Delaware
|
23-0691590
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification No.)
|
|
|
100 Crystal A Drive, Hershey, PA
|
17033
|
(Address of principal executive offices)
|
(Zip Code)
|
|
|
Registrant’s telephone number, including area code: (717) 534-4200
|
|
|
|
Securities registered pursuant to Section 12(b) of the Act:
|
|
Title of each class
|
Name of each exchange on which registered
|
Common Stock, one dollar par value
|
New York Stock Exchange
|
Securities registered pursuant to Section 12(g) of the Act:
|
|
Title of class
|
|
Class B Common Stock, one dollar par value
|
Item 1.
|
BUSINESS
|
|
North America, including the United States and Canada; and
|
|
International, including Latin America, Asia, Europe, Africa and exports to these regions.
|
Under the
HERSHEY’S
brand franchise:
|
|
||
HERSHEY’S
milk chocolate bar
|
HERSHEY’S BLISS
chocolates
|
||
HERSHEY’S
milk chocolate with almonds bar
|
HERSHEY’S COOKIES ‘N’ CRÈME
candy bar
|
||
HERSHEY’S
Extra Dark pure dark chocolate
|
HERSHEY’S COOKIES ‘N’ CRÈME DROPS
candy
|
||
HERSHEY’S
Nuggets chocolates
|
HERSHEY’S POT OF GOLD
boxed chocolates
|
||
HERSHEY’S
Drops chocolates
|
HERSHEY’S
sugar free chocolate candy
|
||
HERSHEY’S AIR DELIGHT
aerated
milk
chocolate
|
HERSHEY’S HUGS
candies
|
||
HERSHEY’S
Miniatures chocolate candy
|
HERSHEY'S SIMPLE PLEASURES
candy
|
||
|
HERSHEY'S
Spreads
|
Under the
KISSES
brand franchise:
|
HERSHEY’S KISSES
brand milk chocolates
|
HERSHEY’S KISSES
brand milk chocolates with almonds
|
HERSHEY’S KISSES
brand milk chocolates filled with caramel
|
HERSHEY’S KISSES
brand
SPECIAL DARK
mildly sweet chocolates
|
HERSHEY'S KISSES
brand Cookies 'n' Creme candies
|
5
th
AVENUE
candy bar
|
PAYDAY
peanut caramel bar
|
ALMOND JOY
candy bar
|
ROLO
caramels in milk chocolate
|
ALMOND JOY PIECES
candy
|
ROLO
Minis
|
BROOKSIDE
chocolate covered real fruit juice pieces
|
SKOR
toffee bar
|
CADBURY
chocolates
|
SPECIAL DARK
mildly sweet chocolate bar
|
CARAMELLO
candy bar
|
SPECIAL DARK PIECES
candy
|
GOOD & PLENTY
candy
|
SYMPHONY
milk chocolate bar
|
HEATH
toffee bar
|
SYMPHONY
milk chocolate bar with almonds and toffee
|
JOLLY RANCHER
candy
|
TAKE5
candy bar
|
JOLLY RANCHER CRUNCH 'N CHEW
candy
|
TWIZZLERS
candy
|
JOLLY RANCHER
sugar free candy
|
TWIZZLERS
sugar free candy
|
KIT KAT BIG KAT
wafer bar
|
WHATCHAMACALLIT
candy bar
|
KIT KAT
wafer bar
|
WHOPPERS
malted milk balls
|
KIT KAT
Minis
|
YORK
Minis
|
LANCASTER
Caramel Soft Crèmes
|
YORK
peppermint pattie
|
MAUNA LOA
macadamia snack nuts
|
YORK
sugar free peppermint pattie
|
MILK DUDS
candy
|
YORK PIECES
candy
|
MOUNDS
candy bar
|
ZAGNUT
candy bar
|
MR. GOODBAR
chocolate bar
|
ZERO
candy bar
|
Company
|
Brand
|
|
Location
|
|
Requirements
|
||
|
|
|
|
|
|||
Cadbury Ireland Limited
|
|
YORK
PETER PAUL ALMOND
JOY
PETER PAUL MOUNDS
|
|
Worldwide
|
|
None
|
|
Cadbury UK Limited
|
|
CADBURY
CARAMELLO
|
|
United States
|
|
Minimum sales requirement exceeded in 2013
|
|
|
|
|
|
|
|||
Société des
Produits Nestlé SA |
|
KIT KAT
ROLO
|
|
United States
|
|
Minimum unit volume sales exceeded in 2013
|
|
|
|
|
|
|
|||
Huhtamäki Oy affiliate
|
|
GOOD & PLENTY
HEATH
JOLLY RANCHER
MILK DUDS
PAYDAY
WHOPPERS
|
|
Worldwide
|
|
None
|
Item 1A.
|
RISK FACTORS
|
|
Commodity market fluctuations;
|
|
Currency exchange rates;
|
|
Imbalances between supply and demand;
|
|
The effect of weather on crop yield;
|
|
Speculative influences;
|
|
Trade agreements among producing and consuming nations;
|
|
Supplier compliance with commitments;
|
|
Political unrest in producing countries; and
|
|
Changes in governmental agricultural programs and energy policies.
|
|
Effective retail execution;
|
|
Appropriate advertising campaigns and marketing programs;
|
|
Our ability to secure adequate shelf space at retail locations;
|
|
Product innovation, including maintaining a strong pipeline of new products;
|
|
Changes in product category consumption;
|
|
Our response to consumer demographics and trends; and
|
|
Consumer health concerns, including obesity and the consumption of certain ingredients.
|
|
Natural disaster;
|
|
Pandemic outbreak of disease;
|
|
Weather;
|
|
Fire or explosion;
|
|
Terrorism or other acts of violence;
|
|
Labor strikes or other labor activities;
|
|
Unavailability of raw or packaging materials; and
|
|
Operational and/or financial instability of key suppliers, and other vendors or service providers.
|
|
Unforeseen global economic and environmental changes resulting in business interruption, supply constraints, inflation, deflation or decreased demand;
|
|
Inability to establish, develop and achieve market acceptance of our global brands in international markets;
|
|
Difficulties and costs associated with compliance and enforcement of remedies under a wide variety of complex laws, treaties and regulations;
|
|
Unexpected changes in regulatory environments;
|
|
Political and economic instability, including the possibility of civil unrest, terrorism, mass violence or armed conflict;
|
|
Nationalization of our properties by foreign governments;
|
|
Tax rates that may exceed those in the United States and earnings that may be subject to withholding requirements and incremental taxes upon repatriation;
|
|
Potentially negative consequences from changes in tax laws;
|
|
The imposition of tariffs, quotas, trade barriers, other trade protection measures and import or export licensing requirements;
|
|
Increased costs, disruptions in shipping or reduced availability of freight transportation;
|
|
The impact of currency exchange rate fluctuations between the U.S. dollar and foreign currencies;
|
|
Failure to gain sufficient profitable scale in certain international markets resulting in losses from impairment or sale of assets; and
|
|
Failure to recruit, retain and build a talented and engaged global workforce.
|
Item 1B.
|
UNRESOLVED STAFF COMMENTS
|
Item 2.
|
PROPERTIES
|
Country
|
|
Location
|
|
Type
|
|
Status
(Own/Lease)
|
United States
|
|
Hershey, Pennsylvania
(2 principal plants)
|
|
Manufacturing—confectionery products and pantry items
|
|
Own
|
|
|
Lancaster, Pennsylvania
|
|
Manufacturing—confectionery products
|
|
Own
|
|
|
Robinson, Illinois
|
|
Manufacturing—confectionery products, and pantry items
|
|
Own
|
|
|
Stuarts Draft, Virginia
|
|
Manufacturing—confectionery products and pantry items
|
|
Own
|
|
|
Edwardsville, Illinois
|
|
Distribution
|
|
Own
|
|
|
Palmyra, Pennsylvania
|
|
Distribution
|
|
Own
|
|
|
Ogden, Utah
|
|
Distribution
|
|
Own
|
Canada
|
|
Brantford, Ontario
|
|
Distribution
|
|
Own
(1)
|
Mexico
|
|
Monterrey, Mexico
|
|
Manufacturing—confectionery products
|
|
Own
|
Item 3.
|
LEGAL PROCEEDINGS
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Item 5.
|
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
5-Year
Compound
Growth Rate
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||
Summary of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net Sales
|
6.8
|
%
|
|
$
|
7,146,079
|
|
|
6,644,252
|
|
|
6,080,788
|
|
|
5,671,009
|
|
|
5,298,668
|
|
|
5,132,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of Sales
|
2.7
|
%
|
|
$
|
3,865,231
|
|
|
3,784,370
|
|
|
3,548,896
|
|
|
3,255,801
|
|
|
3,245,531
|
|
|
3,375,050
|
|
Selling, Marketing and Administrative
|
12.4
|
%
|
|
$
|
1,922,508
|
|
|
1,703,796
|
|
|
1,477,750
|
|
|
1,426,477
|
|
|
1,208,672
|
|
|
1,073,019
|
|
Business Realignment and Impairment Charges (Credits), Net
|
(27.7
|
)%
|
|
$
|
18,665
|
|
|
44,938
|
|
|
(886
|
)
|
|
83,433
|
|
|
82,875
|
|
|
94,801
|
|
Interest Expense, Net
|
(2.0
|
)%
|
|
$
|
88,356
|
|
|
95,569
|
|
|
92,183
|
|
|
96,434
|
|
|
90,459
|
|
|
97,876
|
|
Provision for Income Taxes
|
19.0
|
%
|
|
$
|
430,849
|
|
|
354,648
|
|
|
333,883
|
|
|
299,065
|
|
|
235,137
|
|
|
180,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
21.4
|
%
|
|
$
|
820,470
|
|
|
660,931
|
|
|
628,962
|
|
|
509,799
|
|
|
435,994
|
|
|
311,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net Income Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
—Basic—Class B Stock
|
21.7
|
%
|
|
$
|
3.39
|
|
|
2.73
|
|
|
2.58
|
|
|
2.08
|
|
|
1.77
|
|
|
1.27
|
|
—Diluted—Class B Stock
|
21.6
|
%
|
|
$
|
3.37
|
|
|
2.71
|
|
|
2.56
|
|
|
2.07
|
|
|
1.77
|
|
|
1.27
|
|
—Basic—Common Stock
|
21.7
|
%
|
|
$
|
3.76
|
|
|
3.01
|
|
|
2.85
|
|
|
2.29
|
|
|
1.97
|
|
|
1.41
|
|
—Diluted—Common Stock
|
21.6
|
%
|
|
$
|
3.61
|
|
|
2.89
|
|
|
2.74
|
|
|
2.21
|
|
|
1.90
|
|
|
1.36
|
|
Weighted-Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
—Basic—Common Stock
|
|
|
|
163,549
|
|
|
164,406
|
|
|
165,929
|
|
|
167,032
|
|
|
167,136
|
|
|
166,709
|
|
|
—Basic—Class B Stock
|
|
|
|
60,627
|
|
|
60,630
|
|
|
60,645
|
|
|
60,708
|
|
|
60,709
|
|
|
60,777
|
|
|
—Diluted
|
|
|
|
227,203
|
|
|
228,337
|
|
|
229,919
|
|
|
230,313
|
|
|
228,995
|
|
|
228,697
|
|
|
Dividends Paid on Common Stock
|
8.3
|
%
|
|
$
|
294,979
|
|
|
255,596
|
|
|
228,269
|
|
|
213,013
|
|
|
198,371
|
|
|
197,839
|
|
Per Share
|
8.7
|
%
|
|
$
|
1.81
|
|
|
1.56
|
|
|
1.38
|
|
|
1.28
|
|
|
1.19
|
|
|
1.19
|
|
Dividends Paid on Class B Stock
|
8.7
|
%
|
|
$
|
98,822
|
|
|
85,610
|
|
|
75,814
|
|
|
70,421
|
|
|
65,032
|
|
|
65,110
|
|
Per Share
|
8.8
|
%
|
|
$
|
1.63
|
|
|
1.41
|
|
|
1.25
|
|
|
1.16
|
|
|
1.07
|
|
|
1.07
|
|
Depreciation
|
(6.0
|
)%
|
|
$
|
166,544
|
|
|
174,788
|
|
|
188,491
|
|
|
169,677
|
|
|
157,996
|
|
|
227,183
|
|
Advertising
|
29.3
|
%
|
|
$
|
582,354
|
|
|
480,016
|
|
|
414,171
|
|
|
391,145
|
|
|
241,184
|
|
|
161,133
|
|
Salaries and wages
|
2.7
|
%
|
|
$
|
735,889
|
|
|
709,621
|
|
|
676,482
|
|
|
641,756
|
|
|
613,568
|
|
|
645,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Year-end Position and Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Capital Additions
|
4.3
|
%
|
|
$
|
323,551
|
|
|
258,727
|
|
|
323,961
|
|
|
179,538
|
|
|
126,324
|
|
|
262,643
|
|
Capitalized Software Additions
|
6.1
|
%
|
|
$
|
27,360
|
|
|
19,239
|
|
|
23,606
|
|
|
21,949
|
|
|
19,146
|
|
|
20,336
|
|
Total Assets
|
8.1
|
%
|
|
$
|
5,357,488
|
|
|
4,754,839
|
|
|
4,407,094
|
|
|
4,267,627
|
|
|
3,669,926
|
|
|
3,629,614
|
|
Short-term Debt and Current Portion of Long-term Debt
|
(19.8
|
)%
|
|
$
|
166,875
|
|
|
375,898
|
|
|
139,673
|
|
|
285,480
|
|
|
39,313
|
|
|
501,504
|
|
Long-term Portion of Debt
|
3.6
|
%
|
|
$
|
1,795,142
|
|
|
1,530,967
|
|
|
1,748,500
|
|
|
1,541,825
|
|
|
1,502,730
|
|
|
1,505,954
|
|
Stockholders’ Equity
|
35.2
|
%
|
|
$
|
1,616,052
|
|
|
1,048,373
|
|
|
880,943
|
|
|
945,896
|
|
|
768,634
|
|
|
358,239
|
|
Full-time Employees
|
|
|
12,600
|
|
|
12,100
|
|
|
11,800
|
|
|
11,300
|
|
|
12,100
|
|
|
12,800
|
|
||
Stockholders’ Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Outstanding Shares of Common Stock and Class B Stock at Year-end
|
|
|
223,895
|
|
|
223,786
|
|
|
225,206
|
|
|
227,030
|
|
|
227,998
|
|
|
227,035
|
|
||
Market Price of Common Stock at
Year-end |
22.9
|
%
|
|
$
|
97.23
|
|
|
72.22
|
|
|
61.78
|
|
|
47.15
|
|
|
35.79
|
|
|
34.74
|
|
Price Range During Year (high)
|
|
|
$
|
100.90
|
|
|
74.64
|
|
|
62.26
|
|
|
52.10
|
|
|
42.25
|
|
|
44.32
|
|
|
Price Range During Year (low)
|
|
|
$
|
73.51
|
|
|
59.49
|
|
|
46.24
|
|
|
35.76
|
|
|
30.27
|
|
|
32.10
|
|
Item 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
For the years ended December 31,
|
|
2013
|
|
2012
|
||||||||||||||||||||
|
|
EBIT
|
|
Net
Income |
|
EPS
|
|
EBIT
|
|
Net
Income |
|
EPS
|
||||||||||||
In millions of dollars except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Results in accordance with GAAP
|
|
$
|
1,339.7
|
|
|
$
|
820.5
|
|
|
$
|
3.61
|
|
|
$
|
1,111.1
|
|
|
$
|
660.9
|
|
|
$
|
2.89
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Business realignment charges included in cost of sales (“COS”)
|
|
0.4
|
|
|
0.2
|
|
|
—
|
|
|
36.4
|
|
|
23.7
|
|
|
0.10
|
|
||||||
Non-service-related pension expense included in COS
|
|
5.4
|
|
|
3.3
|
|
|
0.02
|
|
|
8.6
|
|
|
5.3
|
|
|
0.03
|
|
||||||
Acquisition costs included in COS
|
|
0.3
|
|
|
0.2
|
|
|
—
|
|
|
4.1
|
|
|
3.0
|
|
|
0.01
|
|
||||||
Business realignment charges included in selling, marketing and administrative (“SM&A”)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.4
|
|
|
1.6
|
|
|
0.01
|
|
||||||
Non-service-related pension expense included in SM&A
|
|
5.5
|
|
|
3.3
|
|
|
0.01
|
|
|
12.0
|
|
|
7.4
|
|
|
0.03
|
|
||||||
Acquisition costs included in SM&A
|
|
3.8
|
|
|
5.2
|
|
|
0.03
|
|
|
9.3
|
|
|
6.2
|
|
|
0.03
|
|
||||||
Business realignment and impairment charges, net
|
|
18.6
|
|
|
11.6
|
|
|
0.05
|
|
|
45.0
|
|
|
31.9
|
|
|
0.14
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted non-GAAP results
|
|
$
|
1,373.7
|
|
|
$
|
844.3
|
|
|
$
|
3.72
|
|
|
$
|
1,228.9
|
|
|
$
|
740.0
|
|
|
$
|
3.24
|
|
For the years ended December 31,
|
|
2011
|
|
2010
|
||||||||||||||||||||
|
|
EBIT
|
|
Net
Income |
|
EPS
|
|
EBIT
|
|
Net
Income |
|
EPS
|
||||||||||||
In millions of dollars except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Results in accordance with GAAP
|
|
$
|
1,055.0
|
|
|
$
|
628.9
|
|
|
$
|
2.74
|
|
|
$
|
905.3
|
|
|
$
|
509.8
|
|
|
$
|
2.21
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Business realignment charges included in COS
|
|
45.1
|
|
|
28.4
|
|
|
0.12
|
|
|
13.7
|
|
|
8.4
|
|
|
0.04
|
|
||||||
Non-service-related pension expense included in COS
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
0.6
|
|
|
—
|
|
||||||
Business realignment charges included in SM&A
|
|
5.0
|
|
|
3.0
|
|
|
0.01
|
|
|
1.5
|
|
|
0.9
|
|
|
—
|
|
||||||
Non-service-related pension expense included in SM&A
|
|
2.8
|
|
|
2.0
|
|
|
0.01
|
|
|
5.0
|
|
|
3.2
|
|
|
0.02
|
|
||||||
Gain on sale of trademark licensing rights included in SM&A
|
|
(17.0
|
)
|
|
(11.1
|
)
|
|
(0.05
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Business realignment and impairment (credits) charges, net
|
|
(0.9
|
)
|
|
(0.5
|
)
|
|
—
|
|
|
83.4
|
|
|
68.6
|
|
|
0.30
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted non-GAAP results
|
|
$
|
1,090.0
|
|
|
$
|
650.7
|
|
|
$
|
2.83
|
|
|
$
|
1,009.8
|
|
|
$
|
591.5
|
|
|
$
|
2.57
|
|
|
|
Adjusted Non-GAAP Results
|
|||||||
Key Annual Performance Measures
|
|
2013
|
|
2012
|
|
2011
|
|||
Increase in Net Sales
|
|
7.6
|
%
|
|
9.3
|
%
|
|
7.2
|
%
|
Increase in adjusted EBIT
|
|
11.8
|
%
|
|
12.7
|
%
|
|
7.9
|
%
|
Improvement in adjusted EBIT Margin in basis points (“bps”)
|
|
70bps
|
|
|
60bps
|
|
|
10bps
|
|
Increase in adjusted EPS
|
|
14.8
|
%
|
|
14.5
|
%
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
Percent Change
|
||||||||||
|
|
|
|
|
|
|
|
Increase (Decrease)
|
||||||||||
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|
2013-2012
|
|
2012-2011
|
||||||||
In millions of dollars except per share amounts
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net Sales
|
|
$
|
7,146.0
|
|
|
$
|
6,644.3
|
|
|
$
|
6,080.8
|
|
|
7.6
|
%
|
|
9.3
|
%
|
Cost of Sales
|
|
3,865.2
|
|
|
3,784.4
|
|
|
3,548.9
|
|
|
2.1
|
|
|
6.6
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross Profit
|
|
3,280.8
|
|
|
2,859.9
|
|
|
2,531.9
|
|
|
14.7
|
|
|
13.0
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross Margin
|
|
45.9
|
%
|
|
43.0
|
%
|
|
41.6
|
%
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
SM&A Expense
|
|
1,922.5
|
|
|
1,703.8
|
|
|
1,477.8
|
|
|
12.8
|
|
|
15.3
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
SM&A Expense as a percent of sales
|
|
26.9
|
%
|
|
25.6
|
%
|
|
24.3
|
%
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Business Realignment and Impairment
Charges (Credits), Net
|
|
18.6
|
|
|
45.0
|
|
|
(0.9
|
)
|
|
(58.5
|
)
|
|
N/A
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
EBIT
|
|
1,339.7
|
|
|
1,111.1
|
|
|
1,055.0
|
|
|
20.6
|
|
|
5.3
|
|
|||
EBIT Margin
|
|
18.7
|
%
|
|
16.7
|
%
|
|
17.4
|
%
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest Expense, Net
|
|
88.4
|
|
|
95.6
|
|
|
92.2
|
|
|
(7.5
|
)
|
|
3.7
|
|
|||
Provision for Income Taxes
|
|
430.8
|
|
|
354.6
|
|
|
333.9
|
|
|
21.5
|
|
|
6.2
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Effective Income Tax Rate
|
|
34.4
|
%
|
|
34.9
|
%
|
|
34.7
|
%
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
820.5
|
|
|
$
|
660.9
|
|
|
$
|
628.9
|
|
|
24.1
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net Income Per Share—Diluted
|
|
$
|
3.61
|
|
|
$
|
2.89
|
|
|
$
|
2.74
|
|
|
24.9
|
|
|
5.5
|
|
For the 52 weeks ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|||
Consumer Takeaway Increase
|
|
6.3
|
%
|
|
5.7
|
%
|
|
7.8
|
%
|
Market Share Increase
|
|
1.1
|
|
|
0.6
|
|
|
0.8
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Cost of sales
|
|
|
|
|
|
|
||||||
Next Century program
|
|
$
|
402
|
|
|
$
|
36,383
|
|
|
$
|
39,280
|
|
Global supply chain transformation program
|
|
—
|
|
|
—
|
|
|
5,816
|
|
|||
|
|
|
|
|
|
|
||||||
Total cost of sales
|
|
402
|
|
|
36,383
|
|
|
45,096
|
|
|||
|
|
|
|
|
|
|
||||||
Selling, marketing and administrative - Next Century program
|
|
18
|
|
|
2,446
|
|
|
4,961
|
|
|||
|
|
|
|
|
|
|
||||||
Business realignment and impairment charges, net
|
|
|
|
|
|
|
||||||
Next Century program:
|
|
|
|
|
|
|
||||||
Pension settlement loss
|
|
—
|
|
|
15,787
|
|
|
—
|
|
|||
Plant closure expenses
|
|
16,387
|
|
|
20,780
|
|
|
8,620
|
|
|||
Employee separation costs (credits)
|
|
—
|
|
|
914
|
|
|
(9,506
|
)
|
|||
India voluntary retirement program
|
|
2,278
|
|
|
—
|
|
|
—
|
|
|||
Tri-US, Inc. asset impairment charges
|
|
—
|
|
|
7,457
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
Total business realignment and impairment charges (credits), net
|
|
18,665
|
|
|
44,938
|
|
|
(886
|
)
|
|||
|
|
|
|
|
|
|
||||||
Total net charges associated with business realignment initiatives and impairment
|
|
$
|
19,085
|
|
|
$
|
83,767
|
|
|
$
|
49,171
|
|
In thousands of dollars
|
Purchase Price Allocation
|
|
Estimated Useful Life in Years
|
||||
Goodwill
|
$
|
67,974
|
|
|
Indefinite
|
||
Trademarks
|
60,253
|
|
|
25
|
|||
Other intangibles
(1)
|
51,057
|
|
|
6
|
to
|
17
|
|
Other assets, net of liabilities assumed of $18.7 million
|
21,673
|
|
|
|
|||
Non-current deferred tax liabilities
|
(28,101
|
)
|
|
|
|||
Purchase Price
|
$
|
172,856
|
|
|
|
(1)
|
Includes customer relationships, patents and covenants not to compete.
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Current assets
|
|
$
|
2,487,334
|
|
|
$
|
2,113,485
|
|
Property, plant and equipment, net
|
|
1,805,345
|
|
|
1,674,071
|
|
||
Goodwill and other intangibles
|
|
771,805
|
|
|
802,716
|
|
||
Deferred income taxes
|
|
—
|
|
|
12,448
|
|
||
Other assets
|
|
293,004
|
|
|
152,119
|
|
||
|
|
|
|
|
||||
Total assets
|
|
$
|
5,357,488
|
|
|
$
|
4,754,839
|
|
l
|
The change in current assets from 2012 to 2013 was primarily due to the following:
|
|
|
|
Higher cash and cash equivalents in 2013 reflecting strong cash flow from operations;
|
|
|
An increase in accounts receivable reflecting higher sales in December 2013 compared with December 2012;
|
|
|
An increase in total inventories primarily reflecting higher finished goods inventories necessary to support anticipated sales levels of everyday items and the introduction of new products; and
|
|
|
A decrease in current deferred income tax assets primarily reflecting the impact of the change in value of derivative instruments, particularly interest rate swap agreements.
|
l
|
Higher property, plant and equipment in 2013, reflecting capital additions of $323.6 million, partly offset by depreciation expense of $166.5 million.
|
|
l
|
A decrease in non-current deferred tax assets as a result of the change in the funded status of our pension plans.
|
|
l
|
A decrease in goodwill and other intangibles primarily due to the effect of foreign currency translation.
|
|
l
|
An increase in other assets primarily due to a receivable for an anticipated U.S. and Canada Competent Authority resolution of various proposed tax adjustments, the improvement in the funded status of our pension plans and the value of interest rate swap agreements at the end of the year.
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Current liabilities
|
|
$
|
1,408,022
|
|
|
$
|
1,471,110
|
|
Long-term debt
|
|
1,795,142
|
|
|
1,530,967
|
|
||
Other long-term liabilities
|
|
434,068
|
|
|
668,732
|
|
||
Deferred income taxes
|
|
104,204
|
|
|
35,657
|
|
||
|
|
|
|
|
||||
Total liabilities
|
|
$
|
3,741,436
|
|
|
$
|
3,706,466
|
|
l
|
Changes in current liabilities from 2012 to 2013 were primarily the result of the following:
|
|
|
|
Higher accounts payable reflecting an increase in amounts payable for marketing programs as well as capital expenditures, partially offset by the timing of payments associated with inventory deliveries to support manufacturing requirements;
|
|
|
Higher accrued liabilities related to marketing and trade promotion programs, partially offset by lower liabilities associated with the Next Century program;
|
|
|
An increase in accrued income taxes reflecting the impact of proposed tax adjustments in Canada associated with business realignment charges and transfer pricing;
|
|
|
An increase in short-term debt primarily associated with an increase in short-term borrowings for Canada and Mexico, partially offset by the repayment of short-term debt in India; and
|
|
|
A decrease in the current portion of long-term debt reflecting the repayment of $250 million of 5.0% Notes in 2013.
|
l
|
An increase in long-term debt reflecting the issuance of $250 million of 2.625% Notes due in May 2023.
|
|
l
|
A decrease in other long-term liabilities primarily due to the change in the funded status of our pension plans.
|
|
l
|
An increase in deferred income taxes primarily reflecting the tax effect of the change in the funded status of our pension plans.
