Hershey Case study

7172019 Hershey Case study

httpslidepdfcomreaderfullhershey-case-study-568d3c465fdc0 116

International Research Journal of Applied Finance ISSN 2229International Research Journal of Applied Finance ISSN 2229International Research Journal of Applied Finance ISSN 2229International Research Journal of Applied Finance ISSN 2229 ndashndashndashndash 6891689168916891

June 2013June 2013June 2013June 2013 Case Study SeriesCase Study SeriesCase Study SeriesCase Study Series

Dr Rishma Vedd California State University rishmaveddcsuneduNataliya Yassinski California State University nataliyayassinski398mycsunedu

Case ID 040502

983120 983089

Strategic Approach of Business Valuation

Dr Rishma VeddProfessor and Associate Department Chair

California State University Northridge CArishmaveddcsunedu

Nataliya YassinskiAccounting amp Information System

California State University NorthridgeNorthridge

nataliyayassinski398mycsunedu






Case ID 040502

983120 983090

Abstract

A comprehensive financial statement analysis and valuation framework that integrates strategyindustry financial reporting and business valuation draw an understanding of the companyperformance and provide a basis for making reasonable valuation estimates The fundamental

financial statement analysis uses various tools and techniques for business valuation Topicsinclude profitability analysis evaluating sustainable growth cash flow analysis and prospectiveanalysis using various business valuation models such as income market and cost approach

Introduction

The Hershey Company is one of the leaders in the Confectioners Industry (Yahoo Finance TheHershey Company) The company is organized into two business units these are the chocolatebusiness unit and the sweets and refreshment business unit The company manufacturesmarkets sells and distributes along with its subsidiaries chocolate candy sugar confectionerygum and mint baking and pantry and snacks throughout the world The companyrsquos iconicbrands are Hersheyrsquos Reesersquos Hersheyrsquos Kisses Hersheyrsquos Bliss Twizzlers Almond Joy

Mounds York Kit Kat and Pieces The company is organized around geographic regions andthe companyrsquos key region is the United States the Americas Asia Europe the Middle East andAfrica The company exports to approximately 70 countries worldwide Sales representativesand food brokers sell a significant amount of the Hershey Companyrsquos products to wholesaledistributors chain grocery stores mass merchandisers chain drug stores vending companieswholesale clubs convenience stores dollar stores concessionaires and department stores Thebusiness was founded in 1894 by Milton S Hershey and is headquartered in HersheyPennsylvania (The Hershey Company Annual Report 2012)

Business Analysis and Industry Analysis

Business analysis links firmrsquos economics and strategy and analysis of its financial statementswith the objective of gaining insights about the firmrsquos profitability and risk The process ofassessing strategy analysis has five major blocks This Hersheyrsquos business and industry analysisis demonstrated in the following flow chart






Case ID 040502

983120 983091

983109983150983158983145983154983151983150983149983141983150983156 983105983150983137983148983161983155983145983155

983080983120983109983123983124 983105983150983137983148983161983155983145983155983081

983113983150983140983157983155983156983154983161 983105983150983137983148983161983155983145983155

983080983120983151983154983156983141983154983079983155 983110983145983158983141 983110983151983154983139983141983155983081

983107983151983149983152983141983156983137983156983145983158983141

983105983140983158983137983150983156983137983143983141

983123983127983119983124 983105983150983137983148983161983155983145983155

983106983157983155983145983150983141983155983155 983155983156983154983137983156983141983143983161

991266 983120983154983151983142983145983156 983108983154983145983158983141983154983155

991266 983115983141983161 983122983145983155983147983155






Case ID 040502

983120 983092

Environment Analysis (PEST)

Environment analysis is a part of strategic analysis The broader business environment affectsthe level of profitability that a company can expect to achieve This includes global economicforces quality and cost of labor government regulations and borrowing procedures

Understanding the environment and competitive forces within an industry helps with evaluatingthe quality of a particular firmrsquos strategy and profitabilityEnvironmental factors such as political economic social and technological affect the HersheyCompanyrsquos activities

