Item 1. BUSINESS
Hershey Foods Corporation and its subsidiaries (the "Corporation") are engaged in the manufacture, distribution and sale of consumer food products. The Corporation, primarily through its Hershey Chocolate North America, Hershey Grocery, Hershey International and Hershey Pasta Group divisions, produces and distributes a broad line of chocolate, confectionery, grocery and pasta products.
The Corporation was organized under the laws of the State of Delaware on October 24, 1927, as a successor to a business founded in 1894 by Milton S. Hershey.
The Corporation's principal product groups include: chocolate and confectionery products sold in the form of bar goods, bagged items, and boxed items; grocery products in the form of baking ingredients, chocolate drink mixes, peanut butter, dessert toppings, and beverages; and pasta products sold in a variety of shapes, sizes, and packages. The Corporation believes it is a major factor in these product groups in North America. Operating profit margins vary considerably among individual products and brands. Generally, such margins on chocolate and confectionery products are greater than those on pasta and other food products.
The Corporation manufactures in the United States chocolate and confectionery products in a variety of packaged forms and markets them under more than 50 brands. The different packaged forms include various arrangements of the same bar products, such as boxes, trays and bags, as well as a variety of different sizes and weights of the same bar product, such as snack size, standard, king size, large and giant bars. Among the principal chocolate and confectionery products in the United States are: HERSHEY'S COOKIES 'N' MINT chocolate bars, HERSHEY'S HUGS chocolates, HERSHEY'S HUGS WITH ALMONDS chocolates, HERSHEY'S KISSES chocolates, HERSHEY'S KISSES WITH ALMONDS chocolates, HERSHEY'S milk chocolate bars, HERSHEY'S milk chocolate bars with almonds, HERSHEY'S MINIATURES chocolate bars, HERSHEY'S NUGGETS chocolates, AMAZIN' FRUIT gummy bears fruit candy, BAR NONE candy bars, CADBURY'S CREME EGGS candy, CARAMELLO candy bars, KIT KAT wafer bars, LUDEN'S throat drops, MR. GOODBAR milk chocolate bars with peanuts, PETER PAUL ALMOND JOY candy bars, PETER PAUL MOUNDS candy bars, REESE'S crunchy peanut butter cups, REESE'S NUTRAGEOUS candy bars, REESE'S peanut butter cups, REESE'S PIECES candies, ROLO caramels in milk chocolate, SKOR toffee bars, SYMPHONY milk chocolate bars, TWIZZLERS candy, WHATCHAMACALLIT candy bars, YORK peppermint pattie candy, and 5TH AVENUE candy bars.
Principal products in Canada include CHIPITS chocolate chips, GLOSETTE chocolate-covered raisins, peanuts and almonds, LIFE SAVERS candy, OH HENRY! candy bars, PLANTERS nuts, POT OF GOLD boxed chocolates, REESE PEANUT BUTTER CUPS candy, and TWIZZLERS candy.
The Corporation also markets in the United States a line of grocery products in the baking, beverage, peanut butter and toppings categories. Principal products include HERSHEY'S baking chocolate, HERSHEY'S baking chips, HERSHEY'S chocolate drink boxes, HERSHEY'S chocolate milk mix, HERSHEY'S cocoa, HERSHEY'S CHOCOLATE SHOPPE toppings, HERSHEY'S HOT COCOA COLLECTION hot cocoa mix, HERSHEY'S syrup, REESE'S peanut butter, and REESE'S peanut butter baking chips. HERSHEY'S chocolate milk is produced and sold under license by over 20 independent dairies throughout the United States, using a chocolate milk mix manufactured by the Corporation. During the fall of 1994, the Corporation discontinued its line of HERSHEY'S chocolate bar flavor puddings because the business did not meet expected profit objectives.
The Corporation's chocolate, confectionery and grocery products are sold primarily to grocery wholesalers, chain grocery stores, candy distributors, mass merchandisers, chain drug stores, vending companies, wholesale clubs, convenience stores, concessionaires and food distributors by full-time sales representatives, food brokers and part-time retail sales merchandisers throughout the United States and Canada. The Corporation also manufactures, imports, markets, sells and distributes chocolate products in Mexico under the HERSHEY'S brand name. These products are sold through chain grocery stores, food distributors, and wholesale clubs. The Corporation believes its chocolate and confectionery products are sold in over 2 million retail outlets in North America. In 1994, sales to Wal-Mart Stores, Inc. and Subsidiaries amounted to approximately 10% of total net sales.