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
820,470
|
|
|
$
|
660,931
|
|
|
$
|
628,962
|
|
Depreciation and amortization
|
|
201,033
|
|
|
210,037
|
|
|
215,763
|
|
|||
Stock-based compensation and excess tax benefits
|
|
5,571
|
|
|
16,606
|
|
|
29,471
|
|
|||
Deferred income taxes
|
|
7,457
|
|
|
13,785
|
|
|
33,611
|
|
|||
Gain on sale of trademark licensing rights, net of tax
|
|
—
|
|
|
—
|
|
|
(11,072
|
)
|
|||
Non-cash business realignment and impairment
charges
|
|
—
|
|
|
38,144
|
|
|
34,660
|
|
|||
Contributions to pension and other benefit plans
|
|
(57,213
|
)
|
|
(44,208
|
)
|
|
(31,671
|
)
|
|||
Working capital
|
|
(29,391
|
)
|
|
(2,133
|
)
|
|
(116,909
|
)
|
|||
Changes in other assets and liabilities
|
|
240,478
|
|
|
201,665
|
|
|
(194,948
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net cash provided from operating activities
|
|
$
|
1,188,405
|
|
|
$
|
1,094,827
|
|
|
$
|
587,867
|
|
l
|
Over the past three years, total cash provided from operating activities was approximately $2.9 billion.
|
l
|
Depreciation and amortization expenses decreased in 2013, in comparison with 2012, primarily due to lower accelerated depreciation charges related to the Next Century program, offset somewhat by higher capital additions in 2013. Depreciation and amortization expenses decreased in 2012, as compared with 2011, principally as the result of lower accelerated depreciation charges related to the Next Century program, somewhat offset by higher depreciation and amortization charges related to the Brookside acquisition. No significant accelerated depreciation expense was recorded in 2013 compared with approximately $15.3 million recorded in 2012 and $33.0 million recorded in 2011. Depreciation and amortization expenses represent non-cash items that impacted net income and are reflected in the consolidated statements of cash flows to reconcile cash flows from operating activities.
|
l
|
The deferred income tax provision in 2013 was lower than in 2012 primarily as a result of a foreign deferred income tax benefit in 2013 reflecting higher deferred tax assets related to advertising and promotion reserves, partially offset by an increase in the federal deferred income tax provision associated principally with higher deferred tax liabilities related to inventories. The deferred income tax provision was lower in 2012 than in 2011 primarily as a result of the lower tax impact associated with bonus depreciation resulting from reduced capital expenditures in 2012 for the Next Century program. Deferred income taxes represent non-cash items that impacted net income and are reflected in the consolidated statements of cash flows to reconcile cash flows from operating activities.
|
l
|
During the third quarter of 2011, we recorded an $11.1 million gain, net of tax, on the sale of certain non-core trademark licensing rights.
|
l
|
We contributed $133.1 million to our pension and other benefit plans over the past three years to improve the funded status of our domestic plans and to pay benefits under our non-funded pension plans and other benefit plans.
|
l
|
Over the three-year period, cash provided from working capital tended to fluctuate due to the timing of sales and cash collections during December of each year and working capital management practices, including initiatives implemented to reduce working capital. The decrease in cash used by accounts receivable in 2013 was associated with timing of sales and cash collections during December 2013 compared with December 2012. Cash used by changes in inventories in 2013 primarily resulted from higher finished goods inventory levels at the end of 2013 to support anticipated sales levels of everyday items and the introduction of new products, along with the impact of the lower adjustment to LIFO. Cash provided from changes in accounts payable in 2013 were associated with the timing of payments for inventory deliveries and marketing programs. Cash provided from changes in inventories in 2012 resulted from lower inventory levels which were higher at the end of 2011 in anticipation of the transition of production under the Next Century program. Changes in cash used by inventories in 2011 was primarily associated with increases in inventory levels in anticipation of the transition of production under the Next Century program, along with higher inventories to support seasonal sales.
|
l
|
During the three-year period, cash provided from or used by changes in other assets and liabilities reflected the effect of hedging transactions and the impact of business realignment initiatives, along with the related tax effects. Cash provided from changes in other assets and liabilities in 2013 compared with 2012 was primarily associated with the effect of business realignment and impairment charges and the timing of payments associated with selling and marketing programs of $92.5 million, partially offset by the impact of changes in various accrued liabilities and hedging transactions of $53.7 million. Cash provided from changes in other assets and liabilities in 2012 compared with cash used by changes in other assets and liabilities in 2011 primarily reflected the effect of hedging transactions of $304.2 million, the effect of changes in deferred and accrued income taxes of $44.1 million and business realignment initiatives of $46.8 million.
|
l
|
Taxable income and related tax payments in 2013 reflected the increase in income for the year. Taxable income and related tax payments in 2012 and 2011 were reduced primarily by bonus depreciation tax deductions driven by capital expenditures associated with the Next Century program. This was offset somewhat by increases in income taxes paid associated with higher income.
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Capital additions
|
|
$
|
(323,551
|
)
|
|
$
|
(258,727
|
)
|
|
$
|
(323,961
|
)
|
Capitalized software additions
|
|
(27,360
|
)
|
|
(19,239
|
)
|
|
(23,606
|
)
|
|||
Proceeds from sales of property, plant and equipment
|
|
15,331
|
|
|
453
|
|
|
312
|
|
|||
Proceeds from sale of trademark licensing rights
|
|
—
|
|
|
—
|
|
|
20,000
|
|
|||
Loan to affiliate
|
|
(16,000
|
)
|
|
(23,000
|
)
|
|
(7,000
|
)
|
|||
Business acquisitions
|
|
—
|
|
|
(172,856
|
)
|
|
(5,750
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net cash used by investing activities
|
|
$
|
(351,580
|
)
|
|
$
|
(473,369
|
)
|
|
$
|
(340,005
|
)
|
l
|
Capital additions in 2013 for the construction of a new manufacturing facility in Malaysia totaled $40.0 million. Capital additions associated with our Next Century program in 2013 were $11.8 million, in 2012 were $74.7 million, and in 2011 were $179.4 million. Other capital additions were primarily related to purchases of manufacturing equipment for new products and the improvement of manufacturing efficiency.
|
l
|
Capitalized software additions were primarily for ongoing enhancement of our information systems.
|
l
|
We anticipate total capital expenditures, including capitalized software, of approximately $355 million to $375 million in 2014 of which $120 million to $130 million is associated with the construction of the manufacturing facility in Malaysia.
|
l
|
The loans to affiliate during the three-year period were associated with financing the expansion of manufacturing capacity under our manufacturing agreement in China with Lotte Confectionery Company LTD.
|
l
|
In January 2012, the Company acquired Brookside for approximately $172.9 million.
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net change in short-term borrowings
|
|
$
|
54,351
|
|
|
$
|
77,698
|
|
|
$
|
10,834
|
|
Long-term borrowings
|
|
250,595
|
|
|
4,025
|
|
|
249,126
|
|
|||
Repayment of long-term debt
|
|
(250,761
|
)
|
|
(99,381
|
)
|
|
(256,189
|
)
|
|||
Proceeds from lease financing agreement
|
|
—
|
|
|
—
|
|
|
47,601
|
|
|||
Cash dividends paid
|
|
(393,801
|
)
|
|
(341,206
|
)
|
|
(304,083
|
)
|
|||
Exercise of stock options and excess tax benefits
|
|
195,651
|
|
|
295,473
|
|
|
198,408
|
|
|||
Net contributions from (payments to) noncontrolling interests
|
|
2,940
|
|
|
(12,851
|
)
|
|
—
|
|
|||
Repurchase of Common Stock
|
|
(305,564
|
)
|
|
(510,630
|
)
|
|
(384,515
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net cash used by financing activities
|
|
$
|
(446,589
|
)
|
|
$
|
(586,872
|
)
|
|
$
|
(438,818
|
)
|
l
|
In addition to utilizing cash on hand, we use short-term borrowings (commercial paper and bank borrowings) to fund seasonal working capital requirements and ongoing business needs. The reduction in short-term borrowings in 2013 was associated with our international businesses. The increase in short-term borrowings in 2012 was primarily associated with the Brookside acquisition and our international businesses, partially offset by repayments of Godrej Hershey debt. Additional information on short-term borrowings is included under Borrowing Arrangements below.
|
l
|
In May 2013, we issued $250 million of 2.625% Notes due in 2023 and, in November 2011, we issued $250 million of 1.5% Notes due in 2016. The long-term borrowings in 2013 and 2011 were issued under shelf registration statements on Form S-3 described under Registration Statements below.
|
l
|
In April 2013, we repaid $250 million of 5.0% Notes due in 2013 and, in August 2012, we repaid $92.5 million of 6.95% Notes due in 2012. Additionally, in September 2011, we repaid $250.0 million of 5.3% Notes due in 2011.
|
l
|
In September 2011, we entered into a sale and leasing agreement for the 19 East Chocolate Avenue manufacturing facility. Based on the leasing agreement, we are deemed to be the owner of the property for accounting purposes. We received net proceeds of $47.6 million and recorded a lease financing obligation of $50.0 million under the leasing agreement.
|
l
|
Equity contributions of $2.9 million were received from the noncontrolling interests in Hershey do Brasil in 2013. In May 2007, we entered into an agreement with Godrej Beverages and Foods, Ltd., a consumer goods, confectionery and food company, to manufacture and distribute confectionery products, snacks and beverages across India. Under the agreement, we owned a 51% controlling interest in Godrej Hershey Ltd. In September 2012, we acquired the remaining 49% interest in Godrej Hershey Ltd. for approximately $15.8 million. Payments to noncontrolling interests associated with Godrej Hershey Ltd. in 2012 were partially offset by equity contributions of $2.9 million by the noncontrolling interests in Hershey do Brasil in 2012.
|
l
|
We paid cash dividends of $295.0 million on our Common Stock and $98.8 million on our Class B Stock in 2013.
|
l
|
Cash used for the repurchase of Common Stock was partially offset by cash received from the exercise of stock options and the impact of excess tax benefits from stock-based compensation.
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
In thousands
|
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|||||||||
Shares repurchased under authorized programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Open market repurchases
|
|
—
|
|
|
$
|
—
|
|
|
2,054
|
|
|
$
|
124,931
|
|
|
1,903
|
|
|
$
|
100,015
|
|
Shares repurchased to replace reissued shares
|
|
3,656
|
|
|
305,564
|
|
|
5,599
|
|
|
385,699
|
|
|
5,179
|
|
|
284,500
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total share repurchases
|
|
3,656
|
|
|
305,564
|
|
|
7,653
|
|
|
510,630
|
|
|
7,082
|
|
|
384,515
|
|
|||
Shares issued for stock-based compensation programs
|
|
(3,765
|
)
|
|
(156,502
|
)
|
|
(6,233
|
)
|
|
(210,924
|
)
|
|
(5,258
|
)
|
|
(177,654
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net change
|
|
(109
|
)
|
|
$
|
149,062
|
|
|
1,420
|
|
|
$
|
299,706
|
|
|
1,824
|
|
|
$
|
206,861
|
|
l
|
We intend to repurchase shares of Common Stock in order to replace Treasury Stock shares issued for exercised stock options and other stock-based compensation. The value of shares purchased in a given period will vary based on stock options exercised over time and market conditions.
|
l
|
In April 2011, our Board of Directors approved a $250 million authorization to repurchase shares of our Common Stock. As of December 31, 2013, $125.1 million remained available for repurchases of our Common Stock.
|
|
|
Shares
|
|
Dollars
|
|||
|
|
In thousands
|
|||||
Shares repurchased under authorized programs:
|
|
|
|
|
|||
Open market repurchases
|
|
61,393
|
|
|
$
|
2,209,377
|
|
Repurchases from the Milton Hershey School Trust
|
|
11,918
|
|
|
245,550
|
|
|
Shares retired
|
|
(1,056
|
)
|
|
(12,820
|
)
|
|
|
|
|
|
|
|||
Total repurchases under authorized programs
|
|
72,255
|
|
|
2,442,107
|
|
|
Privately negotiated purchases from the Milton Hershey School Trust
|
|
67,282
|
|
|
1,501,373
|
|
|
Shares repurchased to replace reissued shares
|
|
44,995
|
|
|
2,208,116
|
|
|
Shares issued for stock-based compensation programs and employee benefits
|
|
(48,525
|
)
|
|
(1,443,866
|
)
|
|
|
|
|
|
|
|||
Total held as Treasury Stock as of December 31, 2013
|
|
136,007
|
|
|
$
|
4,707,730
|
|
l
|
In October 2011, we entered into a new five-year agreement establishing an unsecured revolving credit facility to borrow up to $1.1 billion, with an option to increase borrowings by an additional $400 million with the consent of the lenders.
|
l
|
In November 2013, the five-year agreement entered into in October 2011 was amended. The amendment reduced the amount of borrowings available under the unsecured revolving credit facility to $1.0 billion, with an option to increase borrowings by an additional $400 million with the consent of the lenders, and extended the termination date to November 2018. As of December 31, 2013, $1.0 billion was available to borrow under the agreement and no borrowings were outstanding. The unsecured revolving credit agreement contains certain financial and other covenants, customary representations, warranties and events of default. As of December 31, 2013, we complied with all of these covenants. We may use these funds for general corporate purposes, including commercial paper backstop and business acquisitions.
|
l
|
In addition to the revolving credit facility, we maintain lines of credit with domestic and international commercial banks. As of December 31, 2013, we could borrow up to approximately $290.3 million in various currencies under the lines of credit and as of December 31, 2012, we could borrow up to $176.7 million.
|
l
|
In May 2009, we filed a shelf registration statement on Form S-3 that registered an indeterminate amount of debt securities. This registration statement was effective immediately upon filing under Securities and Exchange Commission regulations governing “well-known seasoned issuers” (the “2009 WKSI Registration Statement”).
|
l
|
In November 2011, we issued $250 million of 1.50% Notes due November 1, 2016 and, in December 2010, we issued $350 million of 4.125% Notes due December 1, 2020. The Notes were issued under the 2009 WKSI Registration Statement.
|
l
|
The 2009 WKSI Registration Statement expired in May 2012. Accordingly, in May 2012, we filed a new registration statement on Form S-3 (the “2012 WKSI Registration Statement”) to replace the 2009 WKSI Registration Statement. The registration statement filed in May 2012 registered an indeterminate amount of debt securities effective immediately.
|
l
|
In May 2013, we issued $250 million of 2.625% Notes due May 1, 2023. The Notes were issued under the 2012 WKSI Registration Statement.
|
l
|
Proceeds from the debt issuances and any other offerings under the the 2012 WKSI Registration Statement may be used for general corporate requirements. These may include reducing existing borrowings, financing capital additions, and funding contributions to our pension plans, future business acquisitions and working capital requirements.
|
|
|
Payments Due by Year
|
||||||||||||||||||||||||||
|
|
In thousands of dollars
|
||||||||||||||||||||||||||
Contractual Obligations
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Thereafter
|
|
Total
|
||||||||||||||
Unconditional Purchase Obligations
|
|
$
|
1,381,600
|
|
|
$
|
651,900
|
|
|
$
|
48,300
|
|
|
$
|
6,400
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,088,200
|
|
Lease Obligations
|
|
36,669
|
|
|
11,521
|
|
|
10,819
|
|
|
7,563
|
|
|
2,184
|
|
|
1,580
|
|
|
70,336
|
|
|||||||
Minimum Pension Plan Funding Obligations
|
|
3,559
|
|
|
2,746
|
|
|
2,712
|
|
|
2,782
|
|
|
2,556
|
|
|
2,433
|
|
|
16,788
|
|
|||||||
Long-term Debt
|
|
914
|
|
|
251,433
|
|
|
501,331
|
|
|
878
|
|
|
411
|
|
|
1,041,089
|
|
|
1,796,056
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total Obligations
|
|
$
|
1,422,742
|
|
|
$
|
917,600
|
|
|
$
|
563,162
|
|
|
$
|
17,623
|
|
|
$
|
5,151
|
|
|
$
|
1,045,102
|
|
|
$
|
3,971,380
|
|
|
Maturity Date
|
|||||||||||||||||||||
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Thereafter
|
|
Total
|
|
Fair Value
|
|||||||
In thousands of dollars except for rates
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Long-term Debt
|
$914
|
|
$251,433
|
|
$501,331
|
|
$878
|
|
$411
|
|
$1,041,089
|
|
$1,796,056
|
|
$1,947,023
|
|||||||
Interest Rate
|
7.7
|
%
|
|
4.9
|
%
|
|
3.5
|
%
|
|
6.9
|
%
|
|
5.1
|
%
|
|
5.1
|
%
|
|
4.6
|
%
|
|
|
December 31,
|
|
2013
|
|
2012
|
||||||||
|
|
Contract
Amount
|
|
Primary
Currencies
|
|
Contract
Amount
|
|
Primary
Currencies
|
||||
In millions of dollars
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||
Foreign exchange forward contracts to purchase foreign currencies
|
|
$
|
158.4
|
|
|
Malaysian ringgits
Swiss francs
Euros
|
|
$
|
17.1
|
|
|
Euros
British pound sterling
|
Foreign exchange forward contracts to sell foreign currencies
|
|
$
|
2.8
|
|
|
Japanese yen
|
|
$
|
57.8
|
|
|
Canadian dollars
|
December 31,
|
2013
|
2012
|
||||
In millions of dollars
|
|
|
||||
|
|
|
||||
Fair value of foreign exchange forward contracts, net — asset
|
$
|
3.2
|
|
$
|
1.2
|
|
|
|
|
||||
Potential net loss associated with foreign exchange forward contracts resulting from a hypothetical near-term adverse change in market rates of ten percent
|
$
|
12.9
|
|
$
|
7.9
|
|
l
|
Commodity market fluctuations;
|
l
|
Foreign currency exchange rates;
|
l
|
Imbalances between supply and demand;
|
l
|
The effect of weather on crop yield;
|
l
|
Speculative influences;
|
l
|
Trade agreements among producing and consuming nations;
|
l
|
Political unrest in producing countries; and
|
l
|
Changes in governmental agricultural programs and energy policies.
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Cocoa Futures Contract Prices
(dollars per pound)
|
||||||||||||||||||
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
Annual Average
|
|
$
|
1.09
|
|
|
$
|
1.07
|
|
|
$
|
1.34
|
|
|
$
|
1.36
|
|
|
$
|
1.28
|
|
High
|
|
1.26
|
|
|
1.17
|
|
|
1.55
|
|
|
1.53
|
|
|
1.52
|
|
|||||
Low
|
|
0.97
|
|
|
1.00
|
|
|
0.99
|
|
|
1.26
|
|
|
1.10
|
|
For the years ended December 31,
|
2013
|
2012
|
||||||||||
|
Fair
Value
|
Market Risk
(Hypothetical
10% Change)
|
Fair
Value
|
Market Risk
(Hypothetical
10% Change)
|
||||||||
In millions of dollars
|
|
|
|
|
||||||||
|
|
|
|
|
||||||||
Highest long position
|
$
|
(29.3
|
)
|
$
|
2.9
|
|
$
|
35.8
|
|
$
|
3.6
|
|
Lowest long position
|
(249.4
|
)
|
24.9
|
|
(167.2
|
)
|
16.7
|
|
||||
Average position (long)
|
(105.6
|
)
|
10.6
|
|
(44.0
|
)
|
4.4
|
|
l
|
Accrued Liabilities
|
l
|
Pension and Other Post-Retirement Benefits Plans
|
l
|
Goodwill and Other Intangible Assets
|
l
|
Commodities Futures and Options Contracts
|
l
|
Income Taxes
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Promotional costs
|
|
$
|
995.7
|
|
|
$
|
949.3
|
|
|
$
|
945.9
|
|
l
|
We determine the amount of the accrued liability by:
|
|
|
|
Analysis of programs offered;
|
|
|
Historical trends;
|
|
|
Expectations regarding customer and consumer participation;
|
|
|
Sales and payment trends; and
|
|
|
Experience with payment patterns associated with similar, previously offered programs.
|
l
|
The estimated costs of these programs are reasonably likely to change in the future due to changes in trends with regard to customer and consumer participation, particularly for new programs and for programs related to the introduction of new products.
|
|
l
|
Reasonably possible near-term changes in the most material assumptions regarding the cost of promotional programs could result in changes within the following range:
|
|
|
|
A reduction in costs of approximately $9.9 million; and
|
|
|
An increase in costs of approximately $2.5 million.
|
l
|
Changes in these assumptions would affect net sales and income before income taxes.
|
|
l
|
Over the three-year period ended December 31, 2013, actual promotion costs have not deviated from the estimated amounts by more than approximately 3%.
|
|
l
|
Reasonably possible near-term changes in estimates related to the cost of promotional programs would not have a material impact on our liquidity or capital resources.
|
l
|
At the time of sale, we estimate a cost for the possibility that products will become aged or unsaleable in the future. The estimated cost is included as a reduction to net sales.
|
l
|
A related accrued liability is determined using statistical analysis that incorporates historical sales trends, seasonal timing and sales patterns, and product movement at retail.
|
l
|
Estimates for costs associated with unsaleable products may change as a result of inventory levels in the distribution channel, current economic trends, changes in consumer demand, the introduction of new products and changes in trends of seasonal sales in response to promotional programs.
|
l
|
Over the three-year period ended December 31, 2013, costs associated with aged or unsaleable products have amounted to approximately 2% of gross sales.
|
l
|
Reasonably possible near-term changes in the most material assumptions regarding the estimates of such costs would have increased or decreased net sales and income before income taxes in a range from $0.5 million to $1.0 million.
|
l
|
Over the three-year period ended December 31, 2013, actual costs have not deviated from our estimates by more than approximately 4%.
|
l
|
Reasonably possible near-term changes in the estimates of costs associated with unsaleable products would not have a material impact on our liquidity or capital resources.
|
For the years ended December 31
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Service cost and amortization of prior service cost
|
|
$
|
31.8
|
|
|
$
|
31.6
|
|
|
$
|
31.1
|
|
Interest cost, expected return on plan assets and amortization of net loss
|
|
11.2
|
|
|
16.7
|
|
|
2.8
|
|
|||
Administrative expenses
|
|
0.7
|
|
|
0.5
|
|
|
0.6
|
|
|||
Net periodic pension benefit cost
|
|
$
|
43.7
|
|
|
$
|
48.8
|
|
|
$
|
34.5
|
|
|
|
|
|
|
|
|
||||||
Assumptions:
|
|
|
|
|
|
|
||||||
Average discount rate assumptions—net periodic benefit cost calculation
|
|
3.7
|
%
|
|
4.5
|
%
|
|
5.2
|
%
|
|||
Average discount rate assumptions—benefit obligation calculation
|
|
4.5
|
%
|
|
3.7
|
%
|
|
4.5
|
%
|
|||
Asset return assumptions
|
|
7.75
|
%
|
|
8.0
|
%
|
|
8.0
|
%
|
l
|
A one-percentage point decrease in the discount rate assumption would have increased 2013 net periodic pension benefit expense by $5.7 million.
|
l
|
A one-percentage point increase in the discount rate assumption would have decreased 2013 net periodic pension benefit expense by $5.0 million.
|
l
|
A one-percentage point decrease in the discount rate assumption would have increased the December 31, 2013 pension benefits obligations by $108.2 million.
|
l
|
A one-percentage point increase in the discount rate assumption would have decreased the December 31, 2013 pension benefits obligations by $92.6 million.
|
For the years ended December 31,
|
2013
|
2012
|
2011
|
|||
Actual return on assets
|
16.7
|
%
|
13.2
|
%
|
0.8
|
%
|
l
|
A one-percentage point decrease in the asset return assumption would have increased 2013 net periodic pension benefit expense by $9.5 million.
|
l
|
A one-percentage point increase in the asset return assumption would have decreased 2013 net periodic pension benefit expense by $9.4 million.
|
Asset Class
|
|
Allocation Range
|
Equity securities
|
|
55% – 75%
|
Debt securities
|
|
25% – 45%
|
Cash and certain other investments
|
|
0% – 5%
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net periodic other post-retirement benefit cost
|
|
$
|
12.5
|
|
|
$
|
15.1
|
|
|
$
|
16.2
|
|
|
|
|
|
|
|
|
||||||
Assumptions:
|
|
|
|
|
|
|
||||||
Average discount rate assumption
|
|
3.7
|
%
|
|
4.5
|
%
|
|
5.2
|
%
|
l
|
A one-percentage point decrease in the discount rate assumption would have decreased 2013 net periodic other post-retirement benefit cost by $1.4 million.
|
l
|
A one-percentage point increase in the discount rate assumption would have increased 2013 net periodic other post-retirement benefit cost by $1.2 million.
|
December 31,
|
|
2013
|
|
2012
|
||||
In millions of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Other post-retirement benefit obligation
|
|
$
|
270.9
|
|
|
$
|
318.4
|
|
|
|
|
|
|
||||
Assumptions:
|
|
|
|
|
||||
Benefit obligations discount rate assumption
|
|
4.5
|
%
|
|
3.7
|
%
|
l
|
A one-percentage point decrease in the discount rate assumption would have increased the December 31, 2013 other post-retirement benefits obligations by $28.6 million.
|
l
|
A one-percentage point increase in the discount rate assumption would have decreased the December 31, 2013 other post-retirement benefits obligations by $23.6 million.
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net after-tax gains (losses) on cash flow hedging derivatives
|
|
$
|
72.3
|
|
|
$
|
(0.9
|
)
|
|
$
|
(107.7
|
)
|
Reclassification adjustments from accumulated other comprehensive loss to income
|
|
5.8
|
|
|
60.0
|
|
|
(12.5
|
)
|
|||
Hedge ineffectiveness gains (losses) recognized in income, before tax
|
|
3.2
|
|
|
0.7
|
|
|
(2.0
|
)
|
l
|
We reflected reclassification adjustments related to gains or losses on commodities futures and options contracts and other commodity derivative instruments in cost of sales.
|
l
|
No gains or losses on commodities futures and options contracts resulted because we discontinued a hedge due to the probability that the forecasted hedged transaction would not occur.
|
l
|
We recognized no components of gains or losses on commodities futures and options contracts in income due to excluding such components from the hedge effectiveness assessment.
