Analyzing a Financial Statement Using Appropriate Ratios
Hershey’s is a familiar name in snacks. There’s a good chance you have recently enjoyed one of their products. The company manufactures confectionery products in a variety of packaged forms and markets them under more than 50 brands. Among the principal confectionery products in the United States are: HERSHEY’S chocolates, HERSHEY’S KISSES chocolates, KIT KAT, KRACKEL chocolate bars, MR. GOODBAR chocolate bars, REESE’S peanut butter cups, ALMOND JOY candy bars, BUBBLE YUM bubble gum, GOOD&PLENTY candy, MOUNDS candy bars, PAYDAY candy bars, and 5TH AVENUE candy bars.
The following information was reported in a recent annual statement. For the year 2006, compute the ratios discussed in this chapter. If there is not sufficient information, describe what is missing and explain what you would do. Assume a 34% tax rate.
THE HERSHEY COMPANY Consolidated Statements of Income | ||||
For the years ended December 31, | 2006 | 2005 | 2004 | |
In thousands of dollars except per share amounts Net Sales | $ 4,944,230 | $4,819,827 | $ 4,416,389 | |
Costs and Expenses: | ||||
Cost of sales | 3,076,718 | 2,956,682 | 2,672,716 | |
Selling, marketing and administrative | 860,378 | 912,986 | 867,104 | |
Business realignment and asset impairments, net | 14,576 | 96,537 |
| |
Total costs and expenses | 3,951,672 | 3,966,205 | 3,539,820 | |
Income before Interest and Income Taxes | 992,558 | 853,622 | 876,569 | |
Interest expense, net | 116,056 | 87,985 | 66,533 | |
Income before Income Taxes | 876,502 | 765,637 | 810,036 | |
Provision for income taxes | 317,441 | 277,090 | 235,399 | |
Net Income | $559,061 | $ 488,547 | $ 574,637 | |
Net Income Per Share—Basic—Common Stock | $2.44 | $ 2.05 | $ 2.31 | |
Net Income Per Share—Basic—Class B Common | ||||
Stock | $2.19 | $ 1.85 | $ 2.11 | |
Net Income Per Share—Diluted | $2.34 | $ 1.97 | $ 2.24 | |
Cash Dividends Paid Per Share: | ||||
Common Stock | $1.030 | $ .9300 | $ .8350 | |
Class B Common Stock | .925 | .8400 | .7576 | |
THE HERSHEY COMPANY Consolidated Balance Sheets | ||
December 31, | 2006 | 2005 |
In thousands of dollars |
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|
ASSETS |
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Current Assets: |
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|
Cash and cash equivalents | $ 97,141 | $ 67,183 |
Accounts receivable—trade | 522,673 | 507,119 |
Inventories | 648,820 | 634,910 |
Deferred income taxes | 61,360 | 73,203 |
Prepaid expenses and other | 87,818 | 93,988 |
Total current assets | 1,417,812 | 1,376.403 |
Property, Plant and Equipment, Net | 1,651,300 | 1,659,138 |
Goodwill | 501,955 | 487,338 |
Other Intangibles | 140,314 | 142,626 |
Other Assets | 446,184 | 597,194 |
Total assets | $ 4,157,565 | $ 4,262,699 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable | $ 155,517 | $ 167,812 |
Accrued liabilities | 454,023 | 486,832 |
Accrued income taxes | — | 16,623 |
Short-term debt | 655,233 | 819,059 |
Current portion of long-term debt | 188,765 | 56 |
Total current liabilities | 1,453,538 | 1,490,382 |
Long-term Debt | 1,248,128 | 942,755 |
Other Long-term Liabilities | 486,473 | 412,929 |
Deferred Income Taxes | 286,003 | 400,253 |
Total liabilities | 3,474,142 | 3,246,319 |
Commitments and Contingencies | — | — |
Stockholders’ Equity: |
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Preferred Stock, shares issued: none in 2006 and 2005 | — | — |
Common Stock, shares issued: 299,085,666 in 2006 and 299,083,266 in 2005 | 299.085 | 299,083 |
Class B Common Stock, shares issued: 60,816,078 in 2006 and 60,818,478 in 2005 | 60,816 | 60,818 |
Additional paid-in capital | 298,243 | 252,374 |
Unearned ESOP compensation | — | (3,193) |
Retained earnings | 3,965,415 | 3,641,483 |
Treasury—Common Stock shares, at cost: |
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129,638,183 in 2006 and 119,377,690 in 2005 | (3,801,947) | (3,224,863) |
Accumulated other comprehensive loss | (138,189) | (9,322) |
Total stockholders’ equity | 683,423 | 1,016,380 |
Total liabilities and stockholders’ equity | $ 4,157,565 | $ 4,262,699 |
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