Among many legal governmental laws and regulations that applied to the confectionary industrythe most important is the pricing practices This is influenced by price floor legislation forchocolate and other ingredients The FDA requirement for nutritional information is also a requirementthat all food companies are subject to Still another challenge for this and other corporations arelegal challenges in the US and in other nations The Hershey Company as it mentioned in itsown annual report became a subject to a law suit in Canada for its pricing practices and reachedan agreement to settle the suit with $53 million in liability (Annual Report 2012) Any changes

bull Factors

bull Innovantions

bull Information system

bull Communication

bull Factors

bull Consumer behavior

bull Lifestyle trends

bull Consumerism

bull Factors

bull Economic enviroment

bull Umemployment rate

bull Inflation

bull Factors

bull Political development

bull Tax Laws

bull FDA regulations

Political Economic

TechnologicalSocial






Case ID 040502

983120 983093

in food or drug laws anywhere Hershey does can alter the affect its business Lastly child laborlaws in Africa have a significant impact on chocolate production An investor has filed a lawsuit in November of 2012 against the Hershey Company because the company is alleged to havereceived cacao from suppliers who used child labor (Milford McCarty amp Church 2012)The companyrsquos revenue and profitability relies on spending levels and impulse purchases The

aspects are heavily depending on macroeconomic conditions consumer confidenceemployment and availability of consumer credit (The Hershey Company Annual Report 2012)One factor that that can mitigate the fluctuation in the main ingredient of chocolate cocoa issecuring new sources for the commodity that are reliable Hershey is finding new sources thatinclude JamaicaThe Hershey founder Milton S Hershey established a responsible citizenship model for thecompany and the company is continuing his legacy and corporate social responsibility bymanufacturing high-quality Hershey products operating the business with a social responsibilityand adjusting the business operations up to the environmental sustainability level The companyhas established its environment community workplace and marketplace goals and reports theirachievements through its corporate social responsibility (ldquoCSRrdquo) report in 2009 2010 and 2011

The other issue that the company is facing is the increasing national focus on obesity Hersheyas part of the confectionary industry is challenged to increase sales as well as maintain itsreputation as a socially responsible corporate citizenThe company invests considerable resources in technology to efficiently operate its businessIncluded in this effort to be more efficient are cutting edge agricultural practices which includeimproved milking machines and improvements to their distribution Hershey is utilizing RFID tobetter track their products to the marketplace This critical factor of the industry environmentenables the company to manage manufacturing financial logistic sales marketing andadministrative processes in the company

Accounting AnalysisThe next critical step is accounting analysis Accounting analysis identifies accountingprinciples and methods used to prepare financial statements and the ability to adjust these inorder to increase their relevance and reliability One of the steps is to make adjustmentsAdjustments for accounting distortions enable financial reports to better reflect economic realityThis step requires






Case ID 040502

983120 983094

Among the common adjustments there can be these infrequent itemsbull Discontinued operationsbull Extraordinary itemsbull Changes in accounting principlesbull Impairment losses on long-lived assetsbull Restructuring and other chargesbull Changes in estimatesbull Gainslosses from peripheral activitiesbull Items in other comprehensive income (on balance sheet)

All of these elements can be found in the Hershey Companyrsquos notes to consolidate financial

statements item 8 of the form 10-K and managementrsquos discussion and analysis of financialconditions and results of operations (MDampA) item 7 of the form 10-K The followinginformation is found in the MDampA and notes of the Hershey Companyrsquos 10-K

As part of the Project Next Century program production will transition from the Companyscentury-old facility at 19 East Chocolate Avenue in Hershey Pennsylvania to an expanded WestHershey facility which was built in 1992 (The Hershey Company Annual Report 2012)

The company completed an impairment evaluation of goodwill and other intangible assetsassociated with Godrej Hershey Ltd Based on this evaluation the firm recorded a non-cashgoodwill impairment charge of $447 million including a reduction to reflect the share of the

charge associated with the noncontrolling interests (The Hershey Company Annual Report2012)