|
|
|
2012
|
|
2013
|
|
2014 (Projected)
|
||
Reported EPS-Diluted
|
|
$2.89
|
|
$3.61
|
|
$4.02 - $4.11
|
||
Acquisition closing, integration and transaction charges
|
|
0.04
|
|
|
0.03
|
|
|
0.02 - 0.03
|
Total Business Realignment and Impairment Charges
|
|
0.25
|
|
|
0.05
|
|
|
0.01 - 0.02
|
Non-service related pension expense (income)
|
|
0.06
|
|
|
0.03
|
|
|
(0.01) - (0.02)
|
Adjusted EPS-Diluted
|
|
$3.24
|
|
$3.72
|
|
$4.05 - $4.13
|
Item 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
PAGE
|
|
|
|
|
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Responsibility for Financial Statements
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011
|
|
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
|
|
|
Consolidated Balance Sheets as of December 31, 2013 and 2012
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
|
|
|
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012 and 2011
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
|
|
John P. Bilbrey
Chief Executive Officer
|
|
David W. Tacka
Chief Financial Officer
|
|
|
|
New York, New York
|
|
February 21, 2014
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars except per share amounts
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net Sales
|
|
$
|
7,146,079
|
|
|
$
|
6,644,252
|
|
|
$
|
6,080,788
|
|
|
|
|
|
|
|
|
||||||
Costs and Expenses:
|
|
|
|
|
|
|
||||||
Cost of sales
|
|
3,865,231
|
|
|
3,784,370
|
|
|
3,548,896
|
|
|||
Selling, marketing and administrative
|
|
1,922,508
|
|
|
1,703,796
|
|
|
1,477,750
|
|
|||
Business realignment and impairment charges (credits), net
|
|
18,665
|
|
|
44,938
|
|
|
(886
|
)
|
|||
|
|
|
|
|
|
|
||||||
Total costs and expenses
|
|
5,806,404
|
|
|
5,533,104
|
|
|
5,025,760
|
|
|||
|
|
|
|
|
|
|
||||||
Income before Interest and Income Taxes
|
|
1,339,675
|
|
|
1,111,148
|
|
|
1,055,028
|
|
|||
Interest expense, net
|
|
88,356
|
|
|
95,569
|
|
|
92,183
|
|
|||
|
|
|
|
|
|
|
||||||
Income before Income Taxes
|
|
1,251,319
|
|
|
1,015,579
|
|
|
962,845
|
|
|||
Provision for income taxes
|
|
430,849
|
|
|
354,648
|
|
|
333,883
|
|
|||
|
|
|
|
|
|
|
||||||
Net Income
|
|
$
|
820,470
|
|
|
$
|
660,931
|
|
|
$
|
628,962
|
|
|
|
|
|
|
|
|
||||||
Net Income Per Share—Basic—Class B Common Stock
|
|
$
|
3.39
|
|
|
$
|
2.73
|
|
|
$
|
2.58
|
|
|
|
|
|
|
|
|
||||||
Net Income Per Share—Diluted—Class B Common Stock
|
|
$
|
3.37
|
|
|
$
|
2.71
|
|
|
$
|
2.56
|
|
|
|
|
|
|
|
|
||||||
Net Income Per Share—Basic—Common Stock
|
|
$
|
3.76
|
|
|
$
|
3.01
|
|
|
$
|
2.85
|
|
|
|
|
|
|
|
|
||||||
Net Income Per Share—Diluted—Common Stock
|
|
$
|
3.61
|
|
|
$
|
2.89
|
|
|
$
|
2.74
|
|
|
|
|
|
|
|
|
||||||
Cash Dividends Paid Per Share:
|
|
|
|
|
|
|
||||||
Common Stock
|
|
$
|
1.81
|
|
|
$
|
1.560
|
|
|
$
|
1.38
|
|
Class B Common Stock
|
|
1.63
|
|
|
1.412
|
|
|
1.25
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net Income
|
|
$
|
820,470
|
|
|
$
|
660,931
|
|
|
$
|
628,962
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
|
(26,003
|
)
|
|
7,714
|
|
|
(21,213
|
)
|
|||
Pension and post-retirement benefit plans
|
|
166,403
|
|
|
(9,634
|
)
|
|
(85,823
|
)
|
|||
Cash flow hedges:
|
|
|
|
|
|
|
||||||
Gains (losses) on cash flow hedging derivatives
|
|
72,334
|
|
|
(868
|
)
|
|
(107,713
|
)
|
|||
Reclassification adjustments
|
|
5,775
|
|
|
60,043
|
|
|
(12,515
|
)
|
|||
Total other comprehensive income (loss), net of tax
|
|
218,509
|
|
|
57,255
|
|
|
(227,264
|
)
|
|||
Comprehensive income
|
|
$
|
1,038,979
|
|
|
$
|
718,186
|
|
|
$
|
401,698
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
ASSETS
|
|
|
|
|
||||
Current Assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
1,118,508
|
|
|
$
|
728,272
|
|
Accounts receivable—trade, net
|
|
477,912
|
|
|
461,383
|
|
||
Inventories
|
|
659,541
|
|
|
633,262
|
|
||
Deferred income taxes
|
|
52,511
|
|
|
122,224
|
|
||
Prepaid expenses and other
|
|
178,862
|
|
|
168,344
|
|
||
|
|
|
|
|
||||
Total current assets
|
|
2,487,334
|
|
|
2,113,485
|
|
||
Property, Plant and Equipment, Net
|
|
1,805,345
|
|
|
1,674,071
|
|
||
Goodwill
|
|
576,561
|
|
|
588,003
|
|
||
Other Intangibles
|
|
195,244
|
|
|
214,713
|
|
||
Deferred Income Taxes
|
|
—
|
|
|
12,448
|
|
||
Other Assets
|
|
293,004
|
|
|
152,119
|
|
||
|
|
|
|
|
||||
Total assets
|
|
$
|
5,357,488
|
|
|
$
|
4,754,839
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||
Current Liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
461,514
|
|
|
$
|
441,977
|
|
Accrued liabilities
|
|
699,722
|
|
|
650,906
|
|
||
Accrued income taxes
|
|
79,911
|
|
|
2,329
|
|
||
Short-term debt
|
|
165,961
|
|
|
118,164
|
|
||
Current portion of long-term debt
|
|
914
|
|
|
257,734
|
|
||
|
|
|
|
|
||||
Total current liabilities
|
|
1,408,022
|
|
|
1,471,110
|
|
||
Long-term Debt
|
|
1,795,142
|
|
|
1,530,967
|
|
||
Other Long-term Liabilities
|
|
434,068
|
|
|
668,732
|
|
||
Deferred Income Taxes
|
|
104,204
|
|
|
35,657
|
|
||
|
|
|
|
|
||||
Total liabilities
|
|
3,741,436
|
|
|
3,706,466
|
|
||
|
|
|
|
|
||||
Stockholders’ Equity:
|
|
|
|
|
||||
The Hershey Company Stockholders’ Equity
|
|
|
|
|
||||
Preferred Stock, shares issued: none in 2013 and 2012
|
|
—
|
|
|
—
|
|
||
Common Stock, shares issued: 299,281,527 in 2013 and 299,272,927 in 2012
|
|
299,281
|
|
|
299,272
|
|
||
Class B Common Stock, shares issued: 60,620,217 in 2013 and 60,628,817 in 2012
|
|
60,620
|
|
|
60,629
|
|
||
Additional paid-in capital
|
|
664,944
|
|
|
592,975
|
|
||
Retained earnings
|
|
5,454,286
|
|
|
5,027,617
|
|
||
Treasury—Common Stock shares, at cost: 136,007,023 in 2013 and 136,115,714 in 2012
|
|
(4,707,730
|
)
|
|
(4,558,668
|
)
|
||
Accumulated other comprehensive loss
|
|
(166,567
|
)
|
|
(385,076
|
)
|
||
|
|
|
|
|
||||
The Hershey Company stockholders’ equity
|
|
1,604,834
|
|
|
1,036,749
|
|
||
Noncontrolling interests in subsidiaries
|
|
11,218
|
|
|
11,624
|
|
||
|
|
|
|
|
||||
Total stockholders’ equity
|
|
1,616,052
|
|
|
1,048,373
|
|
||
|
|
|
|
|
||||
Total liabilities and stockholders’ equity
|
|
$
|
5,357,488
|
|
|
$
|
4,754,839
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Cash Flows Provided from (Used by) Operating Activities
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
820,470
|
|
|
$
|
660,931
|
|
|
$
|
628,962
|
|
Adjustments to reconcile net income to net cash provided from operations:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
201,033
|
|
|
210,037
|
|
|
215,763
|
|
|||
Stock-based compensation expense
|
|
53,967
|
|
|
50,482
|
|
|
43,468
|
|
|||
Excess tax benefits from stock-based compensation
|
|
(48,396
|
)
|
|
(33,876
|
)
|
|
(13,997
|
)
|
|||
Deferred income taxes
|
|
7,457
|
|
|
13,785
|
|
|
33,611
|
|
|||
Gain on sale of trademark licensing rights, net of tax of $5,962
|
|
—
|
|
|
—
|
|
|
(11,072
|
)
|
|||
Non-cash business realignment and impairment charges
|
|
—
|
|
|
38,144
|
|
|
34,660
|
|
|||
Contributions to pension and other benefits plans
|
|
(57,213
|
)
|
|
(44,208
|
)
|
|
(31,671
|
)
|
|||
Changes in assets and liabilities, net of effects from business acquisitions and divestitures:
|
|
|
|
|
|
|
||||||
Accounts receivable—trade, net
|
|
(16,529
|
)
|
|
(50,470
|
)
|
|
(9,438
|
)
|
|||
Inventories
|
|
(26,279
|
)
|
|
26,598
|
|
|
(115,331
|
)
|
|||
Accounts payable
|
|
13,417
|
|
|
21,739
|
|
|
7,860
|
|
|||
Other assets and liabilities
|
|
240,478
|
|
|
201,665
|
|
|
(194,948
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net Cash Provided from Operating Activities
|
|
1,188,405
|
|
|
1,094,827
|
|
|
587,867
|
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows Provided from (Used by) Investing Activities
|
|
|
|
|
|
|
||||||
Capital additions
|
|
(323,551
|
)
|
|
(258,727
|
)
|
|
(323,961
|
)
|
|||
Capitalized software additions
|
|
(27,360
|
)
|
|
(19,239
|
)
|
|
(23,606
|
)
|
|||
Proceeds from sales of property, plant and equipment
|
|
15,331
|
|
|
453
|
|
|
312
|
|
|||
Proceeds from sale of trademark licensing rights
|
|
—
|
|
|
—
|
|
|
20,000
|
|
|||
Loan to affiliate
|
|
(16,000
|
)
|
|
(23,000
|
)
|
|
(7,000
|
)
|
|||
Business acquisitions
|
|
—
|
|
|
(172,856
|
)
|
|
(5,750
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net Cash (Used by) Investing Activities
|
|
(351,580
|
)
|
|
(473,369
|
)
|
|
(340,005
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows Provided from (Used by) Financing Activities
|
|
|
|
|
|
|
||||||
Net increase in short-term debt
|
|
54,351
|
|
|
77,698
|
|
|
10,834
|
|
|||
Long-term borrowings
|
|
250,595
|
|
|
4,025
|
|
|
249,126
|
|
|||
Repayment of long-term debt
|
|
(250,761
|
)
|
|
(99,381
|
)
|
|
(256,189
|
)
|
|||
Proceeds from lease financing agreement
|
|
—
|
|
|
—
|
|
|
47,601
|
|
|||
Cash dividends paid
|
|
(393,801
|
)
|
|
(341,206
|
)
|
|
(304,083
|
)
|
|||
Exercise of stock options
|
|
147,255
|
|
|
261,597
|
|
|
184,411
|
|
|||
Excess tax benefits from stock-based compensation
|
|
48,396
|
|
|
33,876
|
|
|
13,997
|
|
|||
Payments to noncontrolling interests
|
|
—
|
|
|
(15,791
|
)
|
|
—
|
|
|||
Contributions from noncontrolling interests
|
|
2,940
|
|
|
2,940
|
|
|
—
|
|
|||
Repurchase of Common Stock
|
|
(305,564
|
)
|
|
(510,630
|
)
|
|
(384,515
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net Cash (Used by) Financing Activities
|
|
(446,589
|
)
|
|
(586,872
|
)
|
|
(438,818
|
)
|
|||
|
|
|
|
|
|
|
||||||
Increase (Decrease) in Cash and Cash Equivalents
|
|
390,236
|
|
|
34,586
|
|
|
(190,956
|
)
|
|||
Cash and Cash Equivalents as of January 1
|
|
728,272
|
|
|
693,686
|
|
|
884,642
|
|
|||
|
|
|
|
|
|
|
||||||
Cash and Cash Equivalents as of December 31
|
|
$
|
1,118,508
|
|
|
$
|
728,272
|
|
|
$
|
693,686
|
|
|
|
|
|
|
|
|
||||||
Interest Paid
|
|
$
|
92,551
|
|
|
$
|
100,269
|
|
|
$
|
97,892
|
|
Income Taxes Paid
|
|
373,902
|
|
|
327,230
|
|
|
292,315
|
|
In thousands of dollars
|
|
Preferred
Stock |
|
Common
Stock |
|
Class B
Common Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Treasury
Common Stock |
|
Accumulated Other
Comprehensive Income (Loss) |
|
Noncontrolling
Interests in Subsidiaries |
|
Total
Stockholders’ Equity |
||||||||||||||||||
Balance as of January 1, 2011
|
|
$
|
—
|
|
|
$
|
299,195
|
|
|
$
|
60,706
|
|
|
$
|
434,865
|
|
|
$
|
4,383,013
|
|
|
$
|
(4,052,101
|
)
|
|
$
|
(215,067
|
)
|
|
$
|
35,285
|
|
|
$
|
945,896
|
|
Net income
|
|
|
|
|
|
|
|
|
|
628,962
|
|
|
|
|
|
|
|
|
628,962
|
|
||||||||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(227,264
|
)
|
|
|
|
(227,264
|
)
|
||||||||||||||||
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Common Stock, $1.38 per share
|
|
|
|
|
|
|
|
|
|
(228,269
|
)
|
|
|
|
|
|
|
|
(228,269
|
)
|
||||||||||||||||
Class B Common Stock, $1.25 per share
|
|
|
|
|
|
|
|
|
|
(75,814
|
)
|
|
|
|
|
|
|
|
(75,814
|
)
|
||||||||||||||||
Conversion of Class B Common Stock into Common Stock
|
|
|
|
74
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||||||||||||||
Incentive plan transactions
|
|
|
|
|
|
|
|
(15,844
|
)
|
|
|
|
14,306
|
|
|
|
|
|
|
(1,538
|
)
|
|||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
|
40,439
|
|
|
|
|
|
|
|
|
|
|
40,439
|
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
|
31,357
|
|
|
|
|
163,348
|
|
|
|
|
|
|
194,705
|
|
|||||||||||||||
Repurchase of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
(384,515
|
)
|
|
|
|
|
|
(384,515
|
)
|
||||||||||||||||
Noncontrolling interests in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,659
|
)
|
|
(11,659
|
)
|
|||||||||
Balance as of December 31, 2011
|
|
—
|
|
|
299,269
|
|
|
60,632
|
|
|
490,817
|
|
|
4,707,892
|
|
|
(4,258,962
|
)
|
|
(442,331
|
)
|
|
23,626
|
|
|
880,943
|
|
|||||||||
Net income
|
|
|
|
|
|
|
|
|
|
660,931
|
|
|
|
|
|
|
|
|
660,931
|
|
||||||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,255
|
|
|
|
|
57,255
|
|
||||||||||||||||
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Common Stock, $1.56 per share
|
|
|
|
|
|
|
|
|
|
(255,596
|
)
|
|
|
|
|
|
|
|
(255,596
|
)
|
||||||||||||||||
Class B Common Stock, $1.412 per share
|
|
|
|
|
|
|
|
|
|
(85,610
|
)
|
|
|
|
|
|
|
|
(85,610
|
)
|
||||||||||||||||
Conversion of Class B Common Stock into Common Stock
|
|
|
|
3
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||||||||||||||
Incentive plan transactions
|
|
|
|
|
|
|
|
(24,230
|
)
|
|
|
|
12,379
|
|
|
|
|
|
|
(11,851
|
)
|
|||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
|
49,175
|
|
|
|
|
|
|
|
|
|
|
49,175
|
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
|
88,258
|
|
|
|
|
198,545
|
|
|
|
|
|
|
286,803
|
|
|||||||||||||||
Repurchase of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
(510,630
|
)
|
|
|
|
|
|
(510,630
|
)
|
||||||||||||||||
Purchase of noncontrolling interest in subsidiary
|
|
|
|
|
|
|
|
|
|
|
(11,045
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,746
|
)
|
|
(15,791
|
)
|
|||||||||
Noncontrolling interests in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,256
|
)
|
|
(7,256
|
)
|
|||||||||
Balance as of December 31, 2012
|
|
—
|
|
|
299,272
|
|
|
60,629
|
|
|
592,975
|
|
|
5,027,617
|
|
|
(4,558,668
|
)
|
|
(385,076
|
)
|
|
11,624
|
|
|
1,048,373
|
|
|||||||||
Net income
|
|
|
|
|
|
|
|
|
|
820,470
|
|
|
|
|
|
|
|
|
820,470
|
|
||||||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
218,509
|
|
|
|
|
218,509
|
|
||||||||||||||||
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Common Stock, $1.81 per share
|
|
|
|
|
|
|
|
|
|
(294,979
|
)
|
|
|
|
|
|
|
|
(294,979
|
)
|
||||||||||||||||
Class B Common Stock, $1.63 per share
|
|
|
|
|
|
|
|
|
|
(98,822
|
)
|
|
|
|
|
|
|
|
(98,822
|
)
|
||||||||||||||||
Conversion of Class B Common Stock into Common Stock
|
|
|
|
9
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||||||||||||||
Incentive plan transactions
|
|
|
|
|
|
|
|
(29,333
|
)
|
|
|
|
21,268
|
|
|
|
|
|
|
(8,065
|
)
|
|||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
|
52,465
|
|
|
|
|
|
|
|
|
|
|
52,465
|
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
|
48,837
|
|
|
|
|
135,234
|
|
|
|
|
|
|
184,071
|
|
|||||||||||||||
Repurchase of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
(305,564
|
)
|
|
|
|
|
|
(305,564
|
)
|
||||||||||||||||
Noncontrolling interests in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(406
|
)
|
|
(406
|
)
|
|||||||||
Balance as of December 31, 2013
|
|
$
|
—
|
|
|
$
|
299,281
|
|
|
$
|
60,620
|
|
|
$
|
664,944
|
|
|
$
|
5,454,286
|
|
|
$
|
(4,707,730
|
)
|
|
$
|
(166,567
|
)
|
|
$
|
11,218
|
|
|
$
|
1,616,052
|
|
l
|
A valid customer order with a fixed price has been received;
|
l
|
The product has been delivered to the customer;
|
l
|
There is no further significant obligation to assist in the resale of the product; and
|
l
|
Collectability is reasonably assured.
|
l
|
When internal-use computer software is not expected to provide substantive service potential;
|
l
|
A significant change occurs in the extent or manner in which the software is used or is expected to be used;
|
l
|
A significant change is made or will be made to the software program; and
|
l
|
Costs of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify the software.
|
In thousands of dollars
|
Purchase Price
Allocation
|
|
Estimated
Useful Life in Years |
||||
Goodwill
|
$
|
67,974
|
|
|
Indefinite
|
||
Trademarks
|
60,253
|
|
|
25
|
|||
Other intangibles
(1)
|
51,057
|
|
|
6
|
to
|
17
|
|
Other assets, net of liabilities assumed of $18.7 million
|
21,673
|
|
|
|
|
|
|
Non-current deferred tax liabilities
|
(28,101
|
)
|
|
|
|
|
|
Purchase price
|
$
|
172,856
|
|
|
|
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Cost of sales
|
|
|
|
|
|
|
||||||
Next Century program
|
|
$
|
402
|
|
|
$
|
36,383
|
|
|
$
|
39,280
|
|
Global supply chain transformation program
|
|
—
|
|
|
—
|
|
|
5,816
|
|
|||
|
|
|
|
|
|
|
||||||
Total cost of sales
|
|
402
|
|
|
36,383
|
|
|
45,096
|
|
|||
|
|
|
|
|
|
|
||||||
Selling, marketing and administrative - Next Century program
|
|
18
|
|
|
2,446
|
|
|
4,961
|
|
|||
|
|
|
|
|
|
|
||||||
Business realignment and impairment charges, net
|
|
|
|
|
|
|
||||||
Next Century program:
|
|
|
|
|
|
|
||||||
Pension settlement loss
|
|
—
|
|
|
15,787
|
|
|
—
|
|
|||
Plant closure expenses
|
|
16,387
|
|
|
20,780
|
|
|
8,620
|
|
|||
Employee separation costs (credits)
|
|
—
|
|
|
914
|
|
|
(9,506
|
)
|
|||
India voluntary retirement program
|
|
2,278
|
|
|
—
|
|
|
—
|
|
|||
Tri-US, Inc. asset impairment charges
|
|
—
|
|
|
7,457
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
Total business realignment and impairment charges (credits), net
|
|
18,665
|
|
|
44,938
|
|
|
(886
|
)
|
|||
|
|
|
|
|
|
|
||||||
Total net charges associated with business realignment initiatives and impairment
|
|
$
|
19,085
|
|
|
$
|
83,767
|
|
|
$
|
49,171
|
|
Purchase Obligations
|
2014
|
2015
|
2016
|
2017
|
||||||||
In millions of dollars
|
|
|
|
|
||||||||
|
|
|
|
|
||||||||
Purchase obligations
|
$
|
1,381.6
|
|
$
|
651.9
|
|
$
|
48.3
|
|
$
|
6.4
|
|
Lease Obligations
|
2014
|
2015
|
2016
|
2017
|
2018
|
Thereafter
|
||||||||||||
In millions of dollars
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
||||||||||||
Future minimum rental payments
|
$
|
36.7
|
|
$
|
11.5
|
|
$
|
10.8
|
|
$
|
7.6
|
|
$
|
2.2
|
|
$
|
1.6
|
|
l
|
Whether the instrument qualifies for, and has been designated as, a hedging relationship; and
|
l
|
The type of hedging relationship.
|
There are three types of hedging relationships:
|
|
l
|
Cash flow hedge;
|
l
|
Fair value hedge; and
|
l
|
Hedge of foreign currency exposure of a net investment in a foreign operation.
|
Balance Sheet Caption
|
|
Interest Rate Swap
Agreements |
|
Foreign
Exchange
Forward Contracts and Options |
|
Commodities Futures and Options Contracts
|
||||||
In thousands of dollars
|
|
|
||||||||||
Prepaid expense and other current assets
|
|
$
|
—
|
|
|
$
|
2,672
|
|
|
$
|
4,306
|
|
Other assets
|
|
$
|
22,745
|
|
|
$
|
751
|
|
|
$
|
—
|
|
Accrued liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
129
|
|
Other long-term liabilities
|
|
$
|
—
|
|
|
$
|
198
|
|
|
$
|
—
|
|
Balance Sheet Caption
|
|
Interest Rate Swap
Agreements |
|
Foreign
Exchange Forward Contracts and Options |
|
Commodities Futures and Options Contracts
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
Prepaid expense and other current assets
|
|
$
|
—
|
|
|
$
|
2,119
|
|
|
$
|
—
|
|
Accrued liabilities
|
|
$
|
12,502
|
|
|
$
|
917
|
|
|
$
|
2,010
|
|
Other long-term liabilities
|
|
$
|
922
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash Flow Hedging Derivatives
|
|
Interest Rate
Swap Agreements |
|
Foreign Exchange
Forward Contracts and Options |
|
Commodities
Futures and Options Contracts |
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
Gains (losses) recognized in other comprehensive income (“OCI”) (effective portion)
|
|
$
|
27,534
|
|
|
$
|
4,049
|
|
|
$
|
84,746
|
|
Gains (losses) reclassified from accumulated OCI into income (effective portion) (a)
|
|
$
|
(3,606
|
)
|
|
$
|
2,641
|
|
|
$
|
(8,400
|
)
|
Gains recognized in income (ineffective portion) (b)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,241
|
|
Cash Flow Hedging Derivatives
|
|
Interest Rate
Swap Agreements |
|
Foreign Exchange
Forward Contracts and Options |
|
Commodities
Futures and Options Contracts |
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
Gains (losses) recognized in other comprehensive income (“OCI”) (effective portion)
|
|
$
|
(13,424
|
)
|
|
$
|
47
|
|
|
$
|
12,834
|
|
Gains (losses) reclassified from accumulated OCI into income (effective portion) (a)
|
|
$
|
(3,605
|
)
|
|
$
|
(2,488
|
)
|
|
$
|
(90,900
|
)
|
Gains recognized in income (ineffective portion) (b)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
670
|
|
(a)
|
Gains (losses) reclassified from accumulated OCI into income were included in cost of sales for commodities futures and options contracts and other commodity derivative instruments and for foreign exchange forward contracts and options designated as hedges of purchases of inventory. Other gains and losses for foreign exchange forward contracts and options were included in selling, marketing and administrative expenses. Other gains and losses for interest rate swap agreements were included in interest expense.
|
(b)
|
Gains recognized in income were included in cost of sales for commodities futures and options contracts.
|
December 31,
|
|
2013
|
|
2012
|
||||||||
|
|
Contract
Amount
|
|
Primary
Currencies
|
|
Contract
Amount
|
|
Primary
Currencies
|
||||
In millions of dollars
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||
Foreign exchange forward contracts to purchase foreign currencies
|
|
$
|
158.4
|
|
|
Malaysian ringgits
Swiss francs
Euros
|
|
$
|
17.1
|
|
|
Euros
British pound sterling
|
Foreign exchange forward contracts to sell foreign currencies
|
|
$
|
2.8
|
|
|
Japanese Yen
|
|
$
|
57.8
|
|
|
Canadian dollars
|
December 31,
|
|
2013
|
|
2012
|
||||
In millions of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Fair value of foreign exchange forward contracts, net — asset
|
|
$
|
3.2
|
|
|
$
|
1.2
|
|
l
|
Level 1 Inputs – quoted prices in active markets for identical assets or liabilities;
|
l
|
Level 2 Inputs – quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices that are observable; and inputs that are derived from or corroborated by observable market data by correlation; and
|
l
|
Level 3 Inputs – unobservable inputs used to the extent that observable inputs are not available. These reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
|
Description
|
|
Fair Value as of December 31, 2013
|
|
Quoted Prices in
Active Markets
of Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
In thousands of dollars
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Derivative assets
|
|
$
|
54,254
|
|
|
$
|
28,086
|
|
|
$
|
26,168
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
|
$
|
24,107
|
|
|
$
|
23,909
|
|
|
$
|
198
|
|
|
$
|
—
|
|
Description
|
|
Fair Value as of December 31, 2012
|
|
Quoted Prices in
Active Markets
of Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
In thousands of dollars
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Derivative assets
|
|
$
|
39,175
|
|
|
$
|
37,056
|
|
|
$
|
2,119
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
|
$
|
53,407
|
|
|
$
|
39,066
|
|
|
$
|
14,341
|
|
|
$
|
—
|
|
For the year ended December 31, 2013
|
|
Pre-Tax
Amount |
|
Tax
(Expense) Benefit |
|
After-Tax
Amount |
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
|
|
|
|
$
|
820,470
|
|
||||
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
|
$
|
(26,003
|
)
|
|
$
|
—
|
|
|
(26,003
|
)
|
|
Pension and post-retirement benefit plans
|
|
265,015
|
|
|
(98,612
|
)
|
|
166,403
|
|
|||
Cash flow hedges:
|
|
|
|
|
|
|
||||||
Gains on cash flow hedging derivatives
|
|
116,329
|
|
|
(43,995
|
)
|
|
72,334
|
|
|||
Reclassification adjustments
|
|
9,365
|
|
|
(3,590
|
)
|
|
5,775
|
|
|||
|
|
|
|
|
|
|
||||||
Total other comprehensive income
|
|
$
|
364,706
|
|
|
$
|
(146,197
|
)
|
|
218,509
|
|
|
|
|
|
|
|
|
|
||||||
Comprehensive income
|
|
|
|
|
|
$
|
1,038,979
|
|
For the year ended December 31, 2012
|
|
Pre-Tax
Amount |
|
Tax
(Expense) Benefit |
|
After-Tax
Amount |
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
|
|
|
|
$
|
660,931
|
|
||||
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
|
$
|
7,714
|
|
|
$
|
—
|
|
|
7,714
|
|
|
Pension and post-retirement benefit plans
|
|
(15,159
|
)
|
|
5,525
|
|
|
(9,634
|
)
|
|||
Cash flow hedges:
|
|
|
|
|
|
|
||||||
Losses on cash flow hedging derivatives
|
|
(543
|
)
|
|
(325
|
)
|
|
(868
|
)
|
|||
Reclassification adjustments
|
|
96,993
|
|
|
(36,950
|
)
|
|
60,043
|
|
|||
|
|
|
|
|
|
|
||||||
Total other comprehensive income
|
|
$
|
89,005
|
|
|
$
|
(31,750
|
)
|
|
57,255
|
|
|
|
|
|
|
|
|
|
||||||
Comprehensive income
|
|
|
|
|
|
$
|
718,186
|
|
For the year ended December 31, 2011
|
|
Pre-Tax
Amount |
|
Tax
(Expense) Benefit |
|
After-Tax
Amount |
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
|
|
|
|
$
|
628,962
|
|
||||
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
|
$
|
(21,213
|
)
|
|
$
|
—
|
|
|
(21,213
|
)
|
|
Pension and post-retirement benefit plans
|
|
(137,918
|
)
|
|
52,095
|
|
|
(85,823
|
)
|
|||
Cash flow hedges:
|
|
|
|
|
|
|
||||||
Losses on cash flow hedging derivatives
|
|
(175,011
|
)
|
|
67,298
|
|
|
(107,713
|
)
|
|||
Reclassification adjustments
|
|
(20,282
|
)
|
|
7,767
|
|
|
(12,515
|
)
|
|||
|
|
|
|
|
|
|
||||||
Total other comprehensive loss
|
|
$
|
(354,424
|
)
|
|
$
|
127,160
|
|
|
(227,264
|
)
|
|
|
|
|
|
|
|
|
||||||
Comprehensive income
|
|
|
|
|
|
$
|
401,698
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Foreign currency translation adjustments
|
|
$
|
(16,830
|
)
|
|
$
|
9,173
|
|
Pension and post-retirement benefit plans, net of tax
|
|
(199,634
|
)
|
|
(366,037
|
)
|
||
Cash flow hedges, net of tax
|
|
49,897
|
|
|
(28,212
|
)
|
||
|
|
|
|
|
||||
Total accumulated other comprehensive loss
|
|
$
|
(166,567
|
)
|
|
$
|
(385,076
|
)
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Long-term debt and lease obligations
|
|
$
|
84,604
|
|
|
$
|
81,203
|
|
|
$
|
85,543
|
|
Short-term debt
|
|
8,654
|
|
|
23,084
|
|
|
17,051
|
|
|||
Capitalized interest
|
|
(1,744
|
)
|
|
(5,778
|
)
|
|
(7,814
|
)
|
|||
|
|
|
|
|
|
|
||||||
Interest expense, gross
|
|
91,514
|
|
|
98,509
|
|
|
94,780
|
|
|||
Interest income
|
|
(3,158
|
)
|
|
(2,940
|
)
|
|
(2,597
|
)
|
|||
|
|
|
|
|
|
|
||||||
Interest expense, net
|
|
$
|
88,356
|
|
|
$
|
95,569
|
|
|
$
|
92,183
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
5.00% Notes due 2013
|
|
$
|
—
|
|
|
$
|
250,000
|
|
4.85% Notes due 2015
|
|
250,000
|
|
|
250,000
|
|
||
5.45% Notes due 2016
|
|
250,000
|
|
|
250,000
|
|
||
1.50% Notes due 2016
|
|
250,000
|
|
|
250,000
|
|
||
4.125% Notes due 2020
|
|
350,000
|
|
|
350,000
|
|
||
8.8% Debentures due 2021
|
|
100,000
|
|
|
100,000
|
|
||
2.625% Notes due 2023
|
|
250,000
|
|
|
—
|
|
||
7.2% Debentures due 2027
|
|
250,000
|
|
|
250,000
|
|
||
Other obligations, net of unamortized debt discount
|
|
96,056
|
|
|
88,701
|
|
||
|
|
|
|
|
||||
Total long-term debt
|
|
1,796,056
|
|
|
1,788,701
|
|
||
Less—current portion
|
|
914
|
|
|
257,734
|
|
||
|
|
|
|
|
||||
Long-term portion
|
|
$
|
1,795,142
|
|
|
$
|
1,530,967
|
|
l
|
2014
|
—
|
$0.9 million
|
l
|
2015
|
—
|
$251.4 million
|
l
|
2016
|
—
|
$501.3 million
|
l
|
2017
|
—
|
$0.9 million
|
l
|
2018
|
—
|
$0.4 million
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Domestic
|
|
$
|
1,252,208
|
|
|
$
|
980,176
|
|
|
$
|
904,418
|
|
Foreign
|
|
(889
|
)
|
|
35,403
|
|
|
58,427
|
|
|||
|
|
|
|
|
|
|
||||||
Income before income taxes
|
|
$
|
1,251,319
|
|
|
$
|
1,015,579
|
|
|
$
|
962,845
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Current:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
372,649
|
|
|
$
|
299,122
|
|
|
$
|
254,732
|
|
State
|
|
47,980
|
|
|
36,187
|
|
|
32,174
|
|
|||
Foreign
|
|
2,763
|
|
|
5,554
|
|
|
13,366
|
|
|||
|
|
|
|
|
|
|
||||||
Current provision for income taxes
|
|
423,392
|
|
|
340,863
|
|
|
300,272
|
|
|||
|
|
|
|
|
|
|
||||||
Deferred:
