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Example research essay topic: Gross Margin Fourth Quarter - 1,151 words

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... rands, including new products and line extensions, and selected confectionery selling price increases, as well as incremental sales from the Visages acquisition, the Brazilian chocolate and confectionery business acquired in July, 2001. In December 2002, the Corporation announced an increase of 11 % in the price of standard-size candy bars effective January 1, 2003, representing an average increase of approximately 3 % over the entire domestic product line. A buy-in prior to the January 1, 2003 price increase resulted in an approximate 1 % to 2 % increase in fourth quarter, 2002 sales. Net sales rose $ 316. 8 million, or 8 %, from 2000 to 2001. The increase in 2001 was primarily due to incremental sales from the mint and gum business acquired from Nabisco in December 2000 and increases in sales of base confectionery and grocery products, primarily resulting from the introduction of new confectionery products, selected confectionery selling price increases in the United States, and increased international exports.

These increases were partially offset by lower sales resulting from higher promotional allowances; the divestiture of the Luden's throat drops business and the impact of unfavorable foreign currency exchange rates. COST OF SALES Cost of sales decreased $ 107. 5 million, or 4 %, from 2001 to 2002. Cost of sales in 2002 included $ 6. 4 million of costs primarily related to the relocation of equipment associated with the Corporation's business realignment initiatives. Cost of sales in 2001 included $ 50. 1 million associated with business realignment initiatives recorded in the fourth quarter of that year. Excluding costs related to the business realignment initiatives in both years, cost of sales decreased $ 63. 8 million from 2001 to 2002, primarily as a result of lower costs for certain major raw materials, primarily cocoa, milk and packaging materials and reduced supply chain costs, particularly related to shipping and distribution