In addition the Hershey Company completed three-year supply chain transformation program(the global supply chain transformation program) Manufacturing facilities in NaugatuckConnecticut and Smiths Falls Ontario have been closed and are offered for sale The carryingvalue of these properties was $69 million as of December 31 2011 The fair value of these

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983105983155983155983141983155983155 983137983139983139983151983157983150983156983145983150983143 983142983148983141983160983138983145983148983145983156983161

983113983140983141983150983156983145983142983161 983152983151983156983141983150983156983145983137983148 983154983141983140 983142983148983137983143983155

983125983150983140983151 983137983150983161 983140983145983155983156983151983154983156983145983151983150983155 983137983150983140 983150983151983145983155983141






Case ID 040502

983120 983095

properties was estimated based on the expected sales proceeds Actual proceeds from the sale ofthese properties could differ from expected proceeds which could cause additional charges orcredits in 2012 or subsequent years (The Hershey Company Annual Report 2012)

Some of the important nonrecurring charges were

1

Next Century Programa $39280 thousand recorded in cost of sales during 2011 related primarily toaccelerated depreciation of fixed assets

b $13644 thousand recorded in cost of sales during 2010 related primarily toaccelerated depreciation of fixed assets

2 Global Supply Chain Transformation Programa $5816 thousand recorded in 2011 was due to a decline in the estimated net

realizable value of two properties being held for saleb $10136 thousand recorded in cost of sales during 2009 related to start-up costs

and the accelerated depreciation of fixed assets over the estimated remaininguseful life (The Hershey Company Annual Report 2012)

The Next Century Program and the Global Supply Chain Transformation Program have futurepotential benefits for the Hershey Company Both programs incurred the charges (credits)associated with business realignment initiatives and the impairment recorded during 2011 inamount of $(886) thousand 2010 in the amount of $83433 thousand and 2009 in the amount of$82875 thousand that is reflected in the companyrsquos income statement

Financial Analysis

Financial analysis analyzes and evaluates financial risk ratios and profitability The Hersheyrsquosfinancial analysis determines the companyrsquos profitability financial strength managementrsquosefficiency liquiditysolvency and cash flow predictability The following financial ratios help toevaluate the companyrsquos previous performance

Liquidity The companys ability to meet its short-term obligations

Current Ratio Total Current AssetsTotal Current LiabilitiesQuick Ratio (Total Current Assets ndash Inventories) Total Current Liabilities

Average Collection Period Average Accounts Receivable(Total Sales365)Days Inventory Held Days in a yearInventory Turnover

Leverage The companys ability to meet its liabilities in the long term

Financial Leverage Index Return on AssetsReturn on Equity

DebtAssets (Short Term Debt + Long Term Debt)Total Assets

DebtEquity (Short Term Debt + Long Term Debt)Total Equity

Operating Efficiency The assessment of operating management

Accounts ReceivableTurnover

Annual Credit SalesAverage Receivables

Inventory Turnover Cost of goods soldAverage Inventory

Total Asset Turnover SalesAverage Total Assets

ProfitabilityThe indication of the companys market share (rising stable

falling)

Gross Profit Margin (Sales ndash Cost of Sales)Sales






Case ID 040502

983120 983096

Return on Assets (ROA) Profit after taxesTotal Assets

Return on Equity (ROE) Profit after taxesShareholdersrsquo Equity

Market Measures The assessment of investment opportunity

PriceEarnings Current Market Price per ShareAfter-tax Earnings per ShareDividend Payout Cash Dividends PaidNet Income

Common-size financial statement ratio analysis

By comparing consecutive balance sheets income statements and statements of cash flows sideby side and reviewing those changes in individual categories on a year-to-year basis financialanalysts may be able to understand the historical record and future trends of a company In thisldquotrendrdquo analysis we need to focus on

bull Absolute direction speed and extent of a trend

bull Relative direction speed and trend among different componentsTwo popular techniques of comparative analysis are

bull Year-to-year change analysis

bull Index number trend series analysis

In a common-size balance sheet each component of the balance sheet is expressed as apercentage of total assets In a common-size income statement each item is expressed as apercentage of sales