|
|
|
|
|
|
|
||||||
Federal
|
|
11,334
|
|
|
5,174
|
|
|
37,160
|
|
|||
State
|
|
2,212
|
|
|
1,897
|
|
|
(1,005
|
)
|
|||
Foreign
|
|
(6,089
|
)
|
|
6,714
|
|
|
(2,544
|
)
|
|||
|
|
|
|
|
|
|
||||||
Deferred income tax provision
|
|
7,457
|
|
|
13,785
|
|
|
33,611
|
|
|||
|
|
|
|
|
|
|
||||||
Total provision for income taxes
|
|
$
|
430,849
|
|
|
$
|
354,648
|
|
|
$
|
333,883
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Post-retirement benefit obligations
|
|
$
|
101,674
|
|
|
$
|
119,140
|
|
Accrued expenses and other reserves
|
|
119,387
|
|
|
112,760
|
|
||
Stock-based compensation
|
|
47,324
|
|
|
51,388
|
|
||
Derivative instruments
|
|
—
|
|
|
23,822
|
|
||
Pension
|
|
—
|
|
|
72,374
|
|
||
Lease financing obligation
|
|
19,065
|
|
|
19,035
|
|
||
Accrued trade promotion reserves
|
|
39,234
|
|
|
30,594
|
|
||
Net operating loss carryforwards
|
|
39,606
|
|
|
48,455
|
|
||
Other
|
|
11,754
|
|
|
3,643
|
|
||
|
|
|
|
|
||||
Gross deferred tax assets
|
|
378,044
|
|
|
481,211
|
|
||
Valuation allowance
|
|
(87,159
|
)
|
|
(74,021
|
)
|
||
|
|
|
|
|
||||
Total deferred tax assets
|
|
290,885
|
|
|
407,190
|
|
||
|
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
|
||||
Property, plant and equipment, net
|
|
201,224
|
|
|
210,406
|
|
||
Acquired intangibles
|
|
64,249
|
|
|
63,585
|
|
||
Inventories
|
|
33,885
|
|
|
23,335
|
|
||
Derivative instruments
|
|
33,779
|
|
|
—
|
|
||
Pension
|
|
8,037
|
|
|
—
|
|
||
Other
|
|
1,404
|
|
|
10,849
|
|
||
|
|
|
|
|
||||
Total deferred tax liabilities
|
|
342,578
|
|
|
308,175
|
|
||
|
|
|
|
|
||||
Net deferred tax (liabilities) assets
|
|
$
|
(51,693
|
)
|
|
$
|
99,015
|
|
|
|
|
|
|
||||
Included in:
|
|
|
|
|
||||
Current deferred tax assets, net
|
|
$
|
52,511
|
|
|
$
|
122,224
|
|
Non-current deferred tax assets, net
|
|
—
|
|
|
12,448
|
|
||
Non-current deferred tax liabilities, net
|
|
(104,204
|
)
|
|
(35,657
|
)
|
||
|
|
|
|
|
||||
Net deferred tax (liabilities) assets
|
|
$
|
(51,693
|
)
|
|
$
|
99,015
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|||
Federal statutory income tax rate
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase (reduction) resulting from:
|
|
|
|
|
|
|
|||
State income taxes, net of Federal income tax benefits
|
|
2.8
|
|
|
3.2
|
|
|
2.4
|
|
Qualified production income deduction
|
|
(2.6
|
)
|
|
(2.5
|
)
|
|
(2.2
|
)
|
Business realignment and impairment charges and gain on sale of trademark licensing rights
|
|
0.1
|
|
|
0.2
|
|
|
(0.1
|
)
|
International operations
|
|
(0.4
|
)
|
|
(0.1
|
)
|
|
(0.6
|
)
|
Other, net
|
|
(0.5
|
)
|
|
(0.9
|
)
|
|
0.2
|
|
|
|
|
|
|
|
|
|||
Effective income tax rate
|
|
34.4
|
%
|
|
34.9
|
%
|
|
34.7
|
%
|
December 31,
|
|
2013
|
|
2012
|
||||
|
|
|
|
|
||||
In thousands of dollars
|
|
|
||||||
|
|
|
||||||
Balance at beginning of year
|
|
$
|
51,520
|
|
|
$
|
53,553
|
|
Additions for tax positions taken during prior years
|
|
58,246
|
|
|
11,335
|
|
||
Reductions for tax positions taken during prior years
|
|
(5,776
|
)
|
|
(5,478
|
)
|
||
Additions for tax positions taken during the current year
|
|
5,523
|
|
|
5,750
|
|
||
Settlements
|
|
—
|
|
|
(5,234
|
)
|
||
Expiration of statutes of limitations
|
|
(5,550
|
)
|
|
(8,406
|
)
|
||
|
|
|
|
|
||||
Balance at end of year
|
|
$
|
103,963
|
|
|
$
|
51,520
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||
December 31,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
In thousands of dollars
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Change in benefit obligation
|
|
|
|
|
|
|
|
|
||||||||
Projected benefits obligation at beginning of year
|
|
$
|
1,237,778
|
|
|
$
|
1,156,756
|
|
|
$
|
318,415
|
|
|
$
|
318,536
|
|
Service cost
|
|
31,339
|
|
|
30,823
|
|
|
1,094
|
|
|
1,172
|
|
||||
Interest cost
|
|
43,962
|
|
|
49,909
|
|
|
10,747
|
|
|
13,258
|
|
||||
Plan amendments
|
|
55
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Actuarial (gain) loss
|
|
(100,872
|
)
|
|
112,700
|
|
|
(33,412
|
)
|
|
7,916
|
|
||||
Curtailment
|
|
(8,833
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlement
|
|
(319
|
)
|
|
(49,876
|
)
|
|
—
|
|
|
—
|
|
||||
Currency translation and other
|
|
(5,976
|
)
|
|
1,903
|
|
|
(1,030
|
)
|
|
370
|
|
||||
Benefits paid
|
|
(76,642
|
)
|
|
(64,439
|
)
|
|
(24,877
|
)
|
|
(22,837
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Projected benefits obligation at end of year
|
|
1,120,492
|
|
|
1,237,778
|
|
|
270,937
|
|
|
318,415
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Change in plan assets
|
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at beginning of year
|
|
988,167
|
|
|
961,421
|
|
|
—
|
|
|
—
|
|
||||
Actual return on plan assets
|
|
152,976
|
|
|
118,073
|
|
|
—
|
|
|
—
|
|
||||
Employer contribution
|
|
32,336
|
|
|
21,371
|
|
|
24,877
|
|
|
22,837
|
|
||||
Settlement
|
|
(319
|
)
|
|
(49,876
|
)
|
|
—
|
|
|
—
|
|
||||
Currency translation and other
|
|
(4,533
|
)
|
|
1,617
|
|
|
—
|
|
|
—
|
|
||||
Benefits paid
|
|
(76,642
|
)
|
|
(64,439
|
)
|
|
(24,877
|
)
|
|
(22,837
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at end of year
|
|
1,091,985
|
|
|
988,167
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Funded status at end of year
|
|
$
|
(28,507
|
)
|
|
$
|
(249,611
|
)
|
|
$
|
(270,937
|
)
|
|
$
|
(318,415
|
)
|
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||
December 31,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
In thousands of dollars
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Other assets
|
|
$
|
32,533
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued liabilities
|
|
(10,198
|
)
|
|
(9,396
|
)
|
|
(25,477
|
)
|
|
(26,181
|
)
|
||||
Other long-term liabilities
|
|
(50,842
|
)
|
|
(240,215
|
)
|
|
(245,460
|
)
|
|
(292,234
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total
|
|
$
|
(28,507
|
)
|
|
$
|
(249,611
|
)
|
|
$
|
(270,937
|
)
|
|
$
|
(318,415
|
)
|
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||
December 31,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
In thousands of dollars
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Actuarial net (loss) gain
|
|
$
|
(215,702
|
)
|
|
$
|
(362,039
|
)
|
|
$
|
13,107
|
|
|
$
|
(6,320
|
)
|
Net prior service credit (cost)
|
|
5,698
|
|
|
5,539
|
|
|
(2,737
|
)
|
|
(3,217
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total
|
|
$
|
(210,004
|
)
|
|
$
|
(356,500
|
)
|
|
$
|
10,370
|
|
|
$
|
(9,537
|
)
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|||||||
Projected benefit obligation
|
|
$
|
76,801
|
|
|
$
|
1,237,238
|
|
Accumulated benefit obligation
|
|
64,340
|
|
|
1,185,214
|
|
||
Fair value of plan assets
|
|
15,760
|
|
|
987,643
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||||||||||
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
|
$
|
31,339
|
|
|
$
|
30,823
|
|
|
$
|
30,059
|
|
|
$
|
1,094
|
|
|
$
|
1,172
|
|
|
$
|
1,333
|
|
Interest cost
|
|
43,962
|
|
|
49,909
|
|
|
52,960
|
|
|
10,747
|
|
|
13,258
|
|
|
14,967
|
|
||||||
Expected return on plan assets
|
|
(73,128
|
)
|
|
(72,949
|
)
|
|
(78,161
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service cost (credit)
|
|
422
|
|
|
731
|
|
|
1,002
|
|
|
618
|
|
|
619
|
|
|
(255
|
)
|
||||||
Amortization of net loss (gain)
|
|
40,397
|
|
|
39,723
|
|
|
28,004
|
|
|
(73
|
)
|
|
(101
|
)
|
|
(71
|
)
|
||||||
Administrative expenses
|
|
692
|
|
|
545
|
|
|
653
|
|
|
75
|
|
|
120
|
|
|
244
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net periodic benefit cost
|
|
43,684
|
|
|
48,782
|
|
|
34,517
|
|
|
12,461
|
|
|
15,068
|
|
|
16,218
|
|
||||||
Curtailment (credit) loss
|
|
(364
|
)
|
|
—
|
|
|
1,826
|
|
|
—
|
|
|
—
|
|
|
(174
|
)
|
||||||
Settlement loss
|
|
18
|
|
|
19,676
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total amount reflected in earnings
|
|
$
|
43,338
|
|
|
$
|
68,458
|
|
|
$
|
36,389
|
|
|
$
|
12,461
|
|
|
$
|
15,068
|
|
|
$
|
16,044
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||||||||||
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Actuarial net (gain) loss
|
|
$
|
(230,605
|
)
|
|
$
|
8,536
|
|
|
$
|
120,401
|
|
|
$
|
(33,165
|
)
|
|
$
|
7,952
|
|
|
$
|
11,216
|
|
Prior service (credit) cost
|
|
(613
|
)
|
|
(716
|
)
|
|
(1,313
|
)
|
|
(632
|
)
|
|
(613
|
)
|
|
7,614
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total recognized in other comprehensive (income) loss
|
|
$
|
(231,218
|
)
|
|
$
|
7,820
|
|
|
$
|
119,088
|
|
|
$
|
(33,797
|
)
|
|
$
|
7,339
|
|
|
$
|
18,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total recognized in net periodic benefit cost and other comprehensive (income) loss
|
|
$
|
(187,534
|
)
|
|
$
|
56,602
|
|
|
$
|
153,605
|
|
|
$
|
(21,336
|
)
|
|
$
|
22,407
|
|
|
$
|
35,048
|
|
|
Pension Plans
|
|
Post-Retirement
Benefit Plans
|
||||
Amortization of net actuarial loss (gain)
|
$
|
22,952
|
|
|
$
|
(109
|
)
|
|
|
|
|
||||
Amortization of prior service (credit) cost
|
$
|
(668
|
)
|
|
$
|
618
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Discount rate
|
|
4.5
|
%
|
|
3.7
|
%
|
|
4.5
|
%
|
|
3.7
|
%
|
Rate of increase in compensation levels
|
|
4.0
|
%
|
|
4.0
|
%
|
|
N/A
|
|
|
N/A
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||||
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Discount rate
|
|
3.7
|
%
|
|
4.5
|
%
|
|
5.2
|
%
|
|
3.7
|
%
|
|
4.5
|
%
|
|
5.2
|
%
|
Expected long-term return on plan assets
|
|
7.75
|
%
|
|
8.0
|
%
|
|
8.0
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Rate of compensation increase
|
|
4.0
|
%
|
|
4.1
|
%
|
|
4.1
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Impact of assumed health care cost trend rates
|
|
One-Percentage
Point Increase |
|
One-Percentage
Point (Decrease) |
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Effect on total service and interest cost components
|
|
$
|
172
|
|
|
$
|
(152
|
)
|
Effect on post-retirement benefit obligation
|
|
4,132
|
|
|
(3,697
|
)
|
Asset Class
|
|
Target Allocation 2013
|
|||
Equity securities
|
|
55
|
%
|
-
|
75%
|
Debt securities
|
|
25
|
%
|
-
|
45%
|
Cash and certain other investments
|
|
0
|
%
|
-
|
5%
|
In thousands of dollars
|
Quoted prices in active markets of identical assets
(Level 1) |
|
Significant other observable inputs
(Level 2) |
|
Significant other unobservable
inputs (Level 3) |
|
Total assets measured at fair value as of
December 31, 2013 |
||||||||
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
657
|
|
|
$
|
22,998
|
|
|
$
|
—
|
|
|
$
|
23,655
|
|
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. all-cap (a)
|
64,949
|
|
|
137,385
|
|
|
—
|
|
|
202,334
|
|
||||
U.S. large-cap (b)
|
144,254
|
|
|
—
|
|
|
—
|
|
|
144,254
|
|
||||
U.S. small/mid-cap
|
33,145
|
|
|
—
|
|
|
—
|
|
|
33,145
|
|
||||
International all-cap (c)
|
136,892
|
|
|
3,062
|
|
|
—
|
|
|
139,954
|
|
||||
Global all-cap (d)
|
181,702
|
|
|
—
|
|
|
—
|
|
|
181,702
|
|
||||
Fixed income securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government/agency
|
109,995
|
|
|
34,907
|
|
|
—
|
|
|
144,902
|
|
||||
Corporate bonds (e)
|
57,735
|
|
|
34,616
|
|
|
—
|
|
|
92,351
|
|
||||
Collateralized obligations (f)
|
56,016
|
|
|
22,350
|
|
|
—
|
|
|
78,366
|
|
||||
International government/ corporate bonds (g)
|
14,018
|
|
|
37,304
|
|
|
—
|
|
|
51,322
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total Investments
|
$
|
799,363
|
|
|
$
|
292,622
|
|
|
$
|
—
|
|
|
$
|
1,091,985
|
|
In thousands of dollars
|
Quoted prices in active markets of identical assets
(Level 1) |
|
Significant other observable inputs(Level 2)
|
|
Significant other unobservable
inputs (Level 3) |
|
Total assets measured at fair value as of
December 31, 2012 |
||||||||
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
933
|
|
|
$
|
34,027
|
|
|
$
|
—
|
|
|
$
|
34,960
|
|
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. all-cap (a)
|
50,596
|
|
|
104,102
|
|
|
—
|
|
|
154,698
|
|
||||
U.S. large-cap (b)
|
107,934
|
|
|
—
|
|
|
—
|
|
|
107,934
|
|
||||
U.S. small/mid-cap
|
24,816
|
|
|
—
|
|
|
—
|
|
|
24,816
|
|
||||
International all-cap (c)
|
111,834
|
|
|
2,938
|
|
|
—
|
|
|
114,772
|
|
||||
Global all-cap (d)
|
229,044
|
|
|
—
|
|
|
—
|
|
|
229,044
|
|
||||
Domestic real estate
|
24,892
|
|
|
—
|
|
|
—
|
|
|
24,892
|
|
||||
Fixed income securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government/agency
|
76,009
|
|
|
27,984
|
|
|
—
|
|
|
103,993
|
|
||||
Corporate bonds (e)
|
38,001
|
|
|
19,691
|
|
|
—
|
|
|
57,692
|
|
||||
Collateralized obligations (f)
|
61,853
|
|
|
27,012
|
|
|
—
|
|
|
88,865
|
|
||||
International government/corporate bonds (g)
|
13,432
|
|
|
33,069
|
|
|
—
|
|
|
46,501
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total Investments
|
$
|
739,344
|
|
|
$
|
248,823
|
|
|
$
|
—
|
|
|
$
|
988,167
|
|
(a)
|
This category comprises equity funds that track the Russell 3000 index.
|
(b)
|
This category comprises equity funds that track the S&P 500 and/or Russell 1000 indices.
|
(c)
|
This category comprises equity funds that track the MSCI World Ex-US index.
|
(d)
|
This category comprises equity funds that track the MSCI World index.
|
(e)
|
This category comprises fixed income funds primarily invested in investment grade bonds.
|
(f)
|
This category comprises fixed income funds primarily invested in high quality mortgage-backed securities and other asset-backed obligations.
|
(g)
|
This category comprises fixed income funds invested in Canadian and other international bonds.
|
l
|
To optimize the long-term return on plan assets at an acceptable level of risk;
|
l
|
To maintain a broad diversification across asset classes;
|
l
|
To maintain careful control of the risk level within each asset class; and
|
l
|
To focus on a long-term return objective.
|
|
Expected Benefit Payments
|
||||||||||||||||||||||
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019-2023
|
||||||||||||
In thousands of dollars
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension Benefits
|
$
|
67,617
|
|
|
$
|
64,641
|
|
|
$
|
69,085
|
|
|
$
|
101,765
|
|
|
$
|
83,559
|
|
|
$
|
544,322
|
|
Other Benefits
|
25,491
|
|
|
24,690
|
|
|
23,796
|
|
|
22,411
|
|
|
20,843
|
|
|
85,699
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|||
Shares issued
|
|
359,901,744
|
|
|
359,901,744
|
|
|
359,901,744
|
|
|
|
|
|
|
|
|
|||
Treasury shares at beginning of year
|
|
(136,115,714
|
)
|
|
(134,695,826
|
)
|
|
(132,871,512
|
)
|
Stock repurchases:
|
|
|
|
|
|
|
|||
Repurchase programs
|
|
—
|
|
|
(2,054,354
|
)
|
|
(1,902,753
|
)
|
Stock-based compensation programs
|
|
(3,655,830
|
)
|
|
(5,598,537
|
)
|
|
(5,179,028
|
)
|
Stock issuances:
|
|
|
|
|
|
|
|||
Stock-based compensation programs
|
|
3,764,521
|
|
|
6,233,003
|
|
|
5,257,467
|
|
|
|
|
|
|
|
|
|||
Treasury shares at end of year
|
|
(136,007,023
|
)
|
|
(136,115,714
|
)
|
|
(134,695,826
|
)
|
|
|
|
|
|
|
|
|||
Net shares outstanding at end of year
|
|
223,894,721
|
|
|
223,786,030
|
|
|
225,205,918
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In thousands except per share amounts
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
820,470
|
|
|
$
|
660,931
|
|
|
$
|
628,962
|
|
|
|
|
|
|
|
|
||||||
Weighted-average shares—Basic
|
|
|
|
|
|
|
||||||
Common Stock
|
|
163,549
|
|
|
164,406
|
|
|
165,929
|
|
|||
Class B Stock
|
|
60,627
|
|
|
60,630
|
|
|
60,645
|
|
|||
|
|
|
|
|
|
|
||||||
Total weighted-average shares—Basic
|
|
224,176
|
|
|
225,036
|
|
|
226,574
|
|
|||
|
|
|
|
|
|
|
||||||
Effect of dilutive securities:
|
|
|
|
|
|
|
||||||
Employee stock options
|
|
2,476
|
|
|
2,608
|
|
|
2,565
|
|
|||
Performance and restricted stock units
|
|
551
|
|
|
693
|
|
|
780
|
|
|||
|
|
|
|
|
|
|
||||||
Weighted-average shares—Diluted
|
|
227,203
|
|
|
228,337
|
|
|
229,919
|
|
|||
|
|
|
|
|
|
|
||||||
Earnings Per Share—Basic
|
|
|
|
|
|
|
||||||
Common Stock
|
|
$3.76
|
|
$3.01
|
|
$2.85
|
||||||
|
|
|
|
|
|
|
||||||
Class B Stock
|
|
$3.39
|
|
$2.73
|
|
$2.58
|
||||||
|
|
|
|
|
|
|
||||||
Earnings Per Share—Diluted
|
|
|
|
|
|
|
||||||
Common Stock
|
|
$3.61
|
|
$2.89
|
|
$2.74
|
||||||
|
|
|
|
|
|
|
||||||
Class B Stock
|
|
$3.37
|
|
$2.71
|
|
$2.56
|
l
|
Non-qualified stock options (“stock options”);
|
l
|
Performance stock units (“PSUs”) and performance stock;
|
l
|
Stock appreciation rights;
|
l
|
Restricted stock units (“RSUs”) and restricted stock; and
|
l
|
Other stock-based awards.
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Total compensation amount charged against income for stock compensation plans, including stock options, performance stock units and restricted stock units
|
|
$
|
54.0
|
|
|
$
|
50.5
|
|
|
$
|
43.5
|
|
Total income tax benefit recognized in Consolidated Statements of Income for share-based compensation
|
|
$
|
18.5
|
|
|
$
|
17.5
|
|
|
$
|
15.1
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Compensation amount charged against income for stock options
|
|
$
|
21.4
|
|
|
$
|
19.3
|
|
|
$
|
22.5
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||
Stock Options
|
|
Shares
|
|
Weighted-
Average Exercise Price |
|
Shares
|
|
Weighted-
Average Exercise Price |
|
Shares
|
|
Weighted-
Average Exercise Price |
||||||
Outstanding at beginning of year
|
|
10,553,914
|
|
|
$48.08
|
|
14,540,442
|
|
|
$44.86
|
|
17,997,082
|
|
|
$42.21
|
|||
Granted
|
|
1,779,109
|
|
|
$81.95
|
|
2,110,945
|
|
|
$60.89
|
|
2,191,627
|
|
|
$51.62
|
|||
Exercised
|
|
(3,315,990
|
)
|
|
$45.25
|
|
(5,870,607
|
)
|
|
$44.55
|
|
(4,875,122
|
)
|
|
$38.30
|
|||
Forfeited
|
|
(356,697
|
)
|
|
$64.38
|
|
(226,866
|
)
|
|
$52.02
|
|
(773,145
|
)
|
|
$43.90
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Outstanding at end of year
|
|
8,660,336
|
|
|
$55.47
|
|
10,553,914
|
|
|
$48.08
|
|
14,540,442
|
|
|
$44.86
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Options exercisable at year-end
|
|
4,290,416
|
|
|
$46.45
|
|
5,320,775
|
|
|
$45.74
|
|
8,453,362
|
|
|
$46.95
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted-average fair value of options granted during the year (per share)
|
|
$
|
14.51
|
|
|
|
|
$
|
10.60
|
|
|
|
|
$
|
9.97
|
|
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
|||
Dividend yields
|
|
2.2
|
%
|
|
2.4
|
%
|
|
2.7
|
%
|
Expected volatility
|
|
22.2
|
%
|
|
22.4
|
%
|
|
22.5
|
%
|
Risk-free interest rates
|
|
1.4
|
%
|
|
1.5
|
%
|
|
2.8
|
%
|
Expected lives in years
|
|
6.6
|
|
|
6.6
|
|
|
6.5
|
|
l
|
“Dividend yields” means the sum of dividends declared for the four most recent quarterly periods, divided by the average price of our Common Stock for the comparable periods;
|
l
|
“Expected volatility” means the historical volatility of our Common Stock over the expected term of each grant;
|
l
|
“Risk-free interest rates” means the U.S. Treasury yield curve rate in effect at the time of grant for periods within the contractual life of the option; and
|
l
|
“Expected lives” means the period of time that options granted are expected to be outstanding based primarily on historical data.
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Intrinsic value of options exercised
|
|
$
|
135.4
|
|
|
$
|
130.2
|
|
|
$
|
81.3
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
|
Number
Outstanding as of 12/31/13 |
|
Weighted-
Average Remaining Contractual Life in Years |
|
Weighted-
Average Exercise Price |
|
Number
Exercisable as of 12/31/13 |
|
Weighted-
Average Exercise Price |
||||||
$33.40 - $39.26
|
|
2,514,127
|
|
|
5.0
|
|
$
|
37.19
|
|
|
2,000,140
|
|
|
$
|
36.66
|
|
$39.57 - $60.10
|
|
2,503,703
|
|
|
5.1
|
|
$
|
51.94
|
|
|
1,595,372
|
|
|
$
|
52.14
|
|
$60.68 - $91.65
|
|
3,642,506
|
|
|
7.9
|
|
$
|
70.51
|
|
|
694,904
|
|
|
$
|
61.58
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
$33.40 - $91.65
|
|
8,660,336
|
|
|
6.3
|
|
$
|
55.47
|
|
|
4,290,416
|
|
|
$
|
46.45
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Compensation amount charged against income for performance and restricted stock units
|
|
$
|
32.6
|
|
|
$
|
31.2
|
|
|
$
|
21.0
|
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
Units granted
|
|
395,862
|
|
|
503,761
|
|
|
543,596
|
|
|||
Weighted-average fair value at date of grant
|
|
$
|
88.49
|
|
|
$
|
64.99
|
|
|
$
|
58.28
|
|
Monte Carlo simulation assumptions:
|
|
|
|
|
|
|
||||||
Estimated values
|
|
$
|
55.49
|
|
|
$
|
35.62
|
|
|
$
|
37.79
|
|
Dividend yields
|
|
2.0
|
%
|
|
2.5
|
%
|
|
2.7
|
%
|
|||
Expected volatility
|
|
17.1
|
%
|
|
20.0
|
%
|
|
28.8
|
%
|
l
|
“Estimated values” means the fair value for the market-based total shareholder return component of each performance stock unit at the date of grant using a Monte Carlo simulation model;
|
l
|
“Dividend yields” means the sum of dividends declared for the four most recent quarterly periods, divided by the average price of our Common Stock for the comparable periods;
|
l
|
“Expected volatility” means the historical volatility of our Common Stock over the expected term of each grant.
|
Performance Stock Units and Restricted Stock Units
|
|
2013
|
|
Weighted-average grant date fair value
for equity awards or market value for
liability awards
|
|
Outstanding at beginning of year
|
|
1,720,577
|
|
|
$56.71
|
Granted
|
|
395,862
|
|
|
$88.49
|
Performance assumption change
|
|
176,534
|
|
|
$84.27
|
Vested
|
|
(754,991
|
)
|
|
$50.33
|
Forfeited
|
|
(126,583
|
)
|
|
$71.80
|
|
|
|
|
|
|
Outstanding at end of year
|
|
1,411,399
|
|
|
$72.43
|
For the years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
||||||
In millions of dollars
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Intrinsic value of share-based liabilities paid, combined with the fair value of shares vested
|
|
$
|
62.6
|
|
|
$
|
37.3
|
|
|
$
|
36.6
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
Raw materials
|
|
$
|
226,978
|
|
|
$
|
256,969
|
|
Goods in process
|
|
79,861
|
|
|
78,292
|
|
||
Finished goods
|
|
517,968
|
|
|
496,981
|
|
||
Inventories at FIFO
|
|
824,807
|
|
|
832,242
|
|
||
Adjustment to LIFO
|
|
(165,266
|
)
|
|
(198,980
|
)
|
||
Total inventories
|
|
$
|
659,541
|
|
|
$
|
633,262
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Land
|
|
$
|
96,334
|
|
|
$
|
92,916
|
|
Buildings
|
|
956,890
|
|
|
878,527
|
|
||
Machinery and equipment
|
|
2,726,170
|
|
|
2,589,183
|
|
||
|
|
|
|
|
||||
Property, plant and equipment, gross
|
|
3,779,394
|
|
|
3,560,626
|
|
||
Accumulated depreciation
|
|
(1,974,049
|
)
|
|
(1,886,555
|
)
|
||
|
|
|
|
|
||||
Property, plant and equipment, net
|
|
$
|
1,805,345
|
|
|
$
|
1,674,071
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Unamortized intangible assets:
|
|
|
|
|
||||
Goodwill balance at beginning of year
|
|
$
|
588,003
|
|
|
$
|
516,745
|
|
Effect of foreign currency translation
|
|
(11,442
|
)
|
|
3,284
|
|
||
Acquisitions
|
|
—
|
|
|
67,974
|
|
||
|
|
|
|
|
||||
Goodwill balance at end of year
|
|
$
|
576,561
|
|
|
$
|
588,003
|
|
|
|
|
|
|
||||
Trademarks with indefinite lives
|
|
$
|
81,465
|
|
|
$
|
81,465
|
|
Amortized intangible assets, gross:
|
|
|
|
|
||||
Trademarks
|
|
64,436
|
|
|
68,490
|
|
||
Customer-related
|
|
72,094
|
|
|
74,790
|
|
||
Intangible asset associated with cooperative agreement with Bauducco
|
|
13,683
|
|
|
13,683
|
|
||
Patents
|
|
19,278
|
|
|
20,018
|
|
||
Effect of foreign currency translation
|
|
(9,256
|
)
|
|
(6,470
|
)
|
||
|
|
|
|
|
||||
Total other intangible assets, gross
|
|
241,700
|
|
|
251,976
|
|
||
Accumulated amortization:
|
|
|
|
|
||||
Trademarks
|
|
(5,190
|
)
|
|
(2,250
|
)
|
||
Customer-related
|
|
(26,853
|
)
|
|
(22,990
|
)
|
||
Intangible asset associated with cooperative agreement with Bauducco
|
|
(7,379
|
)
|
|
(6,294
|
)
|
||
Patents
|
|
(9,737
|
)
|
|
(7,411
|
)
|
||
Effect of foreign currency translation
|
|
2,703
|
|
|
1,682
|
|
||
Total accumulated amortization
|
|
(46,456
|
)
|
|
(37,263
|
)
|
||
|
|
|
|
|
||||
Other intangibles
|
|
$
|
195,244
|
|
|
$
|
214,713
|
|
Annual Amortization Expense
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
||||||||||
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Estimated amortization expense
|
|
$
|
10,452
|
|
|
$
|
9,916
|
|
|
$
|
9,913
|
|
|
$
|
9,245
|
|
|
$
|
8,151
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Payroll, compensation and benefits
|
|
$
|
245,641
|
|
|
$
|
236,598
|
|
Advertising and promotion
|
|
348,966
|
|
|
289,221
|
|
||
Other
|
|
105,115
|
|
|
125,087
|
|
||
|
|
|
|
|
||||
Total accrued liabilities
|
|
$
|
699,722
|
|
|
$
|
650,906
|
|
December 31,
|
|
2013
|
|
2012
|
||||
In thousands of dollars
|
|
|
|
|
||||
|
|
|
|
|
||||
Post-retirement benefits liabilities
|
|
$
|
245,460
|
|
|
$
|
292,234
|
|
Pension benefits liabilities
|
|
50,842
|
|
|
240,215
|
|
||
Other
|
|
137,766
|
|
|
136,283
|
|
||
|
|
|
|
|
||||
Total other long-term liabilities
|
|
$
|
434,068
|
|
|
$
|
668,732
|
|
Year 2013
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
In thousands of dollars except per share amounts
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
1,827,426
|
|
|
$
|
1,508,514
|
|
|
$
|
1,853,886
|
|
|
$
|
1,956,253
|
|
Gross profit
|
|
849,337
|
|
|
718,574
|
|
|
855,551
|
|
|
857,386
|
|
||||
Net income
|
|
241,906
|
|
|
159,504
|
|
|
232,985
|
|
|
186,075
|
|
||||
Class B Common Stock:
|
|
|
|
|
|
|
|
|
||||||||
Net income per share—Basic
|
|
1.00
|
|
|
0.66
|
|
|
0.96
|
|
|
0.77
|
|
||||
Net income per share—Diluted
(a)
|
|
0.99
|
|
|
0.66
|
|
|
0.95
|
|
|
0.76
|
|
||||
Dividends paid per share
|
|
0.38
|
|
|
0.38
|
|
|
0.435
|
|
|
0.435
|
|
||||
Common Stock:
|
|
|
|
|
|
|
|
|
||||||||
Net income per share—Basic
|
|
1.11
|
|
|
0.73
|
|
|
1.07
|
|
|
0.85
|
|
||||
Net income per share—Diluted
|
|
1.06
|
|
|
0.70
|
|
|
1.03
|
|
|
0.82
|
|
||||
Dividends paid per share
|
|
0.42
|
|
|
0.42
|
|
|
0.485
|
|
|
0.485
|
|
||||
Market Price
|
|
|
|
|
|
|
|
|
||||||||
High
|
|
87.53
|
|
|
91.25
|
|
|
97.69
|
|
|
100.90
|
|
||||
Low
|
|
73.51
|
|
|
85.25
|
|
|
89.17
|
|
|
91.04
|
|
Year 2012
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
In thousands of dollars except per share amounts
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
1,732,064
|
|
|
$
|
1,414,444
|
|
|
$
|
1,746,709
|
|
|
$
|
1,751,035
|
|
Gross profit
|
|
743,396
|
|
|
618,521
|
|
|
742,757
|
|
|
755,208
|
|
||||
Net income
|
|
198,651
|
|
|
135,685
|
|
|
176,716
|
|
|
149,879
|
|
||||
Class B Common Stock:
|
|
|
|
|
|
|
|
|
||||||||
Net income per share—Basic
|
|
0.82
|
|
|
0.56
|
|
|
0.73
|
|
|
0.62
|
|
||||
Net income per share—Diluted
|
|
0.81
|
|
|
0.55
|
|
|
0.73
|
|
|
0.62
|
|
||||
Dividends paid per share
|
|
0.344
|
|
|
0.344
|
|
|
0.344
|
|
|
0.380
|
|
||||
Common Stock:
|
|
|
|
|
|
|
|
|
||||||||
Net income per share—Basic
(a)
|
|
0.91
|
|
|
0.62
|
|
|
0.80
|
|
|
0.69
|
|
||||
Net income per share—Diluted
|
|
0.87
|
|
|
0.59
|
|
|
0.77
|
|
|
0.66
|
|
||||
Dividends paid per share
|
|
0.38
|
|
|
0.38
|
|
|
0.38
|
|
|
0.42
|
|
||||
Market Price
|
|
|
|
|
|
|
|
|
||||||||
High
|
|
61.94
|
|
|
72.03
|
|
|
73.16
|
|
|
74.64
|
|
||||
Low
|
|
59.49
|
|
|
59.81
|
|
|
70.09
|
|
|
68.85
|
|
(a)
|
Quarterly income per share amounts do not total to the annual amount due to changes in weighted-average shares outstanding during the year.
