
million. At the conclusion of the program in 2019, ongoing annual
savings are expected to be approximately $150 million to $175
million.

The Company expects that implementation of the program will
reduce its global workforce by approximately 15%, with a majority
of the reductions coming from hourly headcount positions outside
of the United States.

On February 28, 2017, the Company updated its guidance for
long-term net sales growth and now expects long-term constant
currency net sales growth of 2% to 4%. In addition, the Company
reaffirmed its guidance for long-term adjusted earnings per
share-diluted growth of 6% to 8%. The Company also reaffirmed its
outlook for full year 2017 net sales growth of about 2% to 3%,
updated its outlook for 2017 reported earnings per share-diluted,
which are now anticipated to be $3.19 to $3.45, and reaffirmed its
outlook for 2017 adjusted earnings per share-diluted of $4.72 to
$4.81.

Note:>>In this Item 8.01, the Company references income
measures that are not in accordance with U.S. generally accepted
accounting principles (GAAP) because they exclude business
realignment activities, goodwill and other intangible asset
impairment charges, acquisition integration costs, settlement of
the Shanghai Golden Monkey (SGM) liability, non-service related
pension expense, costs related to the Margin for Growth program and
gains and losses associated with mark-to-market commodity
derivatives. These non-GAAP financial measures 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. Below is a reconciliation of projected 2017 and
full-year 2016 earnings per share-diluted calculated in accordance
with GAAP to non-GAAP adjusted earnings per share-diluted:

The Companys 2017 projected earnings per share-diluted, as
presented above, does not include the impact of mark-to-market
gains and losses on the Company’s commodity derivative contracts
that will be reflected within corporate unallocated expenses in the
Company’s segment results until the related inventory is sold,
under the Company’s accounting policy for commodity derivatives.

Safe Harbor Statement

This Current Report on Form 8-K contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Many of these forward-looking statements can be identified
by the use of words such as intend, believe, expect, anticipate,
should, planned, projected, estimated, and potential, among others.
These statements are made based upon current expectations that are
subject to risk and uncertainty. Because actual results may differ
materially from those contained in the forward-looking statements,
you should not place undue reliance on the forward-looking
statements when deciding whether to buy, sell or hold the
Company’s securities. Factors that could cause results to differ
materially include, but are not limited to: issues or concerns
related to the quality and safety of the Companys products,
ingredients or packaging; changes in raw material and other costs,
along with the availability of adequate supplies of raw materials;
selling price increases, including volume declines associated with
pricing elasticity; market demand for the Companys new and existing
products; increased marketplace competition; disruption to the
Companys manufacturing operations or supply chain; failure to
successfully execute and integrate acquisitions, divestitures and
joint ventures; changes in governmental laws and regulations,
including taxes; political, economic, and/or financial market
conditions; risks and uncertainties related to the Companys
international operations; disruptions, failures or security
breaches of the Companys information technology infrastructure; the
Companys ability to hire, engage and retain a talented global
workforce; the Companys ability to realize expected cost savings
and operating efficiencies associated with strategic initiatives or
restructuring programs; and such other matters as discussed in the
Companys Annual Report on Form 10-K for the year ended December 31,
2016.