Prospective AnalysisAnother key component of the framework for analysis is a prospective analysis Prospectiveanalysis allows the company to improve its business strategy and maintain its sustainability andfor investors to make proper decisions about their investments Discounted dividends abnormalearnings and discounted cash flow methods are used to perform prospective analysis Thewidely used approach is discounted cash flow method

The Hershey Company demonstrated over three yearsrsquo results from 2009 to 2011 the followingintegration of environmental analysis






Case ID 040502

983120 983097

Prospective analysis uses the financial statement data to forecast future earnings cash flow andvaluation of the business One of the key approaches to perform business valuation is thediscounted cash flow (DCF) analysis

Free Cash Flow for business valuation is a different approach from the statement of cash flow

Sales

- Operating Expenses

Earnings Before Interest Taxes Dep amp Amort (EBITDA)

- Depreciation and amortizationOperating Profit (EBIT)

(1 - Average Tax Rate)

Operating Profits After Tax

+ Depreciation and amortization

- Capital Expenditures

New productintroductions

Consumer-driven

approach

Core brandinvestments

Strong financial

performance

Improvemarket share

Cost savingsinitiatives






Case ID 040502

983120 983089 983088

- Additions to Working Capital

Free Cash Flows

Next is to assess the Hersheyrsquos cost of capital (WACC) WACC has the following formula

983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089

This table consists of essential data for determining the Hersheyrsquos WACC

Cost of EquityRe = Rf + β Rm

Rf or Risk Free Rate (20-yearUSTreasury)

289

Rm or Equity risk premium 6β or Beta risk 012

Cost of DebtRd = Rd

1(1- Marginal corporate taxrate)

Rd1 or Companyrsquos before tax rate 511

Marginal corporate tax rate 35

Equity(Debt+Equity) Equity and Debt may be applied as a book valueor a market value

Debt(Debt+Equity) Debt and Equity may be applied as a book valueor a market value

Cost of Capital (WACC) Cost of Equity and percentile of the companyrsquosequity in the last projected year(Equity(Debt+Equity)Cost of Debt and percentile of the companyrsquosdebt in the last projected year(Debt(Debt+Equity)

Companyrsquos Growth Rate (g) 3

Nominal growth rate in theeconomy

25

Terminal Value (TV) TV=(FCFF(last est year)(1+g))(WACC-g)

Present Value Factor

(PV Factor)

PV Factor = 1(1+r)n r = rate of return n =

number of periods

Present Value (PV) PV = FCFF PV Factor

Company Value The sum of PV forecasted years

Company Value without Long-term Debt

Subtract the current portion of the long-term debtfrom the Company Value

Projected Price Stock The Company Value without Long-term Debtdivided by the number of outstanding sharesProvide the factors that indicate why the stockprice is lower or higher than the current stockprice

The Hershey Company has the following five-year goals

bull Revenue growth from $65 billion in 2012 to $10 billion in 2017

bull International revenue growth by 25

bull An increase in growth margin up to 43






Case ID 040502

983120 983089 983090

Stock market participation is gradually improved from 2009 and it is now comparable to theprerecession 2007 level The chart below demonstrates this trend on the stock market from 2009to 2013

The Hershey Company has significantly improved its performance on the stock market from$3030 in 2009 up to $8757 in 2013 and it is reflected on the following graph






Case ID 040502

983120 983089 983091

Requirements1 Provide an environmental analysis for the Hershey Company by using the template (seeEnvironment Analysis section)

2 Identify the key items that need to be adjusted based on the information provided and theinformation from the MDampA section of the Hershey 10-K for 2011 to financial statements3 Determine the appropriate financial ratios for forecasted balance sheet and income statementand provide a brief trend analysis4 Determine the value of stock using discounted cash flow and write brief summary based onyour analysis