|
|
|
|
John P. Bilbrey
Chief Executive Officer
|
|
David W. Tacka
Chief Financial Officer
|
Name
|
|
Age
|
|
Positions Held During the Last Five Years
|
Humberto P. Alfonso
|
|
56
|
|
President, International (May 2013); Executive Vice President, Chief Financial Officer and Chief Administrative Officer (September 2011); Senior Vice President, Chief Financial Officer (July 2007)
|
John P. Bilbrey
|
|
57
|
|
President and Chief Executive Officer (June 2011); Executive Vice President, Chief Operating Officer (November 2010); Senior Vice President, President Hershey North America (December 2007)
|
Michele G. Buck
|
|
52
|
|
President, North America (May 2013); Senior Vice President, Chief Growth Officer (September 2011); Senior Vice President, Global Chief Marketing Officer (December 2007)
|
Richard M. McConville
|
|
60
|
|
Vice President, Chief Accounting Officer (July 2012); Corporate Controller (June 2011); Director, International Controller, International Commercial Group (April 2007)
|
Terence L. O’Day
|
|
64
|
|
Senior Vice President, Chief Supply Chain Officer (May 2013); Senior Vice President, Global Operations (December 2008)
|
David W. Tacka
|
|
60
|
|
Senior Vice President, Chief Financial Officer (May 2013); Vice President, Special Projects (July 2012); Vice President, Chief Accounting Officer (February 2004)
|
Leslie M. Turner
(1)
|
|
56
|
|
Senior Vice President, General Counsel and Secretary (July 2012)
|
Kevin R. Walling
(2)
|
|
48
|
|
Senior Vice President, Chief Human Resources Officer (November 2011); Senior Vice President, Chief People Officer (June 2011)
|
D. Michael Wege
|
|
51
|
|
Senior Vice President, Chief Growth and Marketing Officer (May 2013); Senior Vice President, Chief Commercial Officer (September 2011); Senior Vice President, Chocolate Strategic Business Unit (December 2010);Vice President, U.S. Chocolate (April 2008)
|
Waheed Zaman
(3)
|
|
53
|
|
Senior Vice President, Chief Corporate Strategy and Administrative Officer (August 2013); Senior Vice President, Chief Administrative Officer (April 2013)
|
(1)
|
Ms. Turner was elected Senior Vice President, General Counsel and Secretary effective July 9, 2012. Prior to joining our Company she was Chief Legal Officer of Coca-Cola North America (June 2008), and Associate General Counsel, Coca-Cola Company Bottling Investments Group (January 2006).
|
(2)
|
Mr. Walling was elected Senior Vice President, Chief People Officer effective June 1, 2011. Prior to joining our Company he was Vice President and Chief Human Resource Officer of Kennametal Inc. (November 2005).
|
(3)
|
Mr. Zaman was elected Senior Vice President, Chief Corporate Strategy and Administrative Officer effective August 6, 2013. Prior to joining our Company he was President and Chief Executive Officer of W&A Consulting (May 2012); Senior Vice President, Special Assignments of Chiquita Brands International (February 2012); Senior Vice President, Global Product Supply of Chiquita Brands International (October 2007).
|
(1)
|
Column (a) includes stock options, performance stock units and restricted stock units granted under the stockholder-approved EICP. Of the securities available for future issuances under the EICP in column (c), 9,929,709 are available for awards of stock options and 6,158,923 are available for full-value awards such as performance stock units, performance stock, restricted stock units, restricted stock and other stock-based awards. Securities available for future issuance of full-value awards may also be used for stock option awards. As of December 31, 2013, 29,596 performance stock units were excluded from the number of securities remaining available for issuance in column (c) because the measurement date had not yet occurred
|
(2)
|
Column (a) includes 124,601 stock options outstanding that were granted under the Broad Based Stock Option Plan. In July 2004, we announced a worldwide stock option grant under the Broad Based Stock Option Plan, which provided over 13,000 eligible employees with a grant of 100 non-qualified stock options each. The stock options were granted at a price of $46.44 per share which equates to 100% of the fair market value of our Common Stock on the date of grant (determined as the closing price on the New York Stock Exchange on the trading day immediately preceding the date the stock options were granted) and vested on July 19, 2009. No additional awards may be made under the Broad Based Stock Option Plan or Directors' Compensation Plan.
|
(3)
|
Weighted-average exercise price of outstanding stock options only.
|
2.1
|
|
Share Purchase Agreement by and among Shanghai Golden Monkey Food Joint Stock Co., LTD. and Hershey Netherlands B.V., a wholly-owned subsidiary of the Company, as of December 18, 2013, is attached hereto and filed as Exhibit 2.1.
|
3.1
|
The Company’s Restated Certificate of Incorporation, as amended, is incorporated by reference from Exhibit 3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2005. The By-laws, as amended and restated as of February 21, 2012, are incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed February 24, 2012.
|
|
|
Instruments defining the rights of security holders, including indentures
|
|
|
|
4.1
|
The Company has issued certain long-term debt instruments, no one class of which creates indebtedness exceeding 10% of the total assets of the Company and its subsidiaries on a consolidated basis. These classes consist of the following:
|
|
|
|
1) 4.850% Notes due 2015
|
|
|
|
2) 5.450% Notes due 2016
|
|
|
|
3) 1.500% Notes due 2016
|
|
|
|
4) 4.125% Notes due 2020
|
|
|
|
5) 8.8% Debentures due 2021
|
|
|
|
6) 2.625% Notes due 2023
|
|
|
|
7) 7.2% Debentures due 2027
|
|
|
|
8) Other Obligations
|
10.1
|
|
Kit Kat and Rolo License Agreement (the “License Agreement”) between the Company and Rowntree Mackintosh Confectionery Limited is incorporated by reference from Exhibit 10(a) to the Company’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 19 to the Company’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 Société des Produits Nestlé SA as of January 1, 1990. The Assignment Agreement is incorporated by reference from Exhibit 19 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1990.
|
|
|
|
10.2
|
|
Peter Paul/York Domestic Trademark & Technology License Agreement between the Company and Cadbury Schweppes Inc. (now Cadbury Ireland Limited) dated August 25, 1988, is incorporated by reference from Exhibit 2(a) to the Company’s Current Report on Form 8-K dated September 8, 1988. This agreement was assigned by the Company to its wholly-owned subsidiary, Hershey Chocolate & Confectionery Corporation.
|
|
|
|
10.3
|
|
Cadbury Trademark & Technology License Agreement between the Company and Cadbury Limited (now Cadbury UK Limited) dated August 25, 1988, is incorporated by reference from Exhibit 2(a) to the Company’s Current Report on Form 8-K dated September 8, 1988. This agreement was assigned by the Company to its wholly-owned subsidiary, Hershey Chocolate & Confectionery Corporation.
|
|
|
|
10.4
|
|
Trademark and Technology License Agreement between Huhtamäki and the Company dated December 30, 1996, is incorporated by reference from Exhibit 10 to the Company’s Current Report on Form 8-K dated February 26, 1997. This agreement was assigned by the Company to its wholly-owned subsidiary, Hershey Chocolate & Confectionery Corporation. The agreement was amended and restated in 1999 and the Amended and Restated Trademark and Technology License Agreement is incorporated by reference from Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
|
|
|
|
10.5
|
|
Five Year Credit Agreement dated as of October 14, 2011, among the Company and the banks, financial institutions and other institutional lenders listed on the respective signature pages thereof (“Lenders”), Bank of America, N.A., as administrative agent for the Lenders, JPMorgan Chase Bank, N.A., as syndication agent, Citibank, N.A. and PNC Bank, National Association, as documentation agents, and Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Citigroup Global Markets, Inc. and PNC Capital Markets LLC, as joint lead arrangers and joint book managers is incorporated by reference from Exhibit 10.1 to the Company's current Report on Form 8-K, filed October 20, 2011.
|
|
|
|
10.6
|
|
Amendment No. 1 to Credit Agreement dated as of November 12, 2013, among the Company, the banks, financial institutions and other institutional lenders who are parties to the Five Year Credit Agreement and Bank of America, N.A., as agent, is attached hereto and filed as Exhibit 10.6.
|
|
|
|
10.7
|
|
Master Innovation and Supply Agreement between the Company and Barry Callebaut, AG, dated July 13, 2007, is incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 19, 2007.
|
|
|
|
10.8
|
|
First Amendment to Master Innovation and Supply Agreement between the Company and Barry Callebaut, AG, dated April 14, 2011, is incorporated by reference from Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2011.
|
|
|
|
10.9
|
|
Supply Agreement for Monterrey, Mexico, between the Company and Barry Callebaut, AG, dated July 13, 2007, is incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed July 19, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Exhibits
|
||
|
|
|
12.1
|
|
Computation of ratio of earnings to fixed charges statement
|
|
|
|
|
|
A computation of ratio of earnings to fixed charges for the fiscal years ended December 31, 2013, 2012, 2011, 2010 and 2009 is attached hereto and filed as Exhibit 12.1.
|
|
|
|
21.1
|
|
Subsidiaries of the Registrant
|
|
|
|
|
|
A list setting forth subsidiaries of the Company is attached hereto and filed as Exhibit 21.1.
|
|
|
|
23.1
|
|
Independent Auditors' Consent
|
|
|
|
|
|
The consent dated February 21, 2014 to the incorporation of reports of the Company’s Independent Auditors is attached hereto and filed as Exhibit 23.1.
|
|
|
|
31.1
|
|
Certification of John P. Bilbrey, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto and filed as Exhibit 31.1.
|
|
|
|
31.2
|
|
Certification of David W. Tacka, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto and filed as Exhibit 31.2.
|
|
|
|
32.1
|
|
Certification of John P. Bilbrey, Chief Executive Officer, and David W. Tacka, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto and furnished as Exhibit 32.1.
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
THE HERSHEY COMPANY
|
|
|
(Registrant)
|
|
|
|
By:
|
|
/S/ DAVID W. TACKA
|
|
|
David W. Tacka
|
|
|
Chief Financial Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/S/ JOHN P. BILBREY
|
|
Chief Executive Officer and Director
|
|
February 21, 2014
|
(John P. Bilbrey)
|
|
|
|
|
|
|
|
|
|
/S/ DAVID W. TACKA
|
|
Chief Financial Officer
|
|
February 21, 2014
|
(David W. Tacka)
|
|
|
|
|
|
|
|
|
|
/S/ RICHARD M. MCCONVILLE
|
|
Chief Accounting Officer
|
|
February 21, 2014
|
(Richard M. McConville)
|
|
|
|
|
|
|
|
|
|
/S/ PAMELA M. ARWAY
|
|
Director
|
|
February 21, 2014
|
(Pamela M. Arway)
|
|
|
|
|
|
|
|
|
|
/S/ ROBERT F. CAVANAUGH
|
|
Director
|
|
February 21, 2014
|
(Robert F. Cavanaugh)
|
|
|
|
|
|
|
|
|
|
/S/ CHARLES A. DAVIS
|
|
Director
|
|
February 21, 2014
|
(Charles A. Davis)
|
|
|
|
|
|
|
|
|
|
/S/ MARY KAY HABEN
|
|
Director
|
|
February 21, 2014
|
(Mary Kay Haben)
|
|
|
|
|
|
|
|
|
|
/S/ ROBERT M. MALCOLM
|
|
Director
|
|
February 21, 2014
|
(Robert M. Malcolm)
|
|
|
|
|
|
|
|
|
|
/S/ JAMES M. MEAD
|
|
Director
|
|
February 21, 2014
|
(James M. Mead)
|
|
|
|
|
|
|
|
|
|
/S/ JAMES E. NEVELS
|
|
Director
|
|
February 21, 2014
|
(James E. Nevels)
|
|
|
|
|
|
|
|
|
|
/S/ ANTHONY J. PALMER
|
|
Director
|
|
February 21, 2014
|
(Anthony J. Palmer)
|
|
|
|
|
|
|
|
|
|
/S/ THOMAS J. RIDGE
|
|
Director
|
|
February 21, 2014
|
(Thomas J. Ridge)
|
|
|
|
|
|
|
|
|
|
/S/ DAVID L. SHEDLARZ
|
|
Director
|
|
February 21, 2014
|
(David L. Shedlarz)
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
||||||||||||
Description
|
|
Balance at
Beginning
of Period
|
|
Charged to
Costs and
Expenses
|
|
Charged
to Other Accounts |
|
Deductions
from Reserves |
|
Balance
at End
of Period
|
||||||||||
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year Ended December 31, 2013:
Reserves deducted in the consolidated balance sheet from the assets to which they apply (a) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts Receivable—Trade, Net
|
|
$
|
10,435
|
|
|
$
|
154,092
|
|
|
$
|
—
|
|
|
$
|
(154,283
|
)
|
|
$
|
10,244
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended December 31, 2012:
Reserves deducted in the consolidated balance sheet from the assets to which they apply (a) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts Receivable—Trade, Net
|
|
$
|
14,977
|
|
|
$
|
134,972
|
|
|
$
|
—
|
|
|
$
|
(139,514
|
)
|
|
$
|
10,435
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended December 31, 2011:
Reserves deducted in the consolidated balance sheet from the assets to which they apply (a) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts Receivable—Trade, Net
|
|
$
|
15,190
|
|
|
$
|
135,147
|
|
|
$
|
—
|
|
|
$
|
(135,360
|
)
|
|
$
|
14,977
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of The Hershey Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
John P. Bilbrey
Chief Executive Officer
February 21, 2014
|
1.
|
I have reviewed this Annual Report on Form 10-K of The Hershey Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
David W. Tacka
Chief Financial Officer
February 21, 2014
|
|
Article 1
|
|
General Provisions
|
2
|
|
1.1
|
|
Definitions
|
2
|
|
1.2
|
|
Construction
|
13
|
|
Article 2
|
|
Sale and Purchase of Shares
|
14
|
|
2.1
|
|
Purchase Price for the Shares
|
14
|
|
2.2
|
|
Dividends
|
14
|
|
2.3
|
|
The First Tranche
|
14
|
|
2.4
|
|
The Second Tranche
|
15
|
|
Article 3
|
|
Adjustment for Net Working Capital Difference and Net Debt
|
|
|
Difference
|
16
|
|
||
3.1
|
|
Purpose of Adjustment
|
16
|
|
3.2
|
|
The Post-Closing Adjustment Statement
|
16
|
|
3.3
|
|
Payment of the Post-Closing Adjustment Amount
|
17
|
|
3.4
|
|
Determination of Post-Closing Adjustment Amount
|
17
|
|
Article 4
|
|
Conduct Pending the First Closing
|
18
|
|
4.1
|
|
Access to Information and Assistance with Integration
|
18
|
|
4.2
|
|
Conduct of Business
|
19
|
|
4.3
|
|
Continuing Disclosure
|
20
|
|
4.4
|
|
Pre-Closing Verification
|
21
|
|
4.5
|
|
Working Hour System
|
21
|
|
Article 5
|
|
Conditions Precedent to the First Closing
|
21
|
|
5.1
|
|
Conditions Precedent to All Parties' Obligations
|
21
|
|
5.2
|
|
Conditions Precedent to the Buyer's Obligations
|
22
|
|
5.3
|
|
Conditions Precedent to the Seller's and Founder's Obligations
|
25
|
|
Article 6
|
|
The First Closing
|
26
|
|
6.1
|
|
Date and Venue
|
26
|
|
6.2
|
|
Preparation for First Closing
|
26
|
|
6.3
|
|
Seller's and Founder's Obligation at the First Closing
|
27
|
|
6.4
|
|
Buyer's Obligation at the First Closing
|
29
|
|
6.5
|
|
Parties' Acknowledgements
|
29
|
|
Article 7
|
|
The Second Closing
|
30
|
|
7.1
|
|
Date and Venue
|
30
|
|
7.2
|
|
Buyer's Obligation at the Second Closing
|
30
|
|
7.3
|
|
Seller's Obligation at the Second Closing
|
30
|
|
Article 8
|
|
Representations and Warranties
|
31
|
|
8.1
|
|
Representations and Warranties Relating to Seller and Founder
|
31
|
|
8.2
|
|
Representations and Warranties Relating to the Target Group
|
33
|
|
8.3
|
|
Buyer's Representations and Warranties
|
43
|
|
8.4
|
|
Reliance
|
43
|
|
Article 9
|
|
Non-Competition
|
44
|
|
9.1
|
|
Non-Competition
|
44
|
|
Article 10
|
|
Restriction on Use of Intellectual Property
|
45
|
|
10.1
|
|
Trademark License
|
45
|
|
10.2
|
|
Restriction on Use of Intellectual Property
|
46
|
|
Article 11
|
|
Other Covenants
|
47
|
|
11.1
|
|
Founder's Consulting Services
|
47
|
|
11.2
|
|
Management Bonus Scheme
|
47
|
|
11.3
|
|
Restrictions on Transfer, Lock-up
|
47
|
|
11.4
|
|
Filings, Authorizations and Consents
|
48
|
|
11.5
|
|
Reasonable Efforts and Assistance
|
48
|
|
11.6
|
|
Taxes, Fees and Expense
|
49
|
|
11.7
|
|
Press Release and Public Announcements
|
49
|
|
11.8
|
|
Establishment of Owned Retail Stores
|
49
|
|
11.9
|
|
Waiver of Claims to Intellectual Property
|
50
|
|
11.10
|
|
Compliance Program and Internal Controls
|
50
|
|
11.11
|
|
Permits
|
50
|
|
Article 12
|
|
Indemnification Obligations
|
50
|
|
12.1
|
|
Parties' Respective Indemnification Obligations
|
50
|
|
12.2
|
|
Procedures Relating to Indemnification
|
52
|
|
12.3
|
|
Indemnity Escrow
|
52
|
|
12.4
|
|
Manner of Payment
|
53
|
|
12.5
|
|
Buyer's Discretion
|
53
|
|
Article 13
|
|
Termination and Expiration
|
53
|
|
13.1
|
|
Termination of Agreement before the First Closing Date
|
54
|
|
13.2
|
|
Effect of Termination
|
54
|
|
13.3
|
|
Expiry of this Agreement
|
54
|
|
Article 14
|
|
Miscellaneous
|
54
|
|
14.1
|
|
Severability
|
54
|
|
14.2
|
|
Governing Law
|
54
|
|
14.3
|
|
Dispute Resolution
|
54
|
|
14.4
|
|
Notices
|
56
|
|
14.5
|
|
Effectiveness
|
57
|
|
14.6
|
|
Amendment
|
58
|
|
14.7
|
|
Waiver
|
58
|
|
14.8
|
|
Interest on the Shortfall
|
58
|
|
14.9
|
|
Specific Performance
|
58
|
|
14.10
|
|
Rights Cumulative
|
58
|
|
14.11
|
|
Successors and Assignment
|
58
|
|
14.12
|
|
No Third Party Beneficiaries
|
58
|
|
14.13
|
|
Entire Agreement
|
58
|
|
14.14
|
|
Recitals, Exhibits and Schedules
|
59
|
|
14.15
|
|
Counterparts
|
59
|
|
14.16
|
|
Language
|
59
|
|
1.1
|
Definitions
. Except as otherwise provided under the terms of this Agreement, the following terms shall have the following meanings (where the terms are listed in alphabetical order in the English version of this Agreement and in the sequential order of
pin yin
in the Chinese version of this Agreement):
|
1.2
|
Construction
. For purposes of this Agreement, except where the context otherwise requires:
|
(a)
|
The term “
person
” includes any natural person, legal person, self-proprietorship, trust or partnership.
|
(b)
|
The term “
control
”, when used with respect to any given person, means the power or authority, whether exercised or not, to direct or cause the direction of the business, management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise;
provided
, that such power or authority shall conclusively be presumed to exist upon the ownership of, or the power to direct the vote of, more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such person or power to control the composition of a majority of the board of directors or partners of such person. The terms “
controlled
” and “
controlling
” have meanings correlative to the foregoing.
|
(c)
|
References to a Party include its successors and permitted assignees in accordance with Article 14.11.
|
(d)
|
The term “
third party
” shall mean any person other than the Parties hereto.
|
(e)
|
References to “
days
” other than “
Business Days
” mean calendar days (if, however, an action or obligation is due to be undertaken by or on a day other than a Business Day, i.e., a Saturday, Sunday or public holiday in the PRC, Hong Kong, the Netherlands or New York, then that action or obligation will be deemed to be due on the next following Business Day).
|
(f)
|
Prior to the First Closing Date, all references herein to “applicable Law” when used in relation to a Target Group Member or Seller Shareholder shall be limited to the Laws of the PRC.
|
(g)
|
The table of contents and headings contained herein are for convenience only and shall not affect the construction of the terms represented thereby.
|
(h)
|
The Parties have participated jointly in the negotiation and drafting of this Agreement, and no presumption or burden of proof shall be imposed in favor of or against any Party by virtue of such Party's authorship of any of the provisions of this Agreement; provided however, that
Exhibit A
,
Exhibit B
,
Exhibit C
,
Exhibit D
,
Exhibit H
,
Exhibit I
,
Exhibit P
, and
Exhibit R
have been
|
(a)
|
Prior to the First Closing Date, other than the Company's distribution of no more than thirty percent (30%) of its consolidated distributable net profits for the fiscal year 2013 to its shareholders as dividends for the fiscal year 2013, neither the Seller nor any Seller Shareholder shall claim for, agree to make, or cause the Company to make, any distribution of any assets to the Company's shareholders unless such distribution has been otherwise approved by the Buyer in writing in advance.
|
(b)
|
The Company shall, on or prior to the Second Closing Date and subject to applicable Laws, declare and distribute one hundred percent (100%) of its consolidated distributable net profits for the fiscal year 2014 to the Seller and Buyer as dividends for the fiscal year 2014 in proportion to their respective shareholding in the Company. For the avoidance of doubt, Seller shall be entitled to receive twenty percent (20%) of such dividends and Buyer shall be entitled to eighty percent (80%) of such dividends.
|
(c)
|
The Company shall, after having duly completed an audit of its consolidated results for the fiscal year 2015 in accordance with applicable Laws and paid all Taxes due in respect of its net profits for the fiscal year 2015, declare and distribute thirty percent (30%) of its consolidated distributable net profits for the fiscal year 2015 to its shareholders as dividends, provided that Seller shall in no event receive more than receive twenty percent (20%) of such dividends multiplied by a fraction, the numerator of which is the number of calendars elapsed between January 1, 2015 and the Second Closing Date and the denominator of which is 365.
|
(b)
|
Out of the First Tranche Shares, 287,999,999 Shares shall be sold by Seller to Buyer and one (1) Share shall be sold by Founder to Buyer.
|
(c)
|
The portion of the Purchase Price payable by the Buyer at the First Closing in consideration for the First Tranche Shares (the “
First Tranche Payment
”) shall be RMB 2,416,800,000, of which RMB 8.4 shall belong to the Founder and RMB 2,416,799,911.6 shall belong to the Seller.
|
(a)
|
Subject to the terms and conditions of this Agreement, the Seller hereby agrees to sell, transfer and assign to the Buyer and an Affiliate of Hershey to be designated by the Buyer (the “
Buyer Designee
”), and Buyer hereby agrees on behalf of itself and the Buyer Designee to purchase and accept from the Seller, at the Second Closing, 72,000,000 Shares (which constitute part of the Shares to be acquired by the Seller upon consummation of the Pre-Closing Restructuring, representing twenty-percent (20%) of all the Shares, the “
Second Tranche Shares
”) and all rights, title, interests and benefits attached thereto under the Company's articles of association, pursuant to applicable Laws, free and clear from any and all Encumbrances (the “
Second Tranche
”).
|
(b)
|
Out of the Second Tranche Shares, 71,999,999 Shares shall be sold by Seller to Buyer and one (1) Share shall be sold by Seller to the Buyer Designee.
|
(c)
|
The portion of the Purchase Price payable by the Buyer and Buyer Designee at the Second Closing in consideration for the Second Tranche Shares (the “
Second Tranche Payment
”) shall be RMB 604,200,000, of which RMB 604,199,991.6 shall be paid by the Buyer and RMB 8.4 shall be paid by the Buyer Designee.
|
(d)
|
The Parties intend for, and shall cause the Second Closing to occur on or as close to the first (1
st
) anniversary of the First Closing Date as the obtaining of any Necessary Regulatory Approvals to permit the Second Closing to occur by competent Governmental Authorities shall allow, in each case free and clear of any conditions.
|
(e)
|
Each of the Parties hereby expressly acknowledges and agrees that the terms of the Second Tranche as set forth in this Article 2.4 and elsewhere in this Agreement (including but not limited to Article 7) have been fairly and fully negotiated in good faith and hereby irrevocably waives any and all right or claim under any applicable Law to revise, alter or otherwise challenge the adequacy or fairness of the Second Tranche Payment as full consideration for the Second Tranche Shares and/or other terms of the Second Tranche as set out in this Agreement. The Seller and the Seller Shareholders shall diligently cooperate with the Buyer to properly consummate the Second Tranche in accordance with the terms of this Agreement.
|
3.1
|
Purpose of Adjustment
. Each of the Parties hereby acknowledges and agrees that the Purchase Price assumes the Target Group has as of the First Closing Date: (a) a level of Net Working Capital equal to 645,243,000 and (b) no more than RMB 522,172,000 in Net Debt, both as represented by the Seller and Seller Shareholders as the Net Working Capital and Net Debt in the Management Accounts as of 31 August 2013. As such, to the extent the Target Group has any Net Working Capital Difference and Net Debt Difference as of the First Closing Date, there shall be an adjustment payment equal to the Post-Closing Adjustment Amount that is payable either from the Seller and Founder to the Buyer, or vice versa, in each case calculated pursuant to this Article 3.
