2012 Proxy Statement and 2011 Annual Report
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Letters to Stockholders The Hershey Company Proxy Statement and Notice of 2012 2011 Annual Report Annual Meeting to Stockholders and Proxy March 20, 2012 Statement To Our Stockholders: It is my pleasure to invite you to attend the 2012 Annual Meeting of Stockholders of The Hershey Company to be held at 10:00 a.m. Eastern Daylight Time on Tuesday, May 1, 2012. Business scheduled to be considered at the meeting includes (1) the election of ten directors, (2) ratification of the appointment of KPMG LLP as the Company’s independent auditors for 2012, and (3) a non-binding advisory vote on approval of the Company’s executive compensation (say-on-pay). 2011 Annual Management will review the Company’s 2011 performance and will be Report to available to respond to questions during the meeting. Stockholders The meeting will be held at GIANT Center, 550 West Hersheypark Drive, Hershey, Pennsylvania. Directions to GIANT Center are included with these materials. The doors to GIANT Center will open at 8:00 a.m. Please note the only entrance to the meeting will be at the front of GIANT Center. Seating will be in the arena seats and will require use of the stadium steps. There will be designated seating for those using wheelchairs or requiring special assistance. If you plan to attend the meeting, you will need an ADMISSION TICKET and a government-issued PHOTO IDENTIFICATION to gain admission. Any of the following items will serve as your ADMISSION TICKET: • The Notice of Internet Availability of Proxy Materials you received by mail, directing you to the website where proxy materials could be accessed; • The top half of your Proxy Card, if you received your proxy materials in paper form; •AnAdmission Ticket supplied by our Investor Relations Department upon your request if your proxy materials were delivered by email; or •Aletter from your broker, bank or other holder of record, or your most recent account statement, indicating that you were the beneficial owner of Hershey stock as of the record date, if your shares are held in street name. Please remember that, if you are a street name holder and want to vote your shares at the meeting, you also will need to bring a legal proxy from your broker, bank or other holder of record. As in prior years, we highly recommend you do not carry items such as handbags and packages to the meeting as all such items will be inspected. Weapons and sharp objects (such as pocketknives and scissors), cell phones, pagers, cameras and recording devices will not be permitted inside the meeting room. Please note that we will not distribute voting ballots during the meeting. If you plan to vote at the meeting, pick up a ballot at the Voting Booth upon your arrival and place it in one of the ballot boxes located near the Security Booth area or inside the meeting room, or submit your ballot to a meeting usher at the time designated during the meeting. We also invite you to visit HERSHEY’S CHOCOLATE WORLD visitors center on the day of the Annual Meeting. Please note that this year the visitors center will be open from 8:00 a.m. to 5:00 p.m. Once again, we are offering stockholders a special 25% discount on selected items. You will need to show your ADMISSION TICKET (in any of the forms described above) at HERSHEY’S CHOCOLATE WORLD to receive the special discount. To assure proper representation of your shares at the meeting, we encourage you to submit your voting instructions to the Company in advance by Internet, phone or mail. Please refer to our proxy materials for more information on how to vote your shares. I look forward to seeing you at the meeting. Regards, James E. Nevels Chairman of the Board of Directors John P. Bilbrey President and Chief Executive Officer March 20, 2012 Dear Stockholder, I’m pleased to report that The Hershey Company delivered another strong year, posting net sales above $6 billion for the first time. Our adjusted earnings per share-diluted (adjusted EPS), which we define on page 21 of the Annual Report to Stockholders that accompanies this letter, grew 10.6%, our third consecutive year of a double-digit percentage increase in adjusted EPS. In a challenging economic environment with commodity price volatility, we improved our results in virtually every market in which we do business and grew across all of the channels of trade in which we compete. Our full-year 2011 net sales were $6,080,788,000 compared with $5,671,009,000 in 2010, a 7.2% increase. Our full-year 2011 adjusted EPS was $2.82 versus $2.55 for 2010. In addition, we increased the dividend rate on Common Stock by 10% in February 2012. These results reflect the strength of our strategies to build on our leadership in North America while expanding the business globally. It also reflects the unwavering commitment of our nearly 14,000 employees to execute with excellence. The confectionery category continues to grow, and our performance continues to outpace the category. In the United States, retail takeaway in the channels that account for more than 80% of our retail sales increased 7.8% for the year. Our market share grew for the third consecutive year. We also continued our leadership in the key seasons in 2011. For example, our fourth quarter seasonal category sales, which include Halloween and Holiday, grew more than 4% and Hershey fourth quarter seasonal retail takeaway was up 5.8%, resulting in a market share increase of 0.5 points. Another area where our performance stands out is the convenience-store channel. We continued to leverage our superior insights and strong customer relationships to accelerate performance in this important channel. With the help of our outstanding team of in-store Retail Sales Representatives, who give us a distinct competitive advantage, the fourth quarter of 2011 was Hershey’s 15th consecutive quarter of increased C-store retail takeaway. Our king-size pack types and strong in-store merchandising and programming continued to drive solid volume gains in this channel. As a result, our 2011 market share in C-stores increased 1.4 share points. While we continued to fortify North America, we also grew in our focus countries of Mexico, Brazil, China and India, with combined sales growth in these countries of about 25% in 2011. These are dynamic economies with a growing middle class population eager to enjoy the goodness of Hershey products. In 2012, we’ll open an Asia Research and Development Center in Shanghai that will support our key international markets, enabling us to quickly develop and test new products in the marketplace. I’m also excited about our recent acquisition of Brookside Foods Ltd. With proprietary technology to produce chocolate-covered fruit-juice pieces, these great-tasting products deliver the benefits of flavanols and antioxidants and are a good complement to our portfolio. Brookside’s compound annual growth rate has increased about 20% during the past three years. To meet the manufacturing needs of this fast-growing business, we will add manufacturing capacity in 2012 and expect to have it up and running by year end. We look forward to building the Brookside brand in the U.S. and Canada and leveraging Hershey’s scale at retail. Our success in 2011 also shows that we win when we bring relevant variety and innovation to the confectionery category. We will build on our 2011 success with a solid line-up of innovative products, promotions, programs and merchandising. We are making progress in every market where we sell our products. As we look ahead to 2012 and beyond, we will focus on a long-range plan and vision that will guide our success in the global marketplace. We will continue to invest in our brands, consumer insights capabilities and innovation leadership as we build a high-performing, knowledge-based global company. In the United States, we are nearly finished with the expansion of the West Hershey manufacturing facility, which is the cornerstone of our Project Next Century U.S. supply chain initiative. This project will improve our competitiveness and efficiency and create one of the largest and most modern chocolate manufacturing facilities in the world. Doing business in a responsible fashion is embedded in the heritage of The Hershey Company. In 2011, we continued our leadership in this area with new and innovative corporate responsibility programs that distinguish your company. We invested in the cocoa communities of West Africa to drive sustainable programs benefitting farmers and their families. This builds on more than a decade of Hershey work in the region. Hershey also has always been dedicated to giving back to the communities where we live and work. We continued our strong support of important organizations such as the United Way and The Children’s Miracle Network in 2011, supported by the generous contributions of our employees globally. As we work to deliver against our net sales and earnings growth expectations for 2012, we bring strong momentum, great employees and proven strategies into the new year. Our management team is confident in the Company’s ability to deliver long-term value for all of our stockholders. Thank you for your continued support. John P. Bilbrey Safe Harbor Statement Please refer to the 2011 Annual Report to Stockholders that accompanies this letter for a discussion of Risk Factors that could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied in this letter to stockholders or elsewhere.