Financial Risk Management at Hersheys


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Case Details:

Case Code : FINA020
Case Length : 13 Pages
Period : 2003
Pub. Date : 2003
Teaching Note :Not Available
Organization : HERSHEY FOODS CORPORATION
Industry : Food
Countries : US

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Background Note

Hershey Foods (Hershey) was founded by Milton Hershey, who started Lancaster Caramel Company at the age of 30. In 1893, at the Chicago Exposition, he saw a new chocolate-making machine. In 1900, he sold the caramel operations for $1 million to start a chocolate factory...

Overview of Risk Management

Hershey utilized various derivative instruments, to manage risk. These included interest rate swaps, foreign currency forward contracts and commodities futures contracts...

Market Risk

Foreign Exchange Risk
Hershey entered into foreign exchange forward contracts to hedge transactions primarily related to firm commitments to purchase equipment, certain raw materials and finished goods denominated in foreign currencies and to hedge payment of inter company transactions with its non domestic subsidiaries. Foreign currency risks were hedged generally for periods ranging from three to 24 months...

Exhibits

 Exhibit I: Hershey: Principal Cashflows and Related Interest Rates by Maturity date for Long-term Debt
Exhibit II: Hershey: Sensitivity Analysis -Commodity Positions
Exhibit III: Hershey: Comprehensive Income
Exhibit IV: Hershey: Components of Accumulated OCI as Shown in Balance Sheet
Exhibit V: Hershey: Consolidated Balance Sheets
Exhibit VI: Hershey: Consolidated Cashflow Statement
Annexure A: Accounting for Financial Instruments under US GAAP
 

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