|
(a)
|
The Buyer shall within three (3) months after the First Closing Date, provide to the Seller a written statement (the “
Buyer's Post-Closing Adjustment Statement
”) setting forth the financial position of the Company as of the First Closing Date. The Buyer's Post-Closing Adjustment Statement shall be in the form of the Template Adjustment Statement as attached hereto as
Exhibit F
and set forth in reasonable detail (including the process of calculating the adjustment and the resultant amount) the Buyer's good faith calculation of the Post-Closing Adjustment Amount using the actual settlement figures and account dispositions for Cash, Long Term Loans, Short Term Loans, accounts receivable, inventory, prepayments and other receivables, accounts payable, accrued expenses, and other payables, being those metrics relevant to the calculation of Net Debt and Net Working Capital, each in accordance with PRC GAAP.
|
(b)
|
If the Seller disagrees with the Buyer's Post-Closing Adjustment Statement, the Seller shall be entitled to provide to the Buyer a written statement (the “
Seller's Post-Closing Adjustment Statement
”) not later than forty-five (45) calendar days after its receipt of the Buyer's Post-Closing Adjustment Statement, setting forth in reasonable detail all items disputed by the Seller together with the Seller's proposed changes thereto, including the Seller's calculation of the Post-Closing Adjustment Amount, and an explanation (in reasonable detail) of the basis on which such changes are proposed.
|
(c)
|
If:
|
(i)
|
by written notice to the Buyer, the Seller accepts the Buyer's Post-Closing Adjustment Statement; or
|
(ii)
|
the Seller fails to provide the Buyer with the Seller's Post-Closing Adjustment Statement within forty five (45) Business Days after receipt of the Buyer's Post-Closing Adjustment Statement;
|
(d)
|
If the Seller's Post-Closing Adjustment Statement is provided to the Buyer within forty five (45) Business Days after receipt of the Buyer's Post-Closing Adjustment Statement, then the Seller and the Buyer shall negotiate in good faith and attempt to reach an agreement on all items disputed by the Seller as set forth in the Seller's Post-Closing Adjustment Statement. If, after fifteen (15) Business Days following the Buyer's receipt of the Seller's Post-Closing Adjustment Statement, the Seller and the Buyer have not agreed in writing as to the resolution of all items disputed by the Seller as set forth in the Seller's Post-Closing Adjustment Statement, then the Seller and the Buyer shall submit such items in dispute to the Independent Accountant for resolution in accordance with Article 3.4. If the Seller and the Buyer have agreed in writing as to the resolution of all items disputed by the Seller as set forth in the Seller's Post-Closing Adjustment Statement or (as the case may be) all such items disputed by the Seller have been determined by the Independent Accountant pursuant to Article 3.4(d), then the Seller's Post-Closing Adjustment Statement shall be amended as necessary to reflect the agreement between the Parties or (as the case be) the determination by the Independent Accountant. Such amended Seller's Post-Closing Adjustment Statement shall be deemed to be final and binding on the Parties as of the date on which the agreement between the Parties is reached or (as the case may be) the date on which the Independent Accountant delivers the report referred to in Article 3.4(d) to the Parties and the recalculated Post-Closing Adjustment Amount as set forth in such amended Seller's Post-Closing Adjustment Statement shall be deemed to be final and binding on the Parties and be deemed to be the final Post-Closing Adjustment Amount.
|
3.3
|
Payment of the Post-Closing Adjustment Amount
. The Post-Closing Adjustment
|
(a)
|
if the Post-Closing Adjustment Amount is a positive amount, the Buyer (or, at Buyer's sole and absolute discretion, a Buyer's designee) shall pay to the Seller and the Founder directly by wire transfer of funds into an account jointly designated in writing by the Seller and the Founder an amount equal to the Post-Closing Adjustment Amount; or
|
(b)
|
if the Post-Closing Adjustment Amount is a negative amount, the Seller and the Founder shall jointly pay to the Buyer (or, at Buyer's sole and absolute discretion, a Buyer's designee) by way of release from the Escrow Account (to the extent sufficient to cover this amount) or directly by wire transfer of funds into an account designated in writing by the Buyer (or, at Buyer's sole and absolute discretion, a Buyer's designee) an amount equal to the absolute value of the Post-Closing Adjustment Amount, provided that it shall be in the Buyer's sole and absolute discretion to decide whether such payment shall be made directly by the Seller and the Founder by wire transfer or by way of a release from the Escrow Account pursuant to the Escrow Agreement.
|
(a)
|
The Parties each agree that it shall not engage, directly or indirectly, or agree to engage, the Independent Accountant to perform any auditing services for such Party unless and until all items disputed by the Seller as set forth in the Seller's Post-Closing Adjustment Statement (including, for the avoidance of doubt, the calculation of the disputed items set forth in the Seller's Post-Closing Adjustment Statement) have been resolved and the final Post-Closing Adjustment Amount has been determined pursuant to this Article 3.
|
(b)
|
The Seller and Buyer shall, within ten (10) Business Days after either of such Parties requests by written notice to the other, jointly engage and instruct the Independent Accountant to review this Agreement, the Seller's Post-Closing Adjustment Statement and the Buyer's Post-Closing Adjustment Statement for the purpose of resolving all items disputed by the Seller as set forth in the Seller's Post-Closing Adjustment Statement (including, for the avoidance of doubt, the calculation of the disputed items set forth in the Seller's Post-Closing Adjustment Statement). If either the Seller or Buyer refuses or neglects to take or delays in taking steps for such joint engagement and instruction within the aforesaid ten (10) Business Day period, the other Party is entitled (and is hereby authorized by the first mentioned Party) to engage and instruct the Independent Accountant for and on behalf of both the Seller and Buyer.
|
(c)
|
The scope of the disputes to be resolved by the Independent Accountant pursuant to an engagement under this Article 3 is limited to the items disputed by the Seller as set forth in the Seller's Post-Closing Adjustment Statement, and the Independent Accountant is not to make any other determinations.
|
(d)
|
The Independent Accountant shall deliver to the Seller and the Buyer, barring exceptional circumstances within one (1) month from the engagement date, a report setting forth its decision on the items disputed by the Seller as set forth in the Seller's Post-Closing Adjustment Statement together with the calculation of the disputed items. The report delivered by the Independent Accountant and the calculations of the disputed items as determined by the Independent Accountant shall be deemed to be final, non-appealable and binding on the Parties as of the date on which the Independent Accountant delivers the report to the Parties.
|
(e)
|
The Independent Accountant shall act as an expert, and not as an arbitrator.
|
(f)
|
The Seller and the Buyer shall each bear fifty percent (50%) of the fees and expenses of the Independent Accountant incurred for the purposes of this Article 3.
|
(g)
|
The Parties shall promptly comply with all reasonable requests by the Independent Accountant for all information, books, records and similar items relating to the calculation of Post-Closing Adjustment Amount.
|
(a)
|
provide the Representatives of the Buyer as specified in
Exhibit T
free and full access during normal business hours to all of the premises, assets, debts, accounts, books and records of such Target Group Member for the purposes specified in
Exhibit T
, and shall permit such Representatives of the Buyer to take copies of such accounts, books, records or other documentation and the opportunity to discuss the business, management, operations and financial status of such Target Group Member with employees, auditors and other advisors of such Target Group Member; and
|
(b)
|
cooperate with and provide prompt and adequate assistance to the Buyer and its Representatives in making all contacts and attending all meetings with relevant Governmental Authorities and related personnel as the Buyer may reasonably request prior to the First Closing Date.
|
4.2
|
Conduct of Business
. From the date hereof to the First Closing Date, except for actions reasonably required to be taken by the Company in order to satisfy the conditions set forth under Article 5.2, the Seller and Seller Shareholders shall not take and shall jointly and severally cause each Target Group Member to operate its business in compliance with all applicable Laws and not take any of the following actions without the prior express written consent of the Buyer:
|
(a)
|
purchase, sell, transfer, assign, lease, license, Encumber or otherwise dispose of any assets, entity or business other than in the ordinary course of business;
|
(b)
|
other than in the ordinary course of business and in full compliance with applicable Laws, enter into, terminate, renew, extend, vary, amend or modify any Contract (or a series of Contracts with the same party or parties or in respect of the same subject matter), or assume any obligations, commitments or Liabilities (or a series of obligations, commitments or Liabilities arising from the same subject matter and/or transaction);
|
(c)
|
other than in the ordinary course of business and in full compliance with applicable Laws, enter into, terminate, renew, extend, vary, amend or modify any lease of real property involving a term of more than twelve (12) months or rental obligations exceeding RMB 50,000 per month;
|
(d)
|
alter, amend or vary any Target Group Member's business scope as set forth on its business license;
|
(e)
|
incur or assume any Debt outside the ordinary course of business or that is in excess of RMB 15 million for any single transaction or RMB 50 million for all transactions on an aggregate basis;
|
(f)
|
except for any changes required by applicable PRC Laws and conducted in
|
(g)
|
participate in any acquisition, merger, consolidation, joint venture, partnership or
|
(h)
|
alter such Target Group Member's registered capital or equity holding
|
(i)
|
provide any loan, credit facility (including any credit terms extended to
|
(j)
|
make any new investment or increase any existing investment in fixed assets for an amount exceeding RMB 30 million for any single transaction or RMB 100 million for all transactions on an aggregate basis;
|
(k)
|
except as otherwise provided for in this Agreement, amend any articles of association of such Target Group Member or adopt any resolutions inconsistent therewith;
|
(1)
|
take any other action that would reasonably be expected to have a Material Adverse Effect, or refrain from taking any actions that would be reasonably necessary to prevent a Material Adverse Effect;
|
(m)
|
make, offer to make, promise to make or authorize to be made any Prohibited Payment;
|
(n)
|
enter into any new Related Party Transaction that is: (i) not in the ordinary course of such Target Group Member's business, (ii) not on standard market terms that are at least as favorable to the relevant Target Group Member as what such Target Group Member would have obtained from an independent third party; or (iii) not strictly on an arm's length basis;
|
(o)
|
enter into any assignment or license agreement with, or agree to any
|
(p)
|
cancel, terminate or fail to renew any existing insurance policy;
|
(q)
|
supply, produce, market, distribute and/or sell any product or service that
|
(r)
|
agree, conditionally or otherwise, to do any of the foregoing.
|
4.3
|
Continuing Disclosure
. From the date hereof to the First Closing Date, the Seller and each Seller Shareholder shall, as soon as practicable:
|
(a)
|
fully and accurately disclose to the Buyer any event, circumstance or matter that would reasonably be expected to (i) cause a Material Adverse Effect on such Target Group Member, its assets, business, operations or financial condition, or (ii) otherwise constitute a breach of, or be inconsistent with, any of the representations or warranties given by the Seller in Article 8;
|
(b)
|
inform the Buyer of (i) any termination or variation of, or any amendment to, any Material Contract, or (ii) any written claim by any third party against such Target Group Member in respect of any Material Contract the amount of which exceeds RMB 1,000,000; and
|
(c)
|
notify the Buyer in the event of (i) any resignation of any Key Employee, (ii) any event or incident causing any Target Group Member's production to be suspended except for normal maintenance, or (iii) any lawsuit, arbitration, administrative proceeding, investigation or notice from any Governmental Authority or any third party against or involving any Target Group Member.
|
(a)
|
During a period of twenty (20) Business Days leading to the First Closing Date, the Buyer may reasonably request the Seller and/or Seller Shareholders to provide adequate information so as to verify the due completion by Seller and/or Seller Shareholders of all relevant conditions precedent to the First Closing as set out in Article 5, and the Seller and Seller Shareholders shall each provide prompt and diligent assistance to the Buyer in this regard.
|
(b)
|
No later than five (5) Business Days after the PRC Ministry of Commerce issues its official approval of the First Tranche, the Seller and Seller Shareholders shall provide to Buyer a list of the Target Group's anticipated levels of owned inventory, equipment, machinery and facilities as of the First Closing Date (the “
Personal Properties Audit List
”), which list shall: (i) be determined in good faith by the Seller and Seller Shareholders; (ii) contain reasonably sufficient details with respect to, among other things, the category, conditions, amount and aging of the Target Group's inventory, equipment, machinery and facilities; and (iii) in any event have at least the same level of specificity as that in
Exhibit R
hereof.
|
5.1
|
Conditions Precedent to All Parties' Obligations
. The respective obligations of the Parties to proceed with the First Closing and perform their respective obligations under Article 6 are conditional upon and subject to the satisfaction, on or prior to the Long Stop Date, of the conditions that:
|
(a)
|
there shall not be any applicable Law in effect making illegal the consummation of the First Tranche or Second Tranche, and there shall not be any final and non-appealable Governmental Order in effect prohibiting or restricting the consummation of the First Tranche or the Second Tranche;
|
(b)
|
the Buyer having conducted a physical audit of the Target Group's Real Properties, machinery, equipment, facilities and inventory by reference to the Pre-Closing Audit List and the results of such audit are consistent with the said list in all material respects;
|
(c)
|
the Parties having duly entered into the management bonus scheme as set forth in
Exhibit L
:
|
(d)
|
there having been no fact, event, change, development, condition, occurrence or circumstances that has had or would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and
|
(e)
|
all tasks set out in Article 6.2(c) and 6.2(d) having been duly completed in accordance with applicable Laws.
|
5.2
|
Conditions Precedent to the Buyer's Obligations
. The obligation of the Buyer to proceed with the First Closing and perform its obligations under Article 6 is conditional upon and subject to the satisfaction, or the express waiver in writing by the Buyer, on or prior to the Long Stop Date, of each of the following conditions:
|
(a)
|
Seller and Founder having duly delivered to the Buyer:
|
(A)
|
copies of share certificates issued by the Company to the Minority Shareholders attesting to their respective ownership of the relevant Shares as listed in
Exhibit A
. and
|
(B)
|
a copy of the Company's shareholder register reflecting the existing ownership of the Company as set forth in
Exhibit A
; and
|
(ii)
|
prior to any submission of any application in respect of the First Tranche to the PRC Ministry of Commerce:
|
(A)
|
termination agreement of the share subscription agreement between each Minority Shareholder and the Company;
|
(B)
|
evidence showing cancellation of share certificates issued to the Minority Shareholders in respect of their ownership of the relevant Shares as listed in
Exhibit A
;
|
(C)
|
issuance by the Company of a new share certificate to the Seller (representing 359,999,999 Shares of the Company out of 360,000,000 Shares) and the Founder (representing 1 Share of the Company out of 360,000,000 Shares), and the revised shareholder register of the Company reflecting their respective ownership of such said Shares; and
|
(D)
|
resolutions of the Company's shareholders adopting the amended and restated articles of association of the Company, which articles reflect the ownership of the Company by the Seller and Founder as set out in the preceding Article 5.2(a)(ii)(C).
|
(b)
|
the Seller, the Company and each Seller Shareholder having performed and complied with all agreements, undertakings, obligations and covenants required by this Agreement to be performed or complied with by such Party at or prior to the First Closing;
|
(c)
|
the Buyer having received each of the closing deliverables set forth in Article 6.3 on the First Closing Date;
|
(d)
|
any and all approvals necessary to permit the First Closing to occur by competent Governmental Authorities having been duly obtained, in each case free and clear of any conditions, including without limitation: (A) approvals by the PRC National Development and Reform Commission and the PRC Ministry of Commerce of the First Tranche; and (B) preliminary approval by the Shanghai Administration of Industry and Commerce of the Company's change of its name from "Shanghai Golden Monkey Food Joint Stock Co., Ltd." to "Shanghai Hershey Golden Monkey Food Joint Stock Co., Ltd.";
|
(e)
|
all consents, approvals and/or waivers from third parties as set forth in
Schedule 8.2(w)
of the Disclosure Schedules having been duly obtained and be in full force and effect as of the First Closing Date;
|
(f)
|
each Key Employee having entered into a Retention, Confidentiality, Non-Compete & Lock-up Agreement in the form agreed and set out in
Exhibit M
:
|
(g)
|
except for Related Party Transactions by or among only the Target Group Members and except as otherwise incorporated in the Service Agreements, each Target Group Member having duly terminated without any further Liability to any Target Group Member all Related Party Transactions and all related balances having been duly settled;
|
(h)
|
each Target Group Member having obtained the Permits as set forth in Part 1 of
Exhibit S
in accordance with applicable Laws;
|
(i)
|
the Trademark License Agreements having been duly executed by all relevant parties thereto;
|
(j)
|
except with respect to those Non-Target-Group Entities who are licensees
|
(k)
|
except as otherwise provided in the Trademark License Agreements, each of the Non-Target-Group Entities having duly transferred to the Company, for zero consideration, any and all trademark(s) it owns that may be identical or confusingly similar to any Target Intellectual Property;
|
(l)
|
Shenqiu Yudong Golden Monkey Halal Food Co., Ltd. having duly transferred the use right of the land currently located at the northwest corner of the premises (with an approximate area of 11,000 square meters) to an unrelated third party purchaser on fair market terms pursuant to applicable Law and with no residual Liability to any Target Group Member;
|
(m)
|
each Target Group Member having adopted by board resolution the
|
(n)
|
each of the Company and Target Subsidiaries having duly obtained an
|
(o)
|
the Seller having produced a written certificate to the Buyer stating that no Target Group Member is conducting (whether directly, indirectly, by way of employment or otherwise) any of its business through underage persons;
|
(p)
|
Seller having produced sufficient evidence that the Company has duly
|
(q)
|
the Company having duly spun off Shanghai Golden Monkey International
|
(r)
|
the Seller and each Seller Shareholder having diligently conducted such
|
(s)
|
the Company having prepared, closed and delivered management accounts for
|
(t)
|
the Seller and the Seller Shareholders having duly obtained from each Non-Target-Group Entity an irrevocable undertaking to the effect that such Non-Target-Group Entity shall not, and shall cause its Affiliates not to, engage in any Competitive Business before the second anniversary of the Second Closing Date except as otherwise permitted under Article 9.1(e), in each case issued to Buyer by the relevant Non-Target-Group Entity;
|
(u)
|
the Company having duly entered into a binding lease agreement on terms and conditions agreeable to the Buyer with respect to the new warehouse(s) and/or logistics center(s) being constructed near the site of Shenqiu Yudong Golden Monkey Halal Food Co., Ltd.;
|
(v)
|
the Shanghai Dormitories and the land on which the Shanghai Dormitories are located having been duly transferred by the Company to Shanghai Golden Monkey Group Co., Ltd. in accordance with applicable Law and all Taxes relating to such transfer having been duly paid by the transferee;
|
(w)
|
the Company having duly terminated its lease with Shanghai Golden Monkey Group Co., Ltd. with respect to certain warehouse(s) in Shanghai and the Seller and Seller Shareholders having provided all reasonable assistance to the Buyer and the Company so as to enable the Company to procure suitable alternative arrangements to meet the Company's warehousing requirements; and
|
(x)
|
the Seller and Founder having delivered to the Buyer a certificate jointly
|
5.3
|
Conditions Precedent to the Seller's and Founder's Obligations
. The obligation of the Seller and Founder to proceed with the First Closing and perform their respective obligations under Article 6 is conditional upon and subject to the satisfaction, or the express waiver in writing by the Seller and Founder, on or prior to the Long Stop Date, of each of the following conditions:
|
(a)
|
each of the representations and warranties made by the Buyer under Article 8
|
(b)
|
the Buyer having performed and complied with all agreements, undertakings, obligations and covenants required by this Agreement to be performed or complied with by the Buyer at or prior to the First Closing Date;
|
(c)
|
the Buyer having taken all necessary corporate actions for, and obtained all necessary internal approvals (i.e. board resolutions as required under its constitutional documents and approvals by its chief executive officer) duly authorizing, the execution and performance of this Agreement and the consummation of the First Tranche;
|
(d)
|
any and all approvals necessary to permit the First Closing to occur by competent Governmental Authorities having been duly obtained, in each case free and clear of any conditions;
|
(e)
|
the Buyer having delivered to the Seller a copy or copies, certified by a director or the legal counsel of the Buyer to be copies, of the minutes of the board meetings or the written resolutions of the board of directors of the Buyer and Hershey resolving that the First Tranche be approved and authorizing the execution and performance by the Buyer of the Transaction Agreements and the consummation of the First Tranche;
|
(f)
|
the Buyer having delivered to the Seller an original counterpart of each of the Transaction Agreements to which the Buyer is a party, duly executed by the Buyer, as applicable;
|
(g)
|
the Seller having received each of the closing deliverables set forth in Article 6.4;
|
(h)
|
no later than thirty (30) Business Days after the date hereof, the Buyer having delivered to the Seller an account statement duly issued by a bank in the USA which shows that the Buyer has sufficient funds in the relevant account to make the payments contemplated hereunder; and
|
(i)
|
the Buyer having duly deposited the First Tranche Payment into the Offshore Escrow Account no later than five (5) Business Days after the PRC Ministry of Commerce has issued its official approval of the First Tranche.
|
(a)
|
Subject to all of the conditions set forth in Article 5 having been satisfied (save to the extent waived in accordance with this Agreement or those conditions that by their nature are to be satisfied at the First Closing), the closing of the First Tranche (the “
First Closing
” shall occur within five (5) Business Days after the date on which the last of the conditions set forth in Article 5 has been satisfied or waived (other than those conditions that by their nature are to be satisfied at the First Closing).
|
(b)
|
The date on which the First Closing occurs shall be referred to as the “
First Closing Date
”,
provided
,
however
, that: (i) in no event shall the First Closing Date be later than the Long Stop Date; and (ii) the First Closing Date shall be a Business Day.
|
(c)
|
The First Closing shall take place at the headquarter office of the Company, 5100 Hu'nan Road, Pudong New District, Shanghai, the PRC, commencing at 10:00 a.m. (Shanghai local time) on the First Closing Date.
|
(a)
|
The Parties shall execute the Offshore Escrow Agreement and Onshore Escrow Agreement simultaneously with the execution of this Agreement.
|
(b)
|
No later than five (5) Business Days after the PRC Ministry of Commerce issues its official approval of the First Tranche, the Buyer shall remit the First Tranche Payment to the Offshore Escrow Account and the Offshore Escrow Agent shall immediately send written notice to the Seller and Founder upon its receipt of such funds.
|
(c)
|
Promptly after receiving the Offshore Escrow Agent's notice referenced in Article 6.2(b), the Seller and Seller Shareholders shall diligently cooperate with the Buyer to:
|
(i)
|
prepare and execute all documents and materials required to be part of the Registration Application;
|
(ii)
|
duly hold a shareholders' meeting and adopt the Amended and Restated Articles of Association;
|
(iii)
|
submit the Registration Application on behalf of the Company to AIC and obtain from AIC an official receipt of acceptance of the Registration Application;
|
(iv)
|
obtain from the AIC a new business license attesting to the Buyer's ownership of the First Tranche Shares, the identity of the Company's new legal representative as nominated by the Buyer, the Company's new enterprise type as a "foreign invested joint stock company" and the Company's new name as "Shanghai Hershey Golden Monkey Food Joint Stock Co., Ltd."; and
|
(v)
|
obtain from the AIC a registered copy of the Company's Amended and Restated Articles of Association reflecting the results of the First Tranche contemplated by this Agreement and affixed with AIC's filing seals.
|
(d)
|
Promptly after completion of all steps set forth in Article 6.2(c), the Seller and Founder shall duly apply for and obtain permission for relevant Governmental Authorities to establish the Onshore Escrow Account in accordance with applicable Laws.
|
6.3
|
Seller's and Founder's Obligation at the First Closing
. Subject to the satisfaction (save to the extent waived the Seller in accordance with this Agreement) of each of the conditions set forth in Articles 5.1 and 5.3, at the First Closing, the Seller and Founder shall deliver, or cause to be delivered, to the Buyer all of the following documents or instruments:
|
(a)
|
share certificates then held by the Seller and the Founder attesting to their respective ownership of the relevant First Tranche Shares;
|
(b)
|
proper entry into the Company's share registry attesting that Buyer has become the owners of the First Tranche Shares as of the First Closing Date in accordance with Article 2.3(b);
|
(c)
|
a new share certificate issued by the Company attesting to Buyer's ownership
|
(d)
|
evidence that all share certificates previously issued by the Company to its shareholders, other than those evidencing that the Seller will continue to own the Second Tranche Shares until the completion of the Second Closing, have been duly cancelled;
|
(e)
|
written resignation and/or appointment, as applicable, of each director, supervisor and/or officer of a Target Group Member to be appointed or replaced pursuant to the Shareholders Agreement on the First Closing Date, in each case effective as of the First Closing Date;
|
(f)
|
written resolutions of the board of directors of the Company and Seller, and/or (if required under applicable Law) written resolutions of the shareholders of the Company and Seller, resolving that:
|
(i)
|
both the First Tranche and Second Tranche are approved, and authorizing the execution and performance by the Company and Seller of each of the Transaction Agreements to which the Company and/or Seller is a party and any document to which the Company and/or Seller may become a party in order to consummate the Second Tranche;
|
(ii)
|
the resignations as set forth in Article 6.3(e) be acknowledged, and such persons as may be designated by the Buyer pursuant to Shareholders Agreement be appointed as directors and/or officers of relevant Target Group Member(s) effective immediately upon the aforesaid resignations becoming effective; and
|
(iii)
|
all of the existing signatories, authorities and passwords to all of the bank accounts of each Target Group Member be revoked, and the new signatories, authorities and passwords as determined and designated by the Buyer be appointed and/or adopted, with immediate effect upon the First Closing Date;
|
(g)
|
all applications, registration forms, instruments and other documents required under PRC Law to be filed with relevant Governmental Authorities in the PRC for the purposes of changing the Company's directors, supervisor and/or
|
(h)
|
the complete set of company stamps, chops and seals (including, without limitation, common stamp, stamps for contractual purpose, financial stamps and legal representative stamps) belonging to each of the Target Group Members, which shall then be kept in the custody of persons designated under the Shareholders Agreement;
|
(i)
|
the amended and restated articles of associations and other relevant constitutional documentation of each of the Target Subsidiaries, revised in a manner consistent with the terms of the Amended and Restated Articles of Association;
|
(j)
|
if and where applicable, the original of any power of attorney under which any document to be delivered to the Buyer under this Article 6.3 has been executed;
|
(k)
|
any and all other documents and instruments that are necessary to give full effect to the transfer of the First Tranche Shares to the Buyer;
|
(1)
|
an original counterpart of each of the Transaction Agreements duly executed by the Seller, each Seller Shareholder, each Target Group Member and/or each Non-Target-Group Entity, as applicable;
|
(m)
|
jointly instruct (together with the Buyer) in writing the Offshore Escrow Agent to release the First Tranche Payment from the Offshore Escrow Account and remit the same to the Onshore Escrow Account;
|
(n)
|
together with the Buyer, execute the joint release instruction under the
|
(o)
|
such other closing deliverables as the Buyer may reasonably request.
|
6.4
|
Buyer's Obligation at the First Closing
. Subject to applicable Law and the satisfaction (save to the extent waived by the Buyer in accordance with this Agreement) of each of the conditions set forth in Articles 5.1 and 5.2, the Buyer shall, at the First Closing:
|
(a)
|
jointly instruct (together with the Seller) in writing the Offshore Escrow Agent to release the First Tranche Payment from the Offshore Escrow Account and remit the same to the Onshore Escrow Account; and
|
(b)
|
together with the Seller, execute the joint release instruction under the Onshore Escrow Agreement and cause the Company to prepare and execute all necessary documentation required by relevant Governmental Authorities
|
6.5
|
Parties' Acknowledgements
.
|
(a)
|
Buyer hereby expressly acknowledges and agrees that the Seller and Seller Shareholders shall be entitled to unwind the completion of the items in Articles 6.2(c) and 6.3 if Buyer breaches its obligations under Article 6.4.
|
(b)
|
The Parties hereby expressly acknowledge and agree that the Indemnity Escrow Amount shall remain in the Onshore Escrow Account for a period of eighteen (18) months after the First Closing Date for purposes of satisfying the indemnification obligations as provided in Article 12, at the end of which period any balance remaining out of the Indemnity Escrow Amount, net of funds required to be held by the Onshore Escrow Agent pending outstanding indemnification claims under Article 12, shall be released by the Onshore Escrow Agent and into an account jointly designated by the Seller and Founder.
|
7.1
|
Date and Venue
.
|
(a)
|
No later than the ninth (9
th
) month after the First Closing Date, each of the Buyer, Buyer Designee and Seller shall sign (and each Seller Shareholder shall cause the Seller to sign) the share transfer document for the Second Tranche Shares in the form agreed and set out in
Exhibit K
hereto, together with any other documents and agreements as may be required by applicable Law to effectuate the transfer of the Second Tranche Shares by the Seller to the Buyer and the Buyer Designee (the “
Second Tranche Transaction Documents
”).
|
(b)
|
Immediately upon the execution of the Second Tranche Transaction Documents, the Parties shall diligently cooperate to seek and obtain, in each case as quickly as possible, all Necessary Regulatory Approvals to consummate the Second Tranche.
|
(c)
|
The closing of the Second Tranche (the “
Second Closin
g”) shall take place on a date (the "
Second Closing Date
") that is within five (5) Business Days after the date on which all Necessary Regulatory Approvals for the Second Tranche to occur have been duly obtained.
|
(d)
|
The Second Closing shall take place at the headquarter office of the Company, 5100 Hu'nan Road, Pudong New District, Shanghai, the PRC, commencing at 10:00 a.m. (Shanghai local time) on the Second Closing Date.
|
7.2
|
Buyer's Obligation at the Second Closing
. On the Second Closing Date, Buyer shall directly wire the Second Tranche Payment to the Onshore Escrow Account.
|
7.3
|
Seller's Obligation at the Second Closing
. On the Second Closing Date, the Seller
|
(a)
|
proper entry into the Company's share registry attesting that the Buyer and the Buyer Designee have become the owners of the Second Tranche Shares as of the Second Closing Date in accordance with Article 2.4(b);
|
(b)
|
new share certificates issued by the Company attesting to Buyer's and Buyer Designee's respective ownership of the Second Tranche Shares in accordance with Article 2.4(b);
|
(c)
|
evidence that all share certificates previously issued to shareholders other than the Buyer and Buyer Designee have been duly cancelled;
|
(d)
|
written resignation of each director, supervisor and/or officer of a Target Group Member whose position shall be eliminated or who shall be replaced by a designee and/or nominee of the Buyer pursuant to the Shareholders Agreement, in each case duly executed and effective prior to or immediately upon the Second Closing Date;
|
(e)
|
all applications, registration forms, instruments and other documents required under the PRC Law to be filed with relevant Governmental Authorities in the PRC for the purposes of changing the Company's directors, supervisor and/or officers to such persons designated by the Buyer pursuant to the Shareholders Agreement, duly executed (but undated) by the Company, the Seller and/or the Founders, as applicable, or their respective authorized Representatives; and
|
(f)
|
any and all other documents and instruments that are necessary to give full effect to the transfer of the Second Tranche Shares to the Buyer and the Buyer Designee.
|
8.1
|
Representations and Warranties Relating to Seller and Founder
. The Seller and Seller Shareholders, jointly and severally, represent and warrant to the Buyer that,
except as fairly disclosed and adequately and specifically described in each individual section of the Disclosure Schedules to the contrary,
each of the following statements is true, accurate and not misleading as of the date hereof and will be true, accurate and not misleading as of the First Closing Date. The Seller and Seller Shareholders accept sole and exclusive responsibility for the preparation and production of the Disclosure Schedules and the content, accuracy and completeness of the disclosures therein and no discussions with the Buyer and/or Buyer's Representatives in connection therewith shall affect this unqualified agreement and understanding.
|
(i)
|
As of the date hereof, all shareholders of the Company and their respective ownership of the Shares are set forth in
Exhibit A
hereto. Each such shareholder has legal and valid title to the number of Shares as set out beside its name, free and clear from any and all Encumbrances. All information set forth in
Exhibit A
hereto is true,
|
(ii)
|
As of the First Closing Date, there are no shareholders of the Company other than the Seller and the Founder, where the Seller shall be the sole, record and beneficial owners of 359,999,999 Shares and the Founder shall be the sole, record and beneficial owner of one (1) Share, collectively representing 100% of the Shares, in each case with legal and valid title to the relevant Shares and free and clear from any and all Encumbrances.
|
(iii)
|
Immediately prior to the Seller's transfer of the Second Tranche Shares to the Buyer, the Seller shall be the sole, record and beneficial owner of the Second Tranche Shares, with legal and valid title with respect to such Shares, free and clear from any and all Encumbrances.
|
(iv)
|
Except for this Agreement, there is no Contract by which the Seller, the Founder, the Company or any Target Group Asset is bound, including but not limited to: (A) any Contract relating to the sale, purchase, redemption, exchange, registration, voting or transfer of any Shares; (B) any Contract relating to any investment by, in or otherwise relating to the Company; or (C) any Contract or any cooperation intent or understanding evidenced by any written document relating to any joint venture, amalgamation or similar cooperation involving the Company.
|
(v)
|
Each of the Seller and Founder has the requisite power and authority to sell their respective portions of the First Tranche Shares on the First Closing Date, and the Seller has the requisite power and authority to sell the Second Tranche Shares on to the Second Closing Date, in each case in accordance with this Agreement and such delivery to the Buyer will convey to the Buyer legal and valid title to such First Tranche Shares and the Second Tranche Shares, free and clear of any and all Encumbrances.
|
(b)
|
Power and Authority
. The Seller and Founder each has the requisite capacity and authority under applicable Law to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the First Tranche and the Second Tranche in accordance with this Agreement.
|
(c)
|
Binding Effect
. Upon due execution by the Parties, this Agreement constitutes a valid, binding, and enforceable legal obligation of the Seller and the Founder, provided that, for the avoidance of doubt, the First Tranche and the Second Tranche may not be consummated without having obtained all necessary approvals by competent Governmental Authorities in accordance with applicable Law.
|
(d)
|
No Violation
. Neither the execution and delivery of this Agreement nor the full performance of the Seller's, each Seller Shareholder's and each Target Group Member's obligations hereunder will: (i) violate any Law or policy of any Governmental Authority applicable to the Seller, any Seller Shareholder, any Target Group Member or any Target Group Asset, (ii) violate or breach,
|
(e)
|
Consents and Approvals
.