Appendix A Reported Income Statement

For the years ended December 31 2011 2010 2009

In thousands of dollars except per share amounts

Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531

Selling marketing and administrative 1477750 1426477 1208672

Business realignment and impairment (credits) charg (886) 83433 82875

Total costs and expenses 5025760 4765711 4537078

Income before Interest and Income Taxes 1055028 905298 761590

Interest expense net 92183 96434 90459

Income before Income Taxes 962845 808864 671131

Provision for income taxes 333883 299065 235137

Net Income 628962$ 509799$ 435994$

THE HERSHEY COMPANYCONSOLIDATED STATEMENTS OF INCOME

Source SEC 10-K February 2012 REPORTED








Case ID 040502

Appendix C Forecasted Statement of Income

Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322

Depreciation and amortization expense 172275 183472 170667 184643 202445

Interest Expense 90459 96434 92183 94375 89386

Income before tax 770262 907434 1012016 1087968 1173932

Income tax expense 269833 335536 350945 377284 407094

Income (loss) from extraordinary items and

discontinued operations - - - - -

Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY

STANDARDIZED ADJUSTED amp FORECASTED STATEMENT OF I






Case ID 040502

983120 983089 983094

ReferencesBloomberg Businessweek News (2012) Hershey sets long-term growth goals Retrieved

February 3 2013Milford P McCarty D amp Church S (2012) Hershey Investor Sues for Records on African

Child Labor Bloomberg Retrieved February 2 2013 from

httpwwwbloombergcomnews2012-11-01hershey-investor-sues-for-records-on-african-child-laborhtmlThe Hershey Company (2012) Hershey Co 10-K Annual Report Filed Period 12312012

Retrieved from httpwwwthehersheycompanycominvestorsfinancial-reportssec-filingsaspx

Yahoo Finance (nd) Profile The Hershey Company Retrieved January 27 2013 fromhttpfinanceyahoocomqprs=HSY2C+ampql=1






Case ID 040502

983120 983090

Abstract

A comprehensive financial statement analysis and valuation framework that integrates strategyindustry financial reporting and business valuation draw an understanding of the companyperformance and provide a basis for making reasonable valuation estimates The fundamental

financial statement analysis uses various tools and techniques for business valuation Topicsinclude profitability analysis evaluating sustainable growth cash flow analysis and prospectiveanalysis using various business valuation models such as income market and cost approach

Introduction

The Hershey Company is one of the leaders in the Confectioners Industry (Yahoo Finance TheHershey Company) The company is organized into two business units these are the chocolatebusiness unit and the sweets and refreshment business unit The company manufacturesmarkets sells and distributes along with its subsidiaries chocolate candy sugar confectionerygum and mint baking and pantry and snacks throughout the world The companyrsquos iconicbrands are Hersheyrsquos Reesersquos Hersheyrsquos Kisses Hersheyrsquos Bliss Twizzlers Almond Joy

Mounds York Kit Kat and Pieces The company is organized around geographic regions andthe companyrsquos key region is the United States the Americas Asia Europe the Middle East andAfrica The company exports to approximately 70 countries worldwide Sales representativesand food brokers sell a significant amount of the Hershey Companyrsquos products to wholesaledistributors chain grocery stores mass merchandisers chain drug stores vending companieswholesale clubs convenience stores dollar stores concessionaires and department stores Thebusiness was founded in 1894 by Milton S Hershey and is headquartered in HersheyPennsylvania (The Hershey Company Annual Report 2012)

Business Analysis and Industry Analysis

Business analysis links firmrsquos economics and strategy and analysis of its financial statementswith the objective of gaining insights about the firmrsquos profitability and risk The process ofassessing strategy analysis has five major blocks This Hersheyrsquos business and industry analysisis demonstrated in the following flow chart






Case ID 040502

983120 983091

983109983150983158983145983154983151983150983149983141983150983156 983105983150983137983148983161983155983145983155