The Corporation manufactures, markets, sells and distributes high-quality assorted pralines and seasonal chocolate products in Germany under the GUBOR brand name which are sold directly to retailers. Additionally, the Corporation imports, markets, sells and distributes selected HERSHEY'S chocolate and confectionery products in the Japanese market. In Italy, the Corporation manufactures, markets, sells, and distributes various confectionery and nougat products under several brand names including DONDI, FRESH CLUB, GALATINE, GNAMMY, SCARAMELLINI, and SPERLARI. In the Netherlands and Belgium, the Corporation manufactures and sells chocolate and confectionery products, cookies, biscuits, and ice cream. These products are sold primarily under private labels, but products are also marketed and sold under the JAMIN brand name.
The Corporation manufactures and sells quality pasta products throughout the United States. The Corporation markets its products on a regional basis under several brand names, including AMERICAN BEAUTY, IDEAL BY SAN GIORGIO, LIGHT 'N FLUFFY, MRS. WEISS, P&R, RONZONI, SAN GIORGIO, and SKINNER, as well as certain private labels. These products are sold through chain grocery stores, grocery wholesalers, wholesale clubs, convenience stores and food distributors.
The Corporation's marketing strategy is based upon the consistently superior quality of its products, mass distribution and the best possible consumer value in terms of price and weight. In addition, the Corporation devotes considerable resources to the identification, development, testing, manufacturing and marketing of new products. The Corporation utilizes a variety of promotional programs for customers and advertising and promotional programs for consumers. The Corporation employs promotional programs at various times during the year to stimulate sales of certain products. Chocolate, confectionery and grocery seasonal and holiday related sales have typically been highest during the third and fourth quarters of the year.
The Corporation recognizes that the mass distribution of its consumer food products is an important element in maintaining sales growth and providing service to its customers. The Corporation attempts to meet the changing demands of its customers by planning optimum stock levels and reasonable delivery times consistent with achievement of economies of distribution. To achieve these objectives, the Corporation has developed a distribution network from its manufacturing plants, distribution centers and field warehouses strategically located throughout the United States, Canada and Mexico. The Corporation uses a combination of public and contract carriers to deliver its products from the distribution points to its customers. In conjunction with sales and marketing efforts, the distribution system has been instrumental in the effective promotion of new, as well as established, products on both national and regional scales.
From time to time the Corporation has changed the prices and weights of its consumer food products to accommodate changes in the cost of manufacturing, including the cost of raw materials; the competitive environment; and profit objectives, while at the same time maintaining consumer value. As a result of higher semolina costs, the Corporation implemented a price increase averaging 4% during the first quarter of 1994 on its pasta products and curtailed certain promotional allowances.
The most significant raw material used in the production of the Corporation's chocolate products is cocoa beans. This commodity is imported principally from West African, South American and Far Eastern equatorial regions. West Africa accounts for approximately 60% of the world's crop. Cocoa beans are not uniform, and the various grades and varieties reflect the diverse agricultural practices and natural conditions found in the many growing areas. The Corporation buys a mix of cocoa beans to meet its manufacturing requirements.
The table below sets forth annual average cocoa prices as well as the highest and lowest monthly averages for each of the calendar years indicated. The prices are the monthly average of the quotations at noon of the three active futures trading contracts closest to maturity on the New York Coffee, Sugar and Cocoa Exchange. Because of the Corporation's forward purchasing practices discussed below, and premium prices paid for certain varieties of cocoa beans, these average futures contract prices are not necessarily indicative of the Corporation's average cost of cocoa beans or cocoa products.
