HERSHEY FOODS COMPANY

STEPHANIE BLAINE ACG2021.080

Annual ReportAnnual Report

Executive SummaryExecutive Summary

Chocolate sales are doing well. Hershey is in a good position globally. Hershey Food sales will be going up in the future. Cash is flowing properly.

IntroductionIntroduction Richard H. Lenny Chief Executive Officer

Hershey, PennsylvaniaDECEMBER 31, 2003

Hershey’s Chocolate*Almond Joy*Mounds*Cadbury Crème Eggs*Hershey’s Kisses Reeses*Whoppers*Hugs*Kit Kat*Jolly Rancher

WORLDWIDE

Audit ReportAudit Report

Independent Auditors

KPMG LLP

345 Park Avenue

New York, NY 10017

Stock Market InformationStock Market Information

• Stock price for February 19, 2004: $80.09

• Twelve month trading range of the company’s stock: $64.05 (3/03)- $77.40 (11/03)

• Dividends were declared on October 7,2003 and

February 17,2004 at $0.395 per share.

• Hold on to your investments. The market is slowly rising.

Industry Situation Industry Situation and Company Plansand Company Plans

Hershey Foods’ goal is to have the #1 position in the North American confectionary

market.

Hershey wants to lead in the United States chocolate related grocery products.

Income StatementIncome Statement

2002 2001

Gross Profit

Income from

Operations

$625,343 $706,405

Net Income $403,578 $207,156

Hershey Foods Corporation uses a single-step format

There has been decreases this year due to returns, discounts, and allowances, plus customer bankruptcies and closings

Balance SheetBalance Sheet

Liabilities have not changed much while Stockholder’s Equity increased a lot, making Assets bigger.

Assets

=

Liabilities

+

SHE

2002 $348,0551= $2,108,848+ $1,371,703

2001 $3,247,430= $2,011,226+ $1,147,204

Statement of Cash FlowsStatement of Cash Flows•Cash flows from operations are more than net income for the past two years.

•The company is growing through investing activities, like new

software programs. •What is the company’s primary source of financing is through stock sales.

•Overall, has cash decreased over the past year, while 2001 increased from 2000.

Accounting PoliciesAccounting Policies

•Principles of Consolidation

•Use of Estimates

•Revenue Recognition

•Cash Equivalents

•Commodities Futures Contracts

•Property, Plant and Equipment

Financial AnalysisFinancial AnalysisLiquidity RatiosLiquidity Ratios

For the past two years: 2002 2001

• Working Capital $716,772$561,097

• Current Ratio 2.31 1.925

• Receivable turnover 445 times 230 times

• Average days’ sales uncollected 8% 158%

• Inventory turnover 387 times 40times

• Average days’ inventory on hand 94% 912.5%

Financial AnalysisFinancial AnalysisProfitability RatiosProfitability Ratios

For the past two years: 2002 2001 • Profit margin (on every dollar) $0.097 $0.056

• Asset turnover 1.18 1.28

• Return on assets .116 .064

• Return on equity .294 .181

Financial AnalysisFinancial AnalysisSolvency RatioSolvency Ratio

For the past two years: 2002 2001 • Debt to equity 1.537 1.831

Financial AnalysisFinancial AnalysisMarket Strength RatiosMarket Strength Ratios

For the past two years: 2002 2001

• Price/earnings per share $2.96 $1.52

• Dividend yield $2.93 $1.50