983080983120983109983123983124 983105983150983137983148983161983155983145983155983081

983113983150983140983157983155983156983154983161 983105983150983137983148983161983155983145983155

983080983120983151983154983156983141983154983079983155 983110983145983158983141 983110983151983154983139983141983155983081

983107983151983149983152983141983156983137983156983145983158983141

983105983140983158983137983150983156983137983143983141

983123983127983119983124 983105983150983137983148983161983155983145983155

983106983157983155983145983150983141983155983155 983155983156983154983137983156983141983143983161

991266 983120983154983151983142983145983156 983108983154983145983158983141983154983155

991266 983115983141983161 983122983145983155983147983155






Case ID 040502

983120 983092





bull Factors

bull Innovantions


bull Communication

bull Factors



bull Consumerism

bull Factors



bull Inflation

bull Factors


bull Tax Laws


Political Economic

TechnologicalSocial






Case ID 040502

983120 983093










Case ID 040502

983120 983094








983113983140983141983150983156983145983142983161 983147983141983161 983137983139983139983151983157983150983156983145983150983143 983152983151983148983145983139983161

983105983155983155983141983155983155 983137983139983139983151983157983150983156983145983150983143 983142983148983141983160983138983145983148983145983156983161

983113983140983141983150983156983145983142983161 983152983151983156983141983150983156983145983137983148 983154983141983140 983142983148983137983143983155

983125983150983140983151 983137983150983161 983140983145983155983156983151983154983156983145983151983150983155 983137983150983140 983150983151983145983155983141






Case ID 040502

983120 983095



1







Financial Analysis















falling)







Case ID 040502

983120 983096



















Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983091

983109983150983158983145983154983151983150983149983141983150983156 983105983150983137983148983161983155983145983155

983080983120983109983123983124 983105983150983137983148983161983155983145983155983081

983113983150983140983157983155983156983154983161 983105983150983137983148983161983155983145983155

983080983120983151983154983156983141983154983079983155 983110983145983158983141 983110983151983154983139983141983155983081

983107983151983149983152983141983156983137983156983145983158983141

983105983140983158983137983150983156983137983143983141

983123983127983119983124 983105983150983137983148983161983155983145983155

983106983157983155983145983150983141983155983155 983155983156983154983137983156983141983143983161

991266 983120983154983151983142983145983156 983108983154983145983158983141983154983155

991266 983115983141983161 983122983145983155983147983155






Case ID 040502

983120 983092





bull Factors

bull Innovantions


bull Communication

bull Factors



bull Consumerism

bull Factors



bull Inflation

bull Factors


bull Tax Laws


Political Economic

TechnologicalSocial






Case ID 040502

983120 983093










Case ID 040502

983120 983094








983113983140983141983150983156983145983142983161 983147983141983161 983137983139983139983151983157983150983156983145983150983143 983152983151983148983145983139983161

983105983155983155983141983155983155 983137983139983139983151983157983150983156983145983150983143 983142983148983141983160983138983145983148983145983156983161

983113983140983141983150983156983145983142983161 983152983151983156983141983150983156983145983137983148 983154983141983140 983142983148983137983143983155

983125983150983140983151 983137983150983161 983140983145983155983156983151983154983156983145983151983150983155 983137983150983140 983150983151983145983155983141






Case ID 040502

983120 983095



1







Financial Analysis















falling)







Case ID 040502

983120 983096



















Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983092





bull Factors

bull Innovantions


bull Communication

bull Factors



bull Consumerism

bull Factors



bull Inflation

bull Factors


bull Tax Laws


Political Economic

TechnologicalSocial






Case ID 040502

983120 983093










Case ID 040502

983120 983094








983113983140983141983150983156983145983142983161 983147983141983161 983137983139983139983151983157983150983156983145983150983143 983152983151983148983145983139983161

983105983155983155983141983155983155 983137983139983139983151983157983150983156983145983150983143 983142983148983141983160983138983145983148983145983156983161