Cocoa Futures Contract Prices (cents per pound)
1990 1991 1992 1993 1994
Annual Average. . . . . . 55.5 52.8 47.6 47.3 59.1 High. . . . . . . . . . . 63.5 60.0 56.2 56.7 66.1 Low . . . . . . . . . . . 43.6 45.6 41.3 41.8 51.3
Source: International Cocoa Organization Quarterly Bulletin of Cocoa Statistics
The price of sugar, the Corporation's second most important commodity for its domestic chocolate and confectionery products, is subject to price supports under farm legislation. Due to import quotas and duties imposed to support the price of sugar established by that legislation, sugar prices paid by United States users are currently substantially higher than prices on the world sugar market. The average wholesale list price of refined sugar, F.O.B. Northeast, has remained relatively stable in a range of $.28 to $.31 per pound for the past ten years.
Other raw materials purchased in substantial quantities for domestic manufacturing purposes include milk, peanuts, and almonds. The price of milk is affected by Federal Marketing Orders and the prices of milk and peanuts are affected by price support programs administered by the United States Department of Agriculture. The Food, Agriculture, Conservation, and Trade Act of 1990, which is a five-year extension of prior farm legislation, was passed by Congress in October 1990. While this law is not substantially different from the previous farm legislation, it continues to have an impact on the price of sugar, peanuts and milk because it sets price support levels for these and other commodities.
During the first quarter of 1994, domestic milk prices averaged well above the prior year's levels, as a result of significantly lower milk production in Minnesota and Wisconsin. With more favorable weather conditions and bumper crops, milk production began increasing during the second quarter, resulting in lower prices during the last half of the year.
Peanut prices were moderately higher through the first quarter of 1994 as a result of a lower than average 1993 crop harvest. However, prices decreased through the last three quarters due to a declining demand for domestic peanuts, favorable crop forecasts and an excellent 1994 harvest.
Domestic almond prices during the early part of 1994 remained at historically high levels due to low stocks and a below average yield from the 1993 crop. By mid-year, market prices began to decline as a result of an excellent 1994 harvest.
Pasta is made from semolina milled from durum wheat, a class of hard wheat grown in the United States and Canada. The Corporation purchases semolina from commercial mills and is also engaged in a custom milling agreement to obtain sufficient quantities of semolina. In 1994, the Corporation's semolina costs per pound were the highest since 1981. The exceptionally high costs resulted from short supplies caused by a poor harvest in 1993, combined with United States Government tariffs on imports of Canadian wheat. The tariffs are scheduled to end in September 1995, but could be extended by the United States Government.
The Corporation attempts to minimize the effect of price fluctuations related to the purchase of its major raw materials primarily through the forward purchasing of such commodities to cover future manufacturing requirements generally for periods ranging from 3 to 24 months. With regard to cocoa and sugar, price risks are also managed by entering into futures and options contracts. At the present time, similar futures and options contracts are not
available for use in pricing the Corporation's other major raw materials. Futures contracts are used in combination with forward purchasing of cocoa and sugar requirements principally to take advantage of market fluctuations which provide more favorable pricing opportunities and to increase diversity or flexibility in sourcing these raw materials. The Corporation's commodity procurement practices are intended to reduce the risk of future price increases, but also may potentially limit the Corporation's ability to benefit from possible price decreases.
The primary effect on liquidity from using futures contracts is associated with margin requirements related to cocoa and sugar futures. Cash outflows and inflows result from original margins which are "good faith deposits" established by the New York Coffee, Sugar and Cocoa Exchange to ensure that market participants will meet their contractual financial obligations. Additionally, variation margin payments and receipts are required when the value of open positions is adjusted to reflect daily price movements. The magnitude of such cash inflows and outflows is dependent upon price coverage levels and the volatility of the market. Historically, cash flows related to margin requirements have not been material to the Corporation's total working capital requirements.
The Corporation manages the purchase of forward and futures contracts by developing and monitoring procurement strategies for each of its major commodities. These procurement strategies, including the use of futures contracts to hedge the pricing of cocoa and sugar, are directly linked to the overall planning and management of the Corporation's business, since the cost of raw materials account for a significant portion of the cost of finished goods. Procurement strategies with regard to cocoa, sugar and other major raw material requirements are developed by the analysis of fundamentals, including weather and crop analysis, and by discussions with market analysts, brokers and dealers. Procurement strategies are determined, implemented and monitored on a regular basis by senior management. Procurement activities for all major commodities are also reported to the Board of Directors on a regular basis.
