Hershey Foods Corporation (NYSE: HSY) yesterday announced record sales and earnings for the third quarter ended September 30, 2001. Consolidated net sales for the third quarter of 2001 were $1,304,184,000 compared with $1,196,755,000 for the third quarter of 2000. Net income for the third quarter of 2001 was $120,762,000, or $.88 per share diluted, compared with $107,405,000, or $.78 per share diluted, for the comparable period of 2000, an EPS increase of 12.8 percent.

For the first nine months of 2001, consolidated net sales were $3,283,324,000 compared with $3,026,074,000 for the first nine months of 2000. Net income for the first nine months of 2001 was $252,107,000, or $1.83 per share diluted, compared with $218,581,000, or $1.58 per share diluted, for the same period in 2000, an EPS increase of 15.8 percent.

During the third quarter, sales increased by nine percent, driven by a solid three percent increase in the base business, as well as continued strength in the acquired mint and gum business. In addition, Hershey's retail sales growth, as measured by IRI, continues to outpace the category resulting in market share gains over the latest twelve-week, year-to-date, and 52-week periods.

Hershey achieved continued improvement in its gross margin as a result of lower logistics costs and overall improved supply chain efficiencies. This improvement enabled additional marketing spending, which contributed to the strong retail performance.

The pre-tax gain of $19.2 million on the September 5 sale of Luden's was largely offset by an $18.1 million tax liability on the transaction, resulting in an increase of approximately $.01 per share diluted for the quarter. Given the highly seasonal nature of the Luden's business, it is expected that the overall effect of the transaction will be neutral by the end of the year.

"Hershey's Back-to-School and Halloween sell-in to our retail customers developed very well as evidenced by these results," said Richard H. Lenny, President and Chief Executive Officer. "While the economic environment has been challenging, Hershey delivered a solid third quarter performance. I'm very pleased with how well our organization is delivering on several initiatives put in place during the year, which are beginning to deliver meaningful results," Lenny concluded.


This release contains statements which are forward looking. These statements are made based upon current expectations which are subject to risk and uncertainty. Actual results may differ materially from those contained in the forward-looking statements. Factors which could cause results to differ materially include, but are not limited to: changes in the confectionery and grocery business environment, including actions of competitors and changes in consumer preferences; changes in governmental laws and regulations, including taxes; market demand for new and existing products; the Corporation's ability to implement improvements to and reduce costs associated with the Corporation's distribution operations; and changes in raw material and other costs, as discussed in the Corporation's Annual Report on Form 10-K for 2000.

                          Hershey Foods Corporation
                 Summary of Consolidated Statements of Income
         for the periods ended September 30, 2001 and October 1, 2000
              (in thousands of dollars except per share amounts)

                                 Third Quarter             Nine Months
                                2001        2000         2001       2000

    Net Sales               $1,304,184   $1,196,755  $3,283,324  $3,026,074

    Costs and Expenses:
      Cost of Sales            752,575      696,431   1,906,719   1,803,598
      Selling, Marketing
       and Administrative      342,622      303,688     923,911     808,210
      Gain on Sale of
       Business                (19,237)         ---     (19,237)        ---

      Total Costs and
       Expenses              1,075,960    1,000,119   2,811,393   2,611,808

    Income Before Interest
     and Income Taxes          228,224      196,636     471,931     414,266
    Interest Expense, net       18,147       21,152      52,371      56,525

    Income Before Income
     Taxes                     210,077      175,484     419,560     357,741
    Provision for Income
     Taxes                      89,315       68,079     167,453     139,160

    Net Income                $120,762     $107,405    $252,107    $218,581

    Net Income Per Share
                 - Basic         $0.89        $0.78       $1.85       $1.59
                 - Diluted       $0.88        $0.78       $1.83       $1.58

    Shares Outstanding
                 - Basic       135,869      136,836     136,343     137,568
                 - Diluted     137,213      137,690     137,768     138,480

                          Hershey Foods Corporation
                         Consolidated Balance Sheets
                as of September 30, 2001 and December 31, 2000
                          (in thousands of dollars)

    Assets                                        2001            2000

    Cash and Cash Equivalents                    $49,168         $31,969
    Accounts Receivable - Trade (Net)            548,409         379,680
    Deferred Income Taxes                         68,950          76,136
    Inventories                                  725,703         605,173
    Prepaid Expenses and Other                    75,985         202,390

    Total Current Assets                       1,468,215       1,295,348

    Net Plant and Property                     1,576,946       1,585,388
    Intangibles Resulting from Business
     Acquisitions                                438,875         474,448
    Other Assets                                 127,303          92,580

    Total Assets                              $3,611,339      $3,447,764

    Liabilities and Stockholders' Equity

    Loans Payable                               $238,298        $258,123
    Accounts Payable                             162,998         149,232
    Accrued Liabilities                          365,238         358,067
    Taxes Payable                                 94,022           1,479

    Total Current Liabilities                    860,556         766,901

    Long-Term Debt                               876,981         877,654
    Other Long-Term Liabilities                  332,602         327,674
    Deferred Income Taxes                        299,590         300,499

    Total Liabilities                          2,369,729       2,272,728

    Total Stockholders' Equity                 1,241,610       1,175,036

    Total Liabilities and Stockholders'
     Equity                                   $3,611,339      $3,447,764

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