983113983140983141983150983156983145983142983161 983152983151983156983141983150983156983145983137983148 983154983141983140 983142983148983137983143983155

983125983150983140983151 983137983150983161 983140983145983155983156983151983154983156983145983151983150983155 983137983150983140 983150983151983145983155983141






Case ID 040502

983120 983095



1







Financial Analysis















falling)







Case ID 040502

983120 983096



















Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983093










Case ID 040502

983120 983094








983113983140983141983150983156983145983142983161 983147983141983161 983137983139983139983151983157983150983156983145983150983143 983152983151983148983145983139983161

983105983155983155983141983155983155 983137983139983139983151983157983150983156983145983150983143 983142983148983141983160983138983145983148983145983156983161

983113983140983141983150983156983145983142983161 983152983151983156983141983150983156983145983137983148 983154983141983140 983142983148983137983143983155

983125983150983140983151 983137983150983161 983140983145983155983156983151983154983156983145983151983150983155 983137983150983140 983150983151983145983155983141






Case ID 040502

983120 983095



1







Financial Analysis















falling)







Case ID 040502

983120 983096



















Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983094








983113983140983141983150983156983145983142983161 983147983141983161 983137983139983139983151983157983150983156983145983150983143 983152983151983148983145983139983161

983105983155983155983141983155983155 983137983139983139983151983157983150983156983145983150983143 983142983148983141983160983138983145983148983145983156983161

983113983140983141983150983156983145983142983161 983152983151983156983141983150983156983145983137983148 983154983141983140 983142983148983137983143983155

983125983150983140983151 983137983150983161 983140983145983155983156983151983154983156983145983151983150983155 983137983150983140 983150983151983145983155983141






Case ID 040502

983120 983095



1







Financial Analysis















falling)







Case ID 040502

983120 983096



















Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983095



1







Financial Analysis















falling)







Case ID 040502

983120 983096



















Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983096



















Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983097



Sales









Consumer-driven

approach


Strong financial

performance

Improvemarket share







Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983089 983088


Free Cash Flows


983122983140 983101 9831229831401 (1 983085 983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141)

9831229831401 983085 983139983151983149983152983137983150983161983155 983140983141983138983156 983154983137983156983141

983117983137983154983143983145983150983137983148 983139983151983154983152983151983154983137983156983141 983156983137983160 983154983137983156983141 983101 983113983150983139983151983149983141 983156983137983160983141983160983152983141983150983155983141 983120983154983141983156983137983160 983145983150983139983151983149983141

983122983141 983101 983122983142 + β 983122983149

983122983142 983085 983154983145983155983147 983142983154983141983141 983154983137983156983141 (20983085983161983141983137983154 983125983123 983124983154983141983137983155983157983154983161

983106983151983150983140

983122983149 983085 983141983153983157983145983156983161 983154983145983155983147 983152983154983141983149983145983157983149

983127983105983107983107 983101 (983122983140 983108) + (983122983141 (983109(983108+983109)))

983122983140 983085 983107983151983155983156 983151983142 983108983141983138983156 983122983141 983085 983107983151983155983156 983151983142 983141983153983157983145983156983161






Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983089 983089




289


Cost of DebtRd = Rd









25



(PV Factor)


number of periods















Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983089 983090








Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983089 983091






Net Sales 6080788$ 5671009$ 5298668$

Costs and Expenses

Cost of sales 3548896 3255801 3245531








Net Income 628962$ 509799$ 435994$










Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094














Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502


Estimate Estimate

2009 2010 2011 2012 2013

Sales 5298668$ 5671009$ 6080788$ 6520177$ 6991316$

Cost of Sales 3063120 3058685 3333133 3573980 3832231

Gross Profit 2235548 2612324 2747655 2946197 3159085

SGampA 1202552 1424984 1472789 1579211 1693322







Net Income 500429 571898 661071 710685 766838

THE HERSHEY COMPANY







Case ID 040502

983120 983089 983094












Case ID 040502

983120 983089 983094







Documents

Hershey Case study