Schedule 8.1(e)
of the Disclosure Schedules sets forth all the consents and/or approvals by, as well as notices to and/or filings with, any Governmental Authority that are required in order for the Seller and Seller Shareholders to consummate the transactions as contemplated hereunder.
|
(f)
|
No Other Interests
. Other than the Shares, none of the Seller or Seller Shareholders owns or controls (whether directly or indirectly) any equity interests or securities or rights convertible to or exchangeable for any equity interests, or any voting rights in any Competitor. None of the Seller or Seller Shareholders provides any consulting, advisory, management or other services to, has granted any license for any Intellectual Property, where such license remains valid and effective, or has any other business relationship with, any Competitor.
|
(i)
|
All books, records, Contracts, receipts, Permits and other documents that the Seller and/or Founder, either directly or through its Representatives and Target Group Members, provides to the Buyer in connection with the transaction contemplated hereunder, including, without limitation, to facilitate the Buyer's legal, financial, commercial, Tax, technical, human resources or environmental due diligence on the Company (collectively, the "
Due Diligence Documents
") are either originals or true and complete copies of the originals of such books, records, Contracts, receipts, permits or documents.
|
(ii)
|
All Due Diligence Documents are true and accurate in all material respects, and no Due Diligence Document contains any material omission, misleading or false statement, information or materials.
|
(iii)
|
All information contained in or referred to in Article 8.1, Article 8.2 and the Disclosure Schedules is true, complete and accurate, is not misleading in any respect, and does not omit any material fact. Except to the extent fully, fairly and specifically set out in the Disclosure Schedules and the Management Accounts, no Target Group Member has any Debt or Liabilities.
|
8.2
|
Representations and Warranties Relating to the Target Group
. The Seller, the Seller Shareholders and the Company jointly and severally represent and warrant to the Buyer that,
except as fairly disclosed and adequately and specifically described in the Disclosure Schedules to the contrary
,
each of the following statements is true, accurate and not misleading as of the date hereof and will be true, accurate and not
|
(a)
|
Organization, Existence and Capitalization of the Target Group
.
|
(i)
|
The Company is a domestic joint stock company duly established and validly existing under the Laws of the PRC.
|
(ii)
|
Each Target Subsidiary is a limited liability company duly established and validly existing under the Laws of the PRC.
|
(iii)
|
The information set forth in
Exhibit B
is true and accurate and not misleading as of the date hereof and as of the First Closing Date.
|
(iv)
|
Exhibit C
accurately depicts the organizational structure of the Target Group, including but not limited to the identities of the Company, the Target Subsidiaries and their respective ownership of branches and Liaison Offices.
|
(v)
|
Except as depicted in
Exhibit C
, no Target Group Member owns or controls, directly or indirectly, any equity interests or securities or rights convertible to or exchangeable for any equity interests, or any voting rights, in any person.
|
(vi)
|
No Target Group Member has granted any proxy, general or special power of attorney or other similar instrument to any person that would permit such person to bind any Target Group Member for any commitments.
|
(vii)
|
No Target Group Member has initiated or is otherwise subject to any proceeding for winding up, dissolution or termination of corporate existence. No receiver, manager or anyone in a similar capacity has been appointed in respect of any Target Group Asset or the operations of any Target Group Member, and no circumstance which may reasonably be expected to result in such appointment has arisen.
|
(b)
|
Real Property
.
|
(i)
|
Schedule 8.2(b)(i)
of the Disclosure Schedules sets forth a correct and complete list of: (A) all real property owned by each Target Group Member (the “
Owned Real Properties
”), (B) all leases of real property by each Target Group Member (the “
Real Property Leases
” and, together with the Owned Real Properties, being referred to herein individually as a “
Real Property
” and collectively as the “
Real Properties
”); (C) the respective legally mandated and actual uses of the Real Properties; and (D) titles, certificates, licenses and permits that are held, being applied for and/or unobtainable in respect of the Real Properties.
|
(ii)
|
Each Target Group Member has legal and valid title to all of its Owned Real Properties free and clear of all and any Encumbrances. With
|
(iii)
|
Each Real Property Lease to which a Target Group Member is a party is legal and valid and has been performed by all the parties thereto without any default.
|
(iv)
|
No Real Property is subject to any actual or threatened condemnation, penalty, change of zoning, order of demolishment or reconstruction or any similar action by any Governmental Authority, or circumstances of utilities shortage or interruptions.
|
(v)
|
No Target Group Member has granted any outstanding options, rights of first offer, rights of refusal or similar preemptive rights to purchase or lease any of the Real Properties, or any portion thereof or interest therein (other than any such rights in favor of a Target Group Member). There are no Contracts granting to any person the right of use to or occupancy of any portion of the Real Properties.
|
(vi)
|
The Real Properties include all land, buildings, structures, easements and other rights and interests that are reasonably necessary for use by the Target Group in the operation of its business and operations as conducted as of the date hereof.
|
(c)
|
Personal Property
.
Exhibit R
contains a correct and complete list of all machinery, equipment and facilities of each Target Group Member as of December 31, 2012, which, together with inventory and other personal properties and assets of each Target Group Member, constitute all of the Target Group's personal properties (the “
Personal Properties
”) as of the date hereof. Each Target Group Member has legal and valid title to its Personal Properties, in each case free and clear of any and all Encumbrances. The Personal Properties are in good operating condition and repair other than normal wear and tear. No Target Group Member is in default under, and has not received any written notice of, any default or any event that with notice or lapse of time, or both, would constitute a default, by such Target Group Member under any agreement relating to any such Personal Property.
|
(i)
|
Beside the Real Properties and Personal Properties, each Target Group Member also has legal and valid title to, or the lawful right to use, all other assets used in its business and operations, free and clear of all and any Encumbrances.
|
(ii)
|
All provisions and/or reserves required to be established by each Target Group Member in accordance with applicable Law and PRC GAAP have
|
(e)
|
Sufficiency of Assets
. The Target Group owns, or has the right to use, all assets necessary to conduct its business as it is conducted on the date hereof.
|
(f)
|
Intellectual Property
.
|
(i)
|
The Company has legal and valid title to all Target Intellectual Property, including without limitation all as set forth in
Schedule 8.2(f)
of the Disclosure Schedules, free and clear of any Encumbrances. Each element of Target Intellectual Property is legal and valid. Except for the Company, no Target Group Member owns any Target Intellectual Property.
|
(ii)
|
The Company has neither committed nor omitted any act or thing that would adversely affect the validity, distinctiveness or enforceability of any Target Intellectual Property or the right of any Target Group Member to use the same.
|
(iii)
|
The Target Intellectual Property constitutes all the Intellectual Property that is necessary for the Target Group to conduct its current operations.
|
(iv)
|
None of the Target Intellectual Property: (A) infringes on the rights of any third party, (B) is the subject of any ongoing, pending or threatened proceeding, investigation or claim, or (C) is being infringed by any third party.
|
(v)
|
Other than the Company, none of the Seller, Seller Shareholders and their respective Affiliates (including all Non-Target-Group Entities) owns, is using, has the right to use, or is applying for the right to use any Intellectual Property that is identical or confusingly similar to any Target Intellectual Property.
|
(vi)
|
All software, networks and systems maintained and/or used by each Target Group Member have been duly licensed and sold by, and with all fees and costs duly paid to, their rightful owners in accordance with applicable Laws and each Target Group Member has taken all reasonable actions to protect the integrity, security and continued operation of its software, networks and systems, and there have been no material violations, outages or interruptions of same under any applicable Law, contract or licensing arrangement.
|
(vii)
|
All documentation in connection with the official recognition of
|
(i)
|
Schedule 8.2(g)
of the Disclosure Schedules sets forth a correct and complete list of all Permits currently held by each Target Group Member in connection with its operations. Each of such Permits has been obtained in accordance with applicable Laws and is legal and valid. No suspension, cancellation, revocation, surrender, adverse variation of or failure to extend any of such Permits is pending or threatened to the Knowledge of the Seller, any Seller Shareholder or any Target Group Member, and no such Permit will be suspended, cancelled, revoked, surrendered, adversely varied or not be extended as a result of the First Tranche or Second Tranche.
|
(ii)
|
Part 1 and Part 2 of
Exhibit S
sets forth a correct and complete list of all Permits not yet obtained by each Target Group Member in connection with its operations. All such Permits are capable of being granted in accordance with applicable Laws and neither Seller, any Seller Shareholder nor any Target Group Member is aware of any reason why any such Permit would not be granted by the relevant Governmental Authority, provided that any failure to obtain any such Permit will not, in any event, expose any Target Group Member or its Representatives to criminal liability or termination or suspension of any Target Group Member's use of any material production facility, machinery or equipment or otherwise result in a Material Adverse Effect.
|
(iii)
|
The Permits set forth in
Schedule 8.2(g)
of the Disclosure Schedules and Part 1 and Part 2 of
Exhibit S
are the only Permits required by the Target Group to conduct its operations as conducted at the date hereof in accordance with applicable Laws.
|
(h)
|
No Undisclosed Debt or Liabilities
. Except as and to the extent set fully, fairly and specifically in the Disclosure Schedules and the Management Accounts, no Target Group Member has any Debt or Liabilities other than Trade Debt. None of the Seller, Seller Shareholders or Target Group Members has been or is in default under any note, debt, corporate bond, pledge, charge, mortgage, guarantee, undertaking or any Contract with respect to any Debt or Encumbrance that has caused or could reasonably be expected to cause any Material Adverse Effect on any Target Group Member. No Short Term Loan or Long Term Loan has been obtained by or granted to the Company pursuant to or because of any misrepresentation or non-disclosure of the Company or any Target Group Member and all applicable Laws and requirements and conditions of all Government Authorities have been complied with in connection with the application for and granting of all Long Term Loans and Short Term Loans. None of the Target Group Members has any undisclosed or un-accrued Liabilities.
|
(i)
|
Related Party Transactions
. A full list of all agreements between and/or among Target Group Members and/or their respective Affiliates and/or their respective directors, officers and employees is set forth in
Schedule 8.2(i)
of the Disclosure Schedules. All transactions pursuant to such agreements have
|
(i)
|
The books of account and financial records of each Target Group Member, including but not limited to the Company's audited consolidated accounts for the fiscal years 2010, 2011 and 2012 as set forth in
Exhibit I,
have been prepared in accordance with PRC GAAP consistently applied and present in all respects a full, complete and accurate view of the state of affairs and the financial position and performance of the relevant Target Group Member as of the respective dates and for the respective periods thereof.
|
(ii)
|
The Management Accounts: (A) are prepared in accordance with the requirements of applicable Law and PRC GAAP consistently applied throughout; and (B) present, in all material respects, a true view of, the state of affairs and the financial position of the Target Group as of the dates thereof. Since the date of the Company's latest audited consolidated accounts in accordance with PRC GAAP, no Target Group Member has entered into any financing arrangement or incurred any new Debt (other than Trade Debt), except for the arrangements that have been fully, fairly and specifically disclosed in the Management Accounts.
|
(iii)
|
All transaction by each Target Group Member have been executed
|
(iv)
|
Schedule 8.2(j)(iv)
of the Disclosure Schedules sets forth a complete list of (A) all the accounts opened or held in the name of any Target Group Member; (B) all the accounts jointly opened or held by any Target Group Member and a third party; and (C) all the accounts opened or held in the name of a third party on behalf of any Target Group Member.
|
(v)
|
All funds in the accounts opened or held in the name of any Target
|
(k)
|
Litigation
. There is no existing, pending or, to the Knowledge of the Seller, any Seller Shareholder or any Target Group Member, threatened claim, litigation, arbitration, legal dispute or other judicial proceedings by any third party, nor any investigation, proceeding or action by any Governmental Authority, against any Target Group Member or concerning any Target Group Asset that involves a monetary value in excess of RMB 500,000 individually or RMB 20,000,000 in the aggregate.
|
(1)
|
EHS Matters
. No Target Group Member is required by any Governmental Order or applicable Law to undertake any remedial, corrective, clean-up and/or restoration actions.
|
(m)
|
Material Contracts
. Each Material Contract to which a Target Group Member is a party is legal and valid, and all the parties thereto have duly performed their respective obligations thereunder without any default. No party to any Material Contract has exercised any termination rights with respect thereto; and no party has given notice of any dispute, repudiation or nullification with respect to any Material Contract. No term of any Material Contract is void or voidable for any reason.
|
(n)
|
Employees and Benefits
.
|
(i)
|
Schedule 8.2(n)(i)
of the Disclosure Schedules sets forth a list of all employees of each Target Group Member as of the date hereof and a complete list of all documents relating to or specifying the benefits of such employees (including any bonus plans, retirement schemes, medical benefits or any other material benefits).
|
(ii)
|
There is no ongoing strike, walkout, lockout, work stoppage or other
|
(iii)
|
Save for any benefits as set forth in
Schedule 8.2(n)(i)
of the Disclosure Schedules, neither the execution of this Agreement, the consummation of the First Tranche or the Second Tranche, nor any merger, consolidation, sale of assets, change of control or similar transaction involving any Target Group Member would entitle any employee of any Target Group Member to any new or additional payment, benefit or other right whatsoever.
|
(iv)
|
No Target Group Member has any outstanding Liability arising from or in connection with any work-related injuries or medical conditions suffered by any of its employees.
|
(o)
|
Compliance with the Laws
. Each Target Group Member has complied with all applicable Laws in its conduct of business and operations, except for any Historical Non-compliance that, whether individually or in the aggregate, has not caused, is not causing or will not cause any Material Adverse Effect.
|
(p)
|
Taxes
.
|
(i)
|
Each Target Group Member has fully complied with all applicable Laws relating to Taxes.
|
(ii)
|
All Tax returns, filings or reporting required to be filed with relevant Tax administration authorities by any Target Group Member before the First Closing Date have been timely filed or will be timely filed on or before the First Closing Date.
|
(iii)
|
All such Tax returns, filings and reports are true, complete and correct in all material respects and were prepared in compliance with all applicable Laws. None of the Target Group Member is currently the beneficiary of any extension of time within which to file any Tax returns.
|
(iv)
|
Any Taxes relating to any Target Group Member have been properly accrued and recorded in the books of account of the relevant Target Group Member in accordance with applicable Law and PRC GAAP.
|
(v)
|
None of the Seller, Seller Shareholders or the Target Group Members is presently subject to, or has been subject to in the past twelve (12) months, any legal proceedings, audit, examination or investigation by any Governmental Authority relating to Taxes, and, to the Knowledge of the Seller, each Seller Shareholder and each Target Group Member, there are no disputes regarding Tax pending, likely or threatened, nor are there any facts or circumstances in existence which may give rise to any such dispute.
|
(vi)
|
To the Knowledge of the Seller, each Seller Shareholder and each Target Group Member, no claim has been made by a Governmental Authority in a jurisdiction where any Target Group Member does not file Tax returns that any Target Group Member is or may be subject to taxation by that jurisdiction.
|
(vii)
|
Schedule 8.2(p)(vii)
of the Disclosure Schedules sets forth all
|
(viii)
|
Each Target Group Member has, in all material aspects, retained, to the extent applicable, all Tax returns, filings and reports, Tax payment certificates, Tax calculations, evidence of payment of Taxes, and all related correspondences, filings and submissions to, notices received from and correspondence with any Tax authorities or customs.
|
(ix)
|
Each Target Group Member is in possession of sufficient information (including, without limitation, any records, invoices and information that form part of its Tax or accounting records) to enable it and/or its Representatives to compute its Liability to Tax insofar as such Liability depends on any transaction, matter or event occurring on or before the First Closing Date.
|
(q)
|
Absence of Certain Changes or Events
.
|
(i)
|
Since the date of the Company's latest consolidated accounts that have been audited in accordance with PRC GAAP, each Target Group Member has conducted its operations only in accordance with applicable Law.
|
(ii)
|
Since the date of the Company's latest consolidated accounts that have been audited in accordance with PRC GAAP, except as expressly permitted under Article 2.2(a) or otherwise expressly consented to by the Buyer in writing, no Target Group Member has made any declaration, authorization or payment of any dividends or other distributions of assets.
|
(r)
|
Ethical Practices
. None of the Seller, Seller Shareholders or the Target Group Members has, directly or indirectly or via any Representative, Liaison Office or other third party, established or maintained, or promised to establish or maintain, a secret or unrecorded fund (a
"Prohibited Fund
"), or made any false or fictitious entries or failed to make full and accurate disclosure in any books or records of any Target Group Member relating to any Prohibited Fund.
|
(s)
|
Insurance
.
Schedule 8.2(s)
of the Disclosure Schedules contains a true,
|
(i)
|
the Target Group Members are the sole insured and beneficiary of such insurance policies;
|
(ii)
|
all premiums under such policies have been paid when due and all such policies are in full force and effect; and
|
(iii)
|
none of the Target Group Members has received any notice that any of its insurance policies may be canceled or terminated or coverage thereunder avoided.
|
(t)
|
Products
.
|
(i)
|
Each Target Group Member has duly completed all product recalls or post-sale warnings relating to a product designed, manufactured or sold by it in compliance with applicable Laws and with no residual Liability to any Target Group Member.
|
(ii)
|
None of the Seller and Seller Shareholders is aware of any issue or circumstance which would cause any of the products of any Target Group Member to be unsafe or unfit for human consumption, nor has any Target Group Member been notified of any legal or governmental proceeding pending or threatened in relation to the safety or quality of such products.
|
(u)
|
Liaison Offices
.
|
(i)
|
Except as set forth in
Schedule 8.2(u)
of the Disclosure Schedules,
|
(ii)
|
The Company maintains sound bookkeeping practices for all Liaison
|
(v)
|
Accounts Receivable, Inventory and Distributors
. Except as set forth in
Schedule 8.2(v)
of the Disclosure Schedules:
|
(i)
|
All accounts receivable of any Target Group Member are accounts receivable arising from the sale of products in the ordinary course of business, valid and payable from third parties, and are not subject to any Encumbrance. To the Knowledge of the Seller, each Seller Shareholder and each Target Group Member, no significant amount of such account receivables will be deemed to be bad debts or otherwise uncollectible.
|
(ii)
|
Inventory of any Target Group Member is in compliance with statutory and (if applicable) contractually agreed quality standards and is usable or salable in the ordinary course of business. All inventory of each Target Group Member has been and is located at the warehouses of such Target Group Member and has not been consigned to, or held on consignment from any third party.
|
(iii)
|
All products supplied to distributors by each Target Group Member are in compliance with statutory and (if applicable) contractually agreed quality standards, usable or salable in the ordinary course of business and in compliance with all applicable Laws in all respects. There are no circumstances known to the Seller or the Seller Shareholders that would lead to the reasonable expectation that a material amount of such products will be returned by distributors.
|
(iv)
|
Each relevant Target Group Member has duly entered into a written distribution contracts with all of its distributors, which are valid, binding and enforceable against the relevant distributor. A copy of such standard contract and all terms relating to credit or loans granted to distributors and with respect to the return of product are set out in
Exhibit P
. No Target Group Member has granted any forgiveness of any loan granted to any distributor or agreed to allow distributors to return product sold to distributors, except in the case of a defect in quality.
|
(v)
|
All account receivables from the distributors of Target Group
|
(vi)
|
With respect to each Target Group Member, not more than four
|
(vii)
|
All loans and credits extended to distributors by each Target Group Member have definitive terms, are collectible and have been fully
|
(viii)
|
To the Knowledge of the Seller, each Seller Shareholder and each
|
(ix)
|
To the Knowledge of the Seller, each Seller Shareholder and each
|
(w)
|
Third Party Consents
.
Schedule 8.2(w)
of the Disclosure Schedules set forth all consents, approvals and/or waivers from third parties (other than approvals by and filings with Governmental Authorities) that are required in order for the Seller, Seller Shareholders and Target Group Members to consummate the transactions contemplated hereunder.
|
(x)
|
Non-Target-Group Entities
.
Schedule 8.2(x)
of the Disclosure Schedules sets forth a complete and accurate list of all Non-Target-Group Entities and their respective duly authorized business scopes.
|
8.3
|
Buyer's Representations and Warranties
. The Buyer represents and warrants to the
|
(a)
|
Organization and Existence.
The Buyer is a company duly incorporated and validly existing under the Laws of the Netherlands.
|
(b)
|
Power and Authority
. The Buyer has the requisite capacity and authority under its constitutional documents and applicable Law to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the First Tranche and Second Tranche in accordance with this Agreement. The execution, delivery and performance by the Buyer of this Agreement has been duly authorized by all necessary corporate action on behalf of the Buyer.
|
(c)
|
Binding Effect
. Upon due execution by the Parties, this Agreement constitutes a valid, binding, and enforceable legal obligation of the Buyer, provided that, for the avoidance of doubt, the First Tranche and Second Tranche may not be consummated without having obtained all necessary approvals by competent Governmental Authorities in accordance with applicable Law.
|
(d)
|
No Violation
. Neither the execution and delivery of this Agreement nor the performance by the Buyer of its obligations hereunder will violate or breach, or otherwise constitute or give rise to (with the giving of notice or passage of time or both) a default under any of the terms or provisions of (i) the constitutional documents of the Buyer, (ii) any material Contract, commitment, or other obligation to which the Buyer is a party or by which the Buyer or any of its respective assets are bound, (iii) any Governmental Order applicable to the Buyer or by which the Buyer or any of its respective assets are bound, or (iv) any applicable Law, except, with respect to Clauses (ii), (iii) and (iv) of this Article 8.3(d), for any violation, breach or default which would not reasonably be expected to individually or in the aggregate, have a Material Adverse Effect on the ability of the Buyer to perform its obligations hereunder or to consummate the First Tranche or Second Tranche .
|
8.4
|
Reliance
. Each of the Parties acknowledges that each of the other Parties has entered
|
9.1
|
Non-Competition
|
(a)
|
Each of Seller and Seller Shareholders hereby covenants that, except as
|
(i)
|
engage or invest in, own, manage, operate, control, transfer or license any Intellectual Property to, or participate in the ownership, management, operation or control of, be associated with, or in any manner whatsoever be connected with any Competitive Business or any Competitor in the PRC; or
|
(ii)
|
solicit or induce any employee, consultant, advisor, representative, officer or director of any Target Group Member to engage in any Competitive Business or otherwise participate in any activity prohibited by the foregoing Article 9.1(a)(i) or to terminate their services or employment with the Target Group Member.
|
(b)
|
Each of Seller and Seller Shareholders hereby covenants to cause each Key
|
(c)
|
Each of Seller and Seller Shareholders hereby acknowledges and agrees that the Company and Buyer shall have the right to seek specific performance by and/or other injunction relief against each of Seller and Seller Shareholders for any breach by such
|
(d)
|
For the avoidance of doubt, the obligations of Seller and Seller Shareholders under Articles 9.1(a) are separate from, independent of and in addition to any and all of their respective obligations (whether relating to non-competition or otherwise) in their capacities as officers, employees, representatives and/or agents of any Target Group Member.
|
(e)
|
For the avoidance of doubt, none of the following activities shall be deemed to constitute a breach of the non-compete obligations set forth in Article 9.1(a), so long as such activity does not violate any other provision of the Transaction Agreements (including but not limited to Article 10.1 below and the trademark license agreement(s) referenced therein):
|
(i)
|
the production and sale of Xylitol as an ingredient by Shenqiu Golden Monkey Sugar Co., Ltd.;
|
(ii)
|
the operation of a single supermarket located at 1
st
Floor, Suite 118, 183 Heli West Road, Hangtou Town, Pudong New District, Shanghai by Shanghai Golden Monkey Supermarket Co., Ltd."
|
(iii)
|
the production and sale of cocoa as an ingredient by Shanghai Golden Monkey Group Wuxi Cocoa Co., Ltd.; and
|
(iv)
|
the supply and sale of fresh milk by Zhoukou Yuda Culturing Service Development Co., Ltd.
|
(a)
|
to Shanghai Golden Monkey Group Co. Ltd. for the sole purpose of including the "Golden Monkey" characters in its
|
(b)
|
to Shanghai Golden Monkey Group Wuxi Cocoa Co., Ltd. for the sole purposes of including the "Golden Monkey" characters in its company name;
|
(c)
|
to Shanghai Golden Monkey Real Estate Development Co., Ltd. for the sole purposes of including the "Golden Monkey" characters in its company name and solely in connection with its business of real estate development;
|
(d)
|
to Shanghai Golden Monkey Supermarket Co., Ltd. for the sole purposes of including the "Golden Monkey" characters in its company and the operation of a single supermarket located at 1
st
Floor, Suite 118, 183 Heli West Road, Hangtou Town, Pudong New District, Shanghai;
|
(e)
|
to Shenqiu Golden Monkey Sugar Co., Ltd. for the sole purposes of including the "Golden Monkey" characters in its company name and solely in connection with its business of supplying Xylitol as an ingredient;
|
(f)
|
to Shenqiu Yudong Golden Monkey Logistics Co., Ltd. for the sole purposes of including the "Golden Monkey" characters in its company name and solely in connection with its business of supplying logistics services; and
|
(g)
|
to Shanghai Golden Monkey International Trading Co., for the sole purpose of including the "Golden Monkey" characters in its company name.