The Corporation has license agreements with several companies to manufacture and/or sell products worldwide. Among the more significant are agreements with Cadbury Beverages Inc. and affiliated companies to manufacture and/or market and distribute PETER PAUL ALMOND JOY and PETER PAUL MOUNDS confectionery products worldwide as well as YORK, CADBURY and CARAMELLO confectionery products in the United States. The Corporation's rights under these agreements are extendable on a long-term basis at the Corporation's option. The license for CADBURY and CARAMELLO products is subject to a minimum sales requirement which the Corporation exceeded in 1994. The Corporation also has an agreement with Societe des Produits Nestle SA, which licenses the Corporation to manufacture and distribute in the United States the KIT KAT and ROLO confectionery products. The Corporation's rights under this agreement are extendable on a long-term basis at the Corporation's option, subject to certain conditions, including minimum unit volume sales. In 1994, the minimum volume requirements were exceeded.
Competition
Many of the Corporation's brands enjoy wide consumer acceptance and are among the leading brands sold in the marketplace. However, these brands are sold in highly competitive markets and compete with many other multinational, national, regional and local firms, some of which have resources in excess of those available to the Corporation.
Trademarks
The Corporation has various registered and unregistered trademarks, service marks and licenses which are of material importance to the Corporation's business.
Backlog of Orders
The Corporation manufactures primarily for stock and fills customer orders from finished goods inventories. While at any given time there may be some backlog of orders, such backlog is not material in respect to total sales, nor are the changes from time to time significant.
Research and Development
The Corporation engages in considerable research activities. These principally involve development of new products, improvement in the quality of existing products, improvement and modernization of production processes, and the development and implementation of new technologies to enhance the quality and value of both current and proposed product lines.
Regulation
The Corporation's domestic plants are subject to inspection by the Food and Drug Administration and various other governmental agencies, and its products must comply with regulations under the Federal Food, Drug and Cosmetic Act and with various comparable state statutes regulating the manufacturing and marketing of food products.
Environmental Considerations
In the past the Corporation has made investments based on compliance with environmental laws and regulations. Such expenditures have not been material with respect to the Corporation's capital expenditures, earnings or competitive position.
Employees
As of December 31, 1994, the Corporation had approximately 14,000 full-time and 1,600 part-time employees, of whom approximately 6,000 were covered by collective bargaining agreements. The Corporation considers its employee relations to be good.
Item 2.
Item 2. PROPERTIES
The following is a list of the Corporation's principal manufacturing properties. The Corporation owns each of these properties.
UNITED STATES Hershey, Pennsylvania - Confectionery Products (3 principal plants) Lancaster, Pennsylvania - Confectionery Products Oakdale, California - Confectionery Products Stuarts Draft, Virginia - Confectionery Products Winchester, Virginia - Pasta Products
CANADA Smiths Falls, Ontario - Confectionery and Snack Nut Products
In addition to the locations indicated above, the Corporation owns or leases several other less significant properties used for manufacturing confectionery and pasta products, sales, distribution and administrative functions.
The Corporation's plants are efficient and well maintained. These plants generally have adequate capacity and can accommodate seasonal demands, changing product mixes and certain additional growth. The largest plant is located in Hershey, Pennsylvania. Many additions and improvements have been made to this facility over the years and the plant's manufacturing equipment includes equipment of the latest type and technology.
Item 3.
Item 3. LEGAL PROCEEDINGS
The Corporation has no material pending legal proceedings, other than ordinary routine litigation incidental to its business.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information concerning the principal United States trading market for, market prices of and dividends on the Corporation's Common Stock and Class B Common Stock, and the approximate number of stockholders, may be found in the section "Market Prices and Dividends" on pages 16 and 17 of the Corporation's 1994 Annual Report to Stockholders, which information is incorporated herein by reference and reproduced herein as Exhibit 13.
Item 6.