|
(a)
|
Except as otherwise permitted under this Agreement, each of Seller and Seller Shareholders hereby covenants that it will not, and will cause each of their respective Affiliates (whether or not existing at the time of the execution of this Agreement, and including each Non-Target-Group Entity) not to, at any time, directly or indirectly use, acquire, register, license or otherwise make use of (including without limitation using as a part of any domain name) any Intellectual Property that is identical or confusingly similar to: (a) any Target Intellectual Property, and/or (b) any Intellectual Property that is owned and/or used by the Buyer, Hershey and/or their respective Affiliates.
|
(b)
|
Except as otherwise permitted under this Agreement, each of Seller and Seller Shareholders hereby covenants that it will cause each Key Employee not to, at any time prior to the consummation of the Second Tranche or during the period of Founder's consultancy to the Company pursuant to Article 11.1 below, directly or indirectly use, acquire, register, license or otherwise make use of (including without limitation using as a part of any domain name) any Intellectual Property that is identical or confusingly similar to: (a) any Target Intellectual Property, and/or (b) any Intellectual Property that is owned and/or used by the Buyer, Hershey and/or their respective Affiliates.
|
(c)
|
In the event that any of Seller or Seller Shareholders or their respective Affiliates shall desire to make any use (in addition to that expressly permitted under this Agreement) of any Intellectual Property that is identical or confusingly similar to (a) any Target Intellectual Property, and/or (b) any Intellectual Property that is owned and/or used by Buyer and or their respective Affiliates, then it shall submit a written application to the Company with respect thereto and shall not make any such use without having obtained the prior written consent of the Company. It is agreed that the Company shall have sole and absolute discretion as to whether any such use will be permitted and that, in the event that any such use is permitted, it shall, in each case, be subject to the execution of an agreement substantially in the form of the Trademark License Agreements.
|
(d)
|
For the avoidance of doubt, no license or other rights to use or obtain any
|
(a)
|
The Founder shall provide the following services (the “
Consulting Services
”)
|
(ii)
|
maintaining and fostering the goodwill of the Target Group's distribution network, supply chain and key customers ;
|
(iii)
|
assisting the Target Group in building relationships with Governmental Authorities and Government Officials in full compliance with applicable Laws;
|
(iv)
|
keeping the Target Group abreast of trends and developments in China's confectionery industry and providing strategy recommendations; and
|
(v)
|
such other consulting and advisory services as may be reasonably requested by the Company from time to time.
|
(b)
|
The Founder hereby expressly acknowledges and agrees that his duties to the
|
(i)
|
diligently perform the Consulting Services in good faith;
|
(ii)
|
perform the Consulting Services in compliance with all applicable Laws and Company policies and in accordance with the terms and conditions specified in this Agreement; and
|
11.2
|
Management Bonus Scheme
. The Parties shall implement, with effect from the First Closing Date, the management bonus scheme as set forth in
Exhibit L
.
|
11.7
|
Restrictions on Transfer: Lock-up
.
|
(a)
|
Other than a Transfer by the Seller to the Buyer of the Second Tranche Shares pursuant to the Second Tranche as set forth in this Agreement, the Seller shall not effectuate any Transfer of any of its Second Tranche Shares without the Buyer's prior written consent.
|
(b)
|
Each Seller Shareholder hereby covenants to not, prior to the consummation of the Second Tranche as set forth in this Agreement: (a) Transfer any of his direct and/or indirect shares or equity interest in the Seller; or (b) cause, allow or otherwise participate in any transaction or series of transactions that would result in, whether directly or indirectly, a change in control of the Seller.
|
(a)
|
Each Party shall, as promptly as practicable, take all commercially reasonable actions and use its best efforts to make requisite filings, applications and registrations and to obtain requisite approvals, authorizations and consents, in connection with the First Tranche, the Second Tranche, the matters contemplated under this Agreement and any updating of Permits of the Company reflecting the Company's new name during the Interim Period.
|
(b)
|
Each Party shall exercise the utmost good faith in coordinating and cooperating with the other Parties in applying for and obtaining all Necessary Regulatory Approvals. For the avoidance of doubt, none of the Parties shall in any event without first affording the other Parties a reasonable opportunity for participation or comment: (a) submit any application, filing or other material to any Governmental Authority in connection with the First Tranche or the Second Tranche; or (b) engage in any meeting, discussion or any other communication with any Governmental Authority in relation to the First Tranche or the Second Tranche.
|
(c)
|
Notwithstanding the foregoing, nothing in this Agreement shall require, or be construed to require, Buyer or any of its Affiliates to agree to: (i) sell, hold, divest, discontinue or limit, at any time, any assets, businesses or interests of Buyer, the Company or any of their respective Affiliates; (ii) any conditions relating to, or changes or restrictions in, the operations of any assets, businesses or interests of Buyer, the Company or any of their respective Affiliates; or (iii) any material modification or waiver of the terms and conditions of this Agreement.
|
(a)
|
Without prejudice to Article 11.4, each Party shall use (and shall cause its Affiliates to use) all commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable to cause the conditions set forth in Article 5 to be satisfied as promptly as practicable and to consummate in the most expeditious manner practicable the transactions contemplated under this Agreement; and each Party shall, and shall cause its Affiliates to, refrain from taking any action that would reasonably be expected to prevent or delay the performance by any Party of any of its covenants, obligations, undertakings or agreements hereunder.
|
(b)
|
The Seller and Seller Shareholders shall cause the relevant Non-Target-Group Entities to duly implement the terms of the Service Agreements.
|
(c)
|
The Seller and Seller Shareholders shall provide to the Buyer all assistance and support reasonably requested by the Buyer to enable the Buyer to comply with its financial and/or Tax reporting obligations under applicable Law or Governmental Order.
|
(d)
|
The Parties agree to, from time to time and before or after the First Closing Date and/or Second Closing Date, give such further assurance, provide such further information, take such further actions, and execute and deliver such further documents and/or instruments as are, in each case, within its power to provide and to use their respective best efforts to cause their respective Affiliates to provide as may be reasonably necessary to give full effect to the provisions of this Agreement.
|
(a)
|
Except as otherwise expressly provided hereunder, whether or not the First Closing and/or the Second Closing occurs, each Party shall be solely responsible for all of its own costs and expenses incurred in connection with this Agreement, including without limitation any fees and expenses of counsel, advisors, experts or other agents, in each case, incidental to or in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereunder.
|
(b)
|
Except as otherwise provided hereunder or agreed expressly among the Parties, each Party shall be solely responsible for all Taxes accruing to such Party arising from this Agreement under all applicable Law and shall promptly pay such Taxes when due (which obligation shall, for the avoidance of doubt and without limitation, include the Seller's and Founder's obligation to promptly pay all Taxes due to relevant Tax Authorities in the PRC in respect
|
(i)
|
each Party shall be entitled to perform its obligations of Tax deduction and/or withholding with respect to any payment made under this Agreement in accordance with applicable Laws, and such deducted and/or withheld amounts shall be treated as having been paid to the relevant payee; and
|
(ii)
|
to the extent that any Party has performed any obligation of Tax deduction, withholding and/or payment as mentioned above, it shall provide to the relevant payee reasonable evidence of its payment of such deducted and/or withheld amounts to the relevant Tax Authority on behalf of the payee within twenty (20) Business Days after such payment has been made.
|
(c)
|
For the avoidance of doubt, the Seller and the Buyer shall each pay fifty
|
11.7
|
Press Release and Public Announcements
. No Party shall issue any press release or make any public announcement relating to the subject matter or any content of this Agreement without the prior written approval of the other Parties;
provided
,
however
, Buyer may make any public disclosure as required by applicable Law or any stock exchange (in which case the Buyer, as applicable, will notify the Seller contemporaneously with making the disclosure).
|
11.8
|
Establishment of Owned Retail Stores
. After the First Closing Date, the Parties shall cause the Target Group to duly establish and operate at least two (2) retail stores that will conduct direct-to-market sale of the Target Group's products, which stores shall be wholly owned by one or more Target Group Members.
|
11.9
|
Waiver of Claims to Intellectual Property
. To the fullest extent permitted by applicable Laws, and except as otherwise provided in the Trademark License Agreements to the contrary, each of the Seller and Seller Shareholders hereby, with effect from the First Closing Date, expressly, irrevocably and unconditionally waives and relinquishes all rights, interests and/or claims owned by such Party with respect to any and all Target Intellectual Property.
|
11.10
|
Compliance Program and Internal Controls
.
|
(a)
|
Following the First Closing Date, the Buyer may implement remediation and/or improvement measures with respect to the existing business, operational, financial, accounting, compliance, risk control, internal control and/or such other policies of the Target Group, so as to ensure the compliance by each Target Group Member with all applicable Laws, including, without limitation the Sarbanes Oxley Act of the USA, accounting and auditing requirements in the USA, and the listing rules of any stock exchange relating to corporate governance which are applicable to the Buyer and Hershey, and Seller and Seller Shareholders shall provide prompt and diligent cooperation and assistance in implementing such measures. Following the First Closing Date, each of Seller and Seller Shareholders shall promptly take and/or
|
(a)
|
Each of Seller and Seller Shareholders expressly agrees not to directly or indirectly make, reimburse or promise to make or reimburse any Prohibited Payment, and will diligently cooperate with the Buyer to procure that each Target Group Member and its directors, officers and employees will not directly or indirectly make, reimburse or promise to make or reimburse any Prohibited Payment.
|
(b)
|
Each of Seller and Seller Shareholders hereby covenants that it will, and will cause all Key Employees to, diligently carry out all such tasks and at such times as set forth in
Exhibit V
hereto.
|
11.11
|
Permits
. Seller and Seller Shareholders shall jointly and severally take all actions to procure, as soon as possible and in no event later than the Second Closing Date, all those Permits listed on Part 2 of
Exhibit S
in accordance with applicable Laws.
|
(a)
|
Indemnification bv Seller and Seller Shareholders
. Subject to statutes of limitations under applicable Laws, the Seller and Seller Shareholders shall jointly and severally indemnify and hold harmless the Buyer and its Affiliates and their respective Representatives (collectively, the "
Buyer Indemnitees
", and individually each a "
Buyer Indemnitee
",) from and against all Losses resulting from, arising out of or relating to the following:
|
(i)
|
a breach of any representation or warranty contained in Article 8.1 and 8.2;
|
(ii)
|
a breach of any covenant or obligation to be performed by any of the Seller and Seller Shareholders under this Agreement;
|
(iii)
|
a breach of any covenant or obligation to be performed by any Target Group Member on or prior to the First Closing Date;
|
(iv)
|
any Historical Non-Compliance of any Target Group Member
|
(v)
|
any failure of any Target Group Member to hold and/or obtain any required Permits in accordance with applicable Laws (whether disclosed or not disclosed to the Buyer at any time or in any format,
|
(vi)
|
any and all Liabilities or obligations incurred by any Target Group Member that have not been fairly and adequately disclosed in Disclosure Schedules and/or the Management Accounts;
|
(vii)
|
any and all unpaid Taxes of any Target Group Member that are payable with respect to the period prior to the First Closing Date pursuant to applicable Laws and/or Governmental Orders;
|
(viii)
|
any and all Liabilities or obligations arising out of any "original
|
(ix)
|
any and all Liabilities or obligations arising out of the supply, production, marketing, distribution and/or sale prior to the First Closing Date by any Target Group Member of any product or service that infringes upon the Intellectual Property of any third party and/or is in breach of any applicable Laws.
|
(i)
|
the breach of any representation or warranty made by the Buyer in Article 8; or
|
(ii)
|
a breach of any covenant or obligation to be performed by the Buyer under this Agreement.
|
(a)
|
Any Party seeking indemnification under this Article 12 (an "
Indemnified Party
") for itself or for any Buyer Indemnitee or Seller Indemnitee, shall, promptly after its awareness of the cause of that indemnification, give the Party or Parties from whom indemnification is being sought (an "
Indemnifying Party
") a written notice (a "
Claim Notice
") of any event or matter which such Indemnified Party has determined to or would reasonably be expected to give rise to a right of indemnification under this Article 12, stating in reasonable detail, to the extent available, the nature of the claim, the facts and circumstances with respect to the subject matter of such claim, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises;
provided
,
however
, that for the avoidance of doubt, the failure to provide such notice shall not release the
|
(b)
|
If the Indemnifying Party does not, within thirty (30) days from its receipt of the Claim Notice, deliver a Dispute Notice to the Indemnified Party in accordance with Article 14.3(a) disputing such claim, the Indemnifying Party shall be deemed to have accepted and agreed with such claim. If the Indemnifying Party has, within thirty (30) days from its receipt of the Claim Notice, delivered a Dispute Notice to the Indemnified Party in accordance with Article 14.3(a), then the Indemnifying Party and the Indemnified Party shall proceed in accordance with Article 14.3.
|
(c)
|
Buyer shall discuss with Founder plans to resolve any third party claim against the Company which would result in claims under Article 12.1(a). All such claims against the Company shall be resolved by the Company. When resolving such claims, the Company shall make reasonable efforts to mitigate its Losses in accordance with its obligations under applicable Laws. In the event that the Founder procures a valid settlement offer to the Company from the third party claimant which complies with all applicable Laws (a
"Proposed Settlement
") but such offer is rejected by the Board of Directors of the Company, then to the extent the final settlement amount and/or damages payable by the Company to such third party claimant exceeds the Proposed Settlement ("
Excess Damages
"), no Buyer Indemnitee shall be entitled to seek indemnification under this Article 12 with respect to the Excess Damages.
|
(d)
|
The Parties acknowledge and agree that, if any of the Seller and Seller Shareholders has fulfilled its indemnification obligations under this Article 12 with respect to any third party claims, then no Party shall prevent the relevant Seller and/or Seller Shareholder from seeking redress that it may have against the relevant third party.
|
12.3
|
Indemnity Escrow
. In accordance with the Onshore Escrow Agreement, the Indemnity Escrow Amount shall remain in the Onshore Escrow Account to pay or reimburse the Buyer Indemnitees for Losses in accordance with this Agreement.
|
(a)
|
Any indemnification of a Buyer Indemnitee pursuant to Article 12.1 (a) shall first be disbursed from the Escrow Account in accordance with the Escrow Agreement and afterwards (to the extent the Indemnity Escrow Amount is not sufficient to cover any such Losses), shall be effected by direct wire transfer of funds from the Seller to the Buyer (or, at Buyer's sole and absolute discretion, a Buyer's designee) within fifteen (15) Business Days after the determination of the amount of such indemnification.
|
(b)
|
Any indemnification of a Seller Indemnitee pursuant to Article 12.1(b) shall be effected by wire transfer of funds directly from the Buyer to the Seller within fifteen (15) Business Days after the determination of the amount of such indemnification.
|
(c)
|
If any Indemnifying Party is adjudicated to have committed any action in bad
|
12.5
|
Buyer's Discretion
. In the event the Company suffers any Loss that gives rise to or otherwise entitles the Buyer to any indemnification by the Seller and/or Seller Shareholders hereunder, the Buyer shall have the right to direct the Seller and/or Seller Shareholders to either (a) indemnify the Company for the entire amount of the Loss suffered by the Company or (b) indemnify the Buyer (or, at the Buyer's sole and absolute discretion, a Buyer's designee) for the proportion of the Loss that is attributable to the Buyer.
|
13.1
|
Termination of Agreement before the First Closing Date
. This Agreement may be terminated at any time prior to the First Closing Date as follows:
|
(a)
|
by mutual written consent of all Parties;
|
(b)
|
by either the Seller or the Buyer if the condition set forth in Article 5.1 shall not have been satisfied on or before the Long Stop Date;
provided
,
however
, that such termination shall not prejudice any accrued rights of any Party hereunder, and
provided further
, that the right to terminate this Agreement under this Article 13.1(b) shall not be available to a Party if any action of or by such Party shall have been the principal cause of such non-satisfaction;
|
(c)
|
if any of Seller and Seller Shareholders shall have breached any of its representations, warranties, undertakings, covenants or agreements hereunder such as to give rise to a Material Adverse Effect on the Company or any Target Group Member, Buyer may terminate this Agreement;
|
(d)
|
if the Buyer shall have breached any of its representations, warranties, undertakings, covenants or agreements hereunder, any of the Seller and Seller Shareholders may terminate this Agreement;
|
(e)
|
if any of the conditions set forth in Article 5.2 or Article 5.3 (save to the extent waived in accordance with this Agreement) shall have not been satisfied on or before the Long Stop Date (which date may be extended in writing by all the Parties), this Agreement shall automatically terminate;
provided
,
however
, that such automatic termination shall not prejudice any accrued rights of any Party hereunder.
|
(a)
|
In the event of termination of this Agreement by a Party pursuant to Article 13.1, written notice thereof shall forthwith be given by the terminating Party to each other Party, and this Agreement shall thereupon terminate and become void and have no further effect (except as otherwise provided in Article 13.2(b) below).
|
(b)
|
To the extent this Agreement is duly terminated pursuant to Article 13.1, each Party shall continue to be liable for indemnification with respect to its breaches of this Agreement occurring prior to such termination in accordance with applicable Laws, and shall continue to perform its obligations under the Confidentiality Agreement and under Article 11.6 (Taxes, Fees and Expenses), Article 12 (Indemnification Obligations), this Article 13 (Termination and Expiration) and Article 14 (Miscellaneous).
|
13.3
|
Expiry of this Agreement
. Unless duly terminated pursuant to Article 13.1, no Party shall have the right to terminate this Agreement, and each Party shall duly perform and complete all its obligations hereunder.
|
14.1
|
Severability
. If any provision of this Agreement is determined to be unlawful, invalid or unenforceable in any respect under the Law of any jurisdiction, then such provision shall be deemed to be severed under the Law of such jurisdiction from this Agreement and replaced by a lawful, valid and enforceable provision which carries out, as closely as possible, the intention of the Parties and preserves the economic purpose contemplated by this Agreement and, in such case, each and every other provision of this Agreement shall remain in full force and effect under the Law in that jurisdiction. No such severance shall affect or impair the legality, validity or enforceability under the Law of any other jurisdiction of that or any other provision of this Agreement.
|
14.2
|
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the PRC without reference to its conflict of laws rules.
|
14.3
|
Dispute Resolution
. If any Dispute arises among the Parties in connection with this Agreement, then the Parties shall resolve such Dispute as follows:
|
(a)
|
Dispute Notice
. One Party may at any time deliver to the other Parties a
|
(b)
|
Good Faith Negotiations
. The Parties shall, upon the delivery of a Dispute Notice, cause their respective Representatives to meet and seek to resolve the Dispute amicably through good faith negotiations.
|
(i)
|
If, for any reason, Representatives of the Parties fail to resolve the Dispute within thirty (30) days after the delivery of the Dispute Notice in accordance with Article 14.3(b), then any Party may submit the Dispute to arbitration in Hong Kong under the auspices of the HKIAC.
|
(ii)
|
The arbitral tribunal shall consist of three (3) arbitrators. The Buyer shall appoint one (1) arbitrator, the Seller and Seller Shareholders shall appoint one (1) arbitrator, and the third arbitrator shall be jointly appointed by the two party-appointed arbitrators. All arbitrators must be fluent in both English and Chinese.
|
(iii)
|
The arbitration proceedings shall be conducted in Chinese and in English.
|
(iv)
|
The arbitral tribunal shall apply the UNCITRAL Arbitration Rules as administered by the HKIAC in force at the time of the arbitration.
|
(v)
|
In accordance with the arbitration rules, each party to the arbitration proceedings shall cooperate with each other party in making full disclosure of and providing complete access to all information and documents requested by such other party in connection with such arbitration proceedings.
|
(vi)
|
The award of the arbitral tribunal shall be final and binding upon all parties to the arbitration proceedings, shall be non-appealable, and may be enforced in any court of competent jurisdiction. The prevailing party or parties may also enforce such award by presenting such award to the Escrow Agent for release of the amount of such award from the Escrow Account or apply to any court or courts of competent jurisdiction for enforcement of such award over the Party against which the award has been rendered, or over the assets of the Party against which such award has been rendered, wherever such assets may be located.
|
(vii)
|
Regardless of whether an arbitration proceeding has been initiated, each Party may apply to any court of competent jurisdiction to issue a pre-arbitral injunction to maintain the status quo or prevent irreparable harm, pre-arbitral attachment or other conservatory measure, and any Party shall be entitled to seek preliminary injunctive relief from any court of competent jurisdiction pending the constitution of the arbitral tribunal.
|
(viii)
|
The Parties agree that they shall, to the greatest practicable extent, continue to perform the terms of this Agreement during the pendency of any dispute resolution process or related judicial or administrative proceeding.
|
(d)
|
Confidentiality of Arbitration.
Except as may be required by Law or
|
14.4
|
Notices
. All notices, requests and other communications under this Agreement shall be in writing and shall be deemed to have been duly given at the time of receipt if delivered by hand or via reputable international express courier, charges pre-paid at the addresses shown below:
|
14.5
|
Effectiveness
. This Agreement shall come into effect upon being duly executed by an authorized representative of each Party, provided that neither the First Tranche nor the Second Tranche may be consummated unless all relevant Necessary Regulatory Approvals have been duly obtained.
|
14.6
|
Amendment
. Any amendment, variation, revision and supplement of this Agreement shall be made by a written instrument duly executed by all Parties.
|
14.7
|
Waiver
. Any Party may at any time waive the compliance or performance by the other Party or Parties with any undertakings, covenants, obligations or conditions contained herein that are for the benefits of the Party granting such waiver, but only by written instrument executed by the Party granting such waiver;
provided
,
however
, no such waiver shall be deemed to constitute a waiver of any such undertaking, covenant, obligation or condition in any other circumstance or a waiver of any other undertaking, covenant, obligation or condition. Any failure to exercise or any delay in exercising any of its rights, powers or remedies by a Party pursuant to this Agreement shall not operate as a waiver or variation of that or any other right, power or remedy or such Party.
|
14.8
|
Interest on the Shortfall
. In the event that any amount payable to a Party pursuant to
|
14.9
|
Specific Performance
. The Parties agree that if any Party fails to perform any of its obligations under any of the provisions of this Agreement in accordance with their specific terms or otherwise breaches any of the provisions of this Agreement, each other Party who has duly performed its obligations in accordance with the provisions of this Agreement shall be entitled to demand for specific performance of the terms hereof, in addition to any other remedy such non-breaching Party may have under this Agreement or applicable Law, including but not limited to recovering monetary damages from the breaching Party and requiring the breaching Party to take necessary remedial actions.
|
14.10
|
Rights Cumulative
. Any right, power or remedy of any Party under this Agreement is cumulative and not exclusive of any other right, power or remedy provided by Law or under this Agreement and may be exercised as such Party considers appropriate.
|
14.11
|
Successors and Assignment
. This Agreement shall be binding upon the successors of the Parties. No assignment of any right or obligation hereunder by any Party is permitted without the prior express written consent of each other Party.
|
14.12
|
No Third Party Beneficiaries
. This Agreement shall not create any rights in or confer any benefits upon any third party except for the Parties.
|
14.13
|
Entire Agreement
. This Agreement, together with the other Transaction Agreements, constitutes the entire understanding of the Parties with respect to the transactions and subject matter contemplated herein, and supersede all and any prior memoranda of understanding, letters of intent, agreements, undertakings, arrangements, communications, representations, or warranties, whether oral or written, by any Representative of any Party relating to the transactions contemplated herein.
|
14.14
|
Recitals, Exhibits and Schedules
. Each Recital and Exhibit constitutes an integral part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and any reference to this Agreement shall include the Recitals and Exhibits.
|
14.15
|
Counterparts
. More than one counterpart of this Agreement may be executed by the Parties hereto, and each fully executed counterpart shall be deemed an original rather than a duplicate. Several counterparts of this Agreement may be executed by the Parties respectively, and all counterparts collectively constitute one and the same executed document.
|
14.16
|
Language
. This Agreement shall be written in the English and the Chinese languages, with the texts of both versions being equally authoritative.
|
/s/ Zhao Qisan
|
/s/ Zhao Dongwang
|
/s/ Zhao Dongming
|
SHANGHAI ZHAOSHI INDUSTRIAL INVESTMENT CO., LTD
|
By: /s/ Zhao Qisan
Name:
Title:
|
SHANGHAI GOLDEN MONKEY FOOD JOINT STOCK CO., LTD.
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By: /s/ Zhao Qisan
Name:
Title:
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Level
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Applicable Margin for Eurodollar Rate Advances
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Applicable Margin for Base Rate Advances
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Level 1
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0.410%
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0.000%
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Level 2
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0.450%
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0.000%
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Level 3
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0.565%
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0.000%
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Level 4
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0.680%
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0.000%
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Level 5
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0.900%
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0.000%
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Level 6
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0.975%
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0.000%
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Level
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Applicable
Percentage
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Level 1
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0.040%
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Level 2
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0.050%
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Level 3
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0.060%
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Level 4
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0.070%
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Level 5
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0.100%
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Level 6
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0.150%
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Name of Initial Lender
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Commitment
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||
Bank of America, N.A.
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$135,000,000
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JPMorgan Chase Bank, N.A.
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$135,000,000
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Citibank, N.A.
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$135,000,000
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PNC Bank National Association
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$135,000,000
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Royal Bank of Canada
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$100,000,000
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US Bank National Association
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$75,000,000
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The Northern Trust Company
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$80,000,000
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Sumitomo Mitsui Banking Corporation
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$75,000,000
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Santander Bank, N.A.
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$75,000,000
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CIBC, Inc.
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$30,000,000
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Banco Bradesco S.A., New York Branch
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$25,000,000
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TOTAL OF COMMITMENTS
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$1,000,000,000
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|
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2013
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2012
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2011
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2010
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2009
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||||||||||
Earnings:
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|
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|
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||||||||||
Income from continuing operations before income taxes
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$
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1,251,319
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(a)
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$
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1,015,579
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(b)
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$
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962,845
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(c)
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$
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808,864
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(d)
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$
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671,131
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(e)
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Add (Deduct):
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||||||||||
Interest on indebtedness
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91,514
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|
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98,509
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|
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94,780
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|
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97,704
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|
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91,336
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|
|
|||||
Portion of rents representative of the interest factor
(f)
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7,821
|
|
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8,139
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|
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7,734
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|
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7,472
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|
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8,294
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|
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|||||
Amortization of debt expense
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1,115
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|
|
1,245
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|
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1,149
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|
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1,139
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|
|
970
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|
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|||||
Amortization of capitalized interest
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2,272
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|
|
1,660
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|
|
1,835
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|
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1,478
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|
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1,354
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|||||
Adjustment to exclude minority interest and income or loss from equity investees
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(2,324
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)
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(12,950
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)
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(5,817
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)
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(8,183
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)
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(5,614
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)
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|||||
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||||||||||
Earnings as adjusted
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$
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1,351,717
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$
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1,112,182
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|
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$
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1,062,526
|
|
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$
|
908,474
|
|
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$
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767,471
|
|
|
|
|
|
|
|
|
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|
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||||||||||
Fixed Charges:
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|
|
|
|
|
|
|
|
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|
||||||||||
Interest on indebtedness
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$
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91,514
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|
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$
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98,509
|
|
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$
|
94,780
|
|
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$
|
97,704
|
|
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$
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91,336
|
|
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Portion of rents representative of the interest factor
(f)
|
7,821
|
|
|
8,139
|
|
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7,734
|
|
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7,472
|
|
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8,294
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|
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|||||
Amortization of debt expense
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1,115
|
|
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1,245
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|
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1,149
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1,139
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|
|
970
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|
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|||||
Capitalized interest
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1,744
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|
|
5,778
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|
|
7,814
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|
|
2,116
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|
|
2,640
|
|
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|||||
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|
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|
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||||||||||
Total fixed charges
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$
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102,194
|
|
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$
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113,671
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|
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$
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111,477
|
|
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$
|
108,431
|
|
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$
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103,240
|
|
|
|
|
|
|
|
|
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||||||||||
Ratio of earnings to fixed charges
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13.23
|
|
|
9.78
|
|
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9.53
|
|
|
8.38
|
|
|
7.43
|
|
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(a)
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Includes total business realignment and impairment charges of $19.1 million before tax.
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(b)
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Includes total business realignment and impairment charges of $83.8 million before tax.
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(c)
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Includes total business realignment and impairment charges of $49.2 million before tax and a gain on sale of trademark licensing rights of $17.0 million before tax.
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(d)
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Includes total business realignment and impairment charges of $98.6 million before tax.
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(e)
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Includes total business realignment and impairment charges of $99.1 million before tax.
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(f)
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Portion of rents representative of the interest factor consists of one-third of rental expense for operating leases.
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Subsidiary Name
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Jurisdiction of
Incorporation
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Hershey Chocolate & Confectionery Corporation
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Delaware
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Hershey Chocolate of Virginia, Inc.
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Delaware
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Hershey Canada, Inc.
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Canada
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Hershey Mexico S.A. de C.V.
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Mexico
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Hershey Netherlands B.V.
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The Netherlands
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Hershey International Ltd.
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Delaware
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Mauna Loa Macadamia Nut Corporation
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Hawaii
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/s/ KPMG LLP
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1.
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I have reviewed this Annual Report on Form 10-K of The Hershey Company;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ JOHN P. BILBREY
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John P. Bilbrey
Chief Executive Officer
February 21, 2014
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1.
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I have reviewed this Annual Report on Form 10-K of The Hershey Company;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ DAVID W. TACKA
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David W. Tacka
Chief Financial Officer
February 21, 2014
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Date: February 21, 2014
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/s/JOHN P. BILBREY
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John P. Bilbrey
Chief Executive Officer |
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Date: February 21, 2014
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/s/DAVID W. TACKA
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David W. Tacka
Chief Financial Officer
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