Item 6. SELECTED FINANCIAL DATA
The following information, for the five years ended December 31, 1994, found in the section "Eleven-Year Consolidated Financial Summary" on the inside back cover of the Corporation's 1994 Annual Report to Stockholders, is incorporated herein by reference and reproduced herein as Exhibit 13: Net Sales; Income from Continuing Operations Before Accounting Changes; Income Per Share from Continuing Operations Before Accounting Changes (excluding Notes g, h and i); Dividends Paid on Common Stock (and related Per Share amounts); Dividends Paid on Class B Common Stock (and related Per Share amounts); Long-term Portion of Debt; and Total Assets.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The section "Management's Discussion and Analysis", found on pages 15 through 17 and 19, 21 and 23 of the Corporation's 1994 Annual Report to Stockholders, is incorporated herein by reference and reproduced herein as Exhibit 13.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following audited consolidated financial statements of the Corporation and its subsidiaries are found at the indicated pages in the Corporation's 1994 Annual Report to Stockholders, and such financial statements, along with the report of the independent public accountants thereon, are incorporated herein by reference and reproduced herein as Exhibit 13.
1. Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992. (Page 18)
2. Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992. (Page 20)
3. Consolidated Balance Sheets as of December 31, 1994 and 1993. (Page 22)
4. Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992. (Pages 24 and 25)
5. Notes to Consolidated Financial Statements (Pages 26 through 36), including "Quarterly Data (Unaudited)." (Page 36)
6. Report of Independent Public Accountants. (Page 37)
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions held with the Corporation, periods of service as a director, principal occupations, business experience, and other directorships of nominees for director of the Corporation are set forth in the section "Election of Directors" in the Corporation's Proxy Statement for its 1995 Annual Meeting of Stockholders. Reporting of an inadvertent late filing of a Securities and Exchange Commission Form 4 under Section 16 of the Securities Exchange Act of 1934, as amended, is set forth in the Section "Compliance with Section 16 of the Securities Exchange Act" of the Corporation's Proxy Statement for its 1995 Annual Meeting of Stockholders. All of the above information is incorporated herein by reference.
Executive Officers of the Corporation as of February 28, 1995
Name Age Positions Held During the Last Five Years
CORPORATE
K. L. Wolfe 56 Chairman of the Board and Chief Executive Officer (1993); President and Chief Operating Officer (1985)
J. P. Viviano 56 President and Chief Operating Officer (1993); President, Hershey Chocolate U.S.A., a division of Hershey Foods Corporation (1985)
W. F. Christ 54 Senior Vice President and Chief Financial Officer (1994); President, Hershey International, a division of Hershey Foods Corporation (1988)
C. L. Duncan 55 Vice President, Research and Development (1981)
T. C. Fitzgerald 55 Vice President and Treasurer (1990); Treasurer (1985)
R. M. Garrabrant 42 Controller and Chief Accounting Officer (1994); Director, Mergers and Acquisitions (1990); Director, Corporate Financial Planning & Analysis (1987)
S. A. Lambly 54 Vice President, Human Resources (1989)
R. M. Reese 45 Vice President and General Counsel (1993); Assistant General Counsel (1987)
B. L. Zoumas 52 Vice President, Science and Technology (1992); Vice President, Technical, Hershey Chocolate U.S.A. (1990); Vice President, Science and Technology (1981)
Executive Officers of the Corporation
Name Age Positions Held During the Last Five Years
DIVISION
R. Brace 51 Vice President, Manufacturing, Hershey Chocolate North America, a division of Hershey Foods Corporation (1995); Vice President, Manufacturing, Hershey Chocolate U.S.A. (1987)
J. F. Carr 50 President, Hershey International (1994); Vice President, Marketing, Hershey Chocolate U.S.A. (1984)
F. Cerminara 46 Vice President, Procurement, Hershey Chocolate North America (1995); Vice President, Commodities Procurement, Hershey Chocolate U.S.A. (1994); Vice President, Corporate Development and Commodities (1988)
D. N. Eshleman 40 General Manager, Hershey Grocery, a division of Hershey Foods Corporation (1994); Director, Marketing, Hershey Chocolate U.S.A. (1988)
M. H. Holmes 50 Vice President and General Manager, Chocolate Confectionery, Hershey Chocolate U.S.A. (1994); General Manager, Grocery, Hershey Chocolate U.S.A. (1989)
M. T. Matthews 48 Vice President, Sales, Hershey Chocolate U.S.A. (1989)
R. W. Meyers 51 President and General Manager, Hershey Canada Inc., a subsidiary of Hershey Foods Corporation (1995); President, Hershey Canada Inc. (1990); Acting President, Hershey Canada Inc. (1989)
M. F. Pasquale 47 President, Hershey Chocolate North America (1995); President, Hershey Chocolate U.S.A. (1994); Senior Vice President and Chief Financial Officer (1988)
C. M. Skinner 61 President, Hershey Pasta Group, a division of Hershey Foods Corporation (1984)
There are no family relationships among any of the above-named officers of the Corporation.
Corporate Officers and Division Presidents are generally elected each year at the organization meeting of the Board of Directors following the Annual Meeting of Stockholders in April.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Information concerning compensation of the five most highly compensated executive officers, including the Chairman of the Board and Chief Executive Officer, of the Corporation individually, and compensation of directors, is set forth in the sections "1994 Executive Compensation" and "Compensation of Directors" in the Corporation's Proxy Statement for its 1995 Annual Meeting of Stockholders. This information is incorporated herein by reference.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning ownership of the Corporation's voting securities by certain beneficial owners, individual nominees for directors, and by management, including the five most highly compensated executive officers, is set forth in the section "Voting Securities" in the Corporation's Proxy Statement for its 1995 Annual Meeting of Stockholders. This information is incorporated herein by reference.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning "Certain Relationships and Related Transactions" is set forth in the section "Certain Transactions and Relationships" in the Corporation's Proxy Statement for its 1995 Annual Meeting of Stockholders. This information is incorporated herein by reference.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Item 14(a)(1): Financial Statements
The audited consolidated financial statements of the Corporation and its subsidiaries and the Report of Independent Public Accountants thereon, as required to be filed with this report, are set forth in Item 8 of this report and are incorporated therein by reference to specific pages of the Corporation's 1994 Annual Report to Stockholders and reproduced herein as Exhibit 13.
Item 14(a)(2): Financial Statement Schedule
The following consolidated financial statement schedule of the Corporation and its subsidiaries for the years ended December 31, 1994, 1993 and 1992 is filed herewith on the indicated page in response to Item 14(d):
Schedule II -- Valuation and Qualifying Accounts (Page 15)
Other schedules have been omitted as not applicable or required, or because information required is shown in the consolidated financial statements or notes thereto.
Financial statements of the parent corporation only are omitted because the Corporation is primarily an operating corporation and there are no significant restricted net assets of consolidated and unconsolidated subsidiaries.
Item 14(a)(3): Exhibits
The following items are attached or incorporated by reference in response to Item 14(c):
(3) Articles of Incorporation and By-laws
The Corporation's Restated Certificate of Incorporation, as amended, is incorporated by reference from Exhibit No. 3 to the Corporation's Quarterly Report on Form 10-Q for the quarter ended April 3, 1988. The By-laws, as amended on December 3, 1991, are incorporated by reference from Exhibit No. 3 to the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1991.
(4) Instruments defining the rights of security holders, including indentures
The Corporation has issued certain long-term debt instruments, no one class of which creates indebtedness exceeding 10% of the total assets of the Corporation and its subsidiaries on a consolidated basis. These classes consist of the following:
a. 8.45% to 9.92% Medium-Term Notes due 1994-1998
b. 8.8% Debentures due 2021
c. Other Obligations
The Corporation will furnish copies of the above debt instruments to the Commission upon request.
In 1993 the Corporation called and redeemed its 9.5% Sinking Fund Debentures due 2009 and its 9.125% Sinking Fund Debentures due 2016.
(10) Material contracts
a. After Eight, Kit Kat, and Rolo License Agreement (License Agreement) between Hershey Foods Corporation and Rowntree Mackintosh Confectionery Limited is incorporated by reference from Exhibit No. 10(a) to the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1980. The License Agreement was amended in 1988 and the Amendment Agreement is incorporated by reference from Exhibit No. 19 to the Corporation's Quarterly Report on Form 10-Q for the quarter ended July 3, 1988. The License Agreement was assigned by Rowntree Mackintosh Confectionery Limited to Societe des Produits Nestle SA as of January 1, 1990. The Assignment Agreement is incorporated by reference from Exhibit No. 19 to the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1990.
b. Peter Paul/York Domestic Trademark & Technology License Agreement between Hershey Foods Corporation and Cadbury Schweppes Inc. (now Cadbury Beverages Inc.) dated August 25, 1988, is incorporated by reference from Exhibit No. 2(a) to the Corporation's Current Report on Form 8-K dated September 8, 1988.
c. Cadbury Trademark & Technology License Agreement among Hershey Foods Corporation and Cadbury Schweppes Inc. (now Cadbury Beverages Inc.) and Cadbury Limited dated August 25, 1988, is incorporated by reference from Exhibit No. 2(a) to the Corporation's Current Report on Form 8-K dated September 8, 1988.
Executive Compensation Plans:
d. The 1987 Key Employee Incentive Plan, as amended, is attached hereto as Exhibit No. 19(i).
e. Hershey Foods Corporation's Restated Supplemental Executive Retirement Plan is attached hereto as Exhibit No. 19(ii).
f. Hershey Foods Corporation's Non-Management Director Retirement Plan is incorporated by reference from Exhibit No. 19 to the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 29, 1992.
g. Hershey Foods Corporation's Deferral Plan for Non- Management Directors is incorporated by reference from Exhibit No. 10 to the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
h. A form of the Benefit Protection Agreements entered into between the Corporation and certain of its executive officers is attached hereto as Exhibit No. 10.
(12) Computation of ratio of earnings to fixed charges statement
A computation of ratio of earnings to fixed charges for the years ended December 31, 1994, 1993, 1992, 1991, and 1990 is attached as Exhibit No. 12.
(13) Annual report to security holders
The financial section of the Corporation's 1994 Annual Report to Stockholders is attached as Exhibit No. 13.
(21) Subsidiaries of the Registrant
A list setting forth subsidiaries of the Corporation is attached as Exhibit No. 21.
Item 14(b): Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HERSHEY FOODS CORPORATION (Registrant)
Date: March 6, 1995 By W. F. CHRIST (W. F. Christ, Senior Vice President and Chief Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Corporation and in the capacities and on the date indicated.
Signature Title Date
K. L. WOLFE Chief Executive Officer March 6, 1995 (K. L. Wolfe) and Director
W. F. CHRIST Chief Financial Officer March 6, 1995 (W. F. Christ)
R. M. GARRABRANT Chief Accounting Officer March 6, 1995 (R. M. Garrabrant)
J. P. VIVIANO Director March 6, 1995 (J. P. Viviano)
H. O. BEAVER, JR. Director March 6, 1995 (H. O. Beaver, Jr.)
T. C. GRAHAM Director March 6, 1995 (T. C. Graham)
B. GUITON HILL Director March 6, 1995 (B. Guiton Hill)
J. C. JAMISON Director March 6, 1995 (J. C. Jamison)
Signature Title Date
S. C. MOBLEY Director March 6, 1995 (S. C. Mobley)
F. I. NEFF Director March 6, 1995 (F. I. Neff)
R. J. PERA Director March 6, 1995 (R. J. Pera)
J. M. PIETRUSKI Director March 6, 1995 (J. M. Pietruski)
V. A. SARNI Director March 6, 1995 (V. A. Sarni)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Hershey Foods Corporation:
We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Hershey Foods Corporation's 1994 annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 27, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14(a)(2) on page 9 is the responsibility of the Corporation's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, N.Y. January 27, 1995
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports dated January 27, 1995, included or incorporated by reference in this Form 10-K for the year ended December 31, 1994, into the Corporation's previously filed Registration Statements on Forms S-8 or S-3 (File No. 33-35062, File No. 33-45431, File No. 33-45556 and File No. 33-51089).
ARTHUR ANDERSEN LLP
New York, N.Y. March 6, 1995
(a) Includes recoveries of amounts previously written off.
HERSHEY FOODS CORPORATION ANNUAL REPORT ON FORM 10-K
Index to Exhibits
Exhibit No.
10 -- Benefits Protection Agreements
12 -- Computation of ratio of earnings to fixed charges statement
13 -- Financial section of 1994 Annual Report to Stockholders
19.i -- The 1987 Key Employee Incentive Plan, as amended
19.ii -- Hershey Foods Corporation's Restated Supplemental Executive Retirement Plan
21 -- Subsidiaries of the Registrant
27 -- Financial Data Schedule for the period ended December 31, 1994. (Required for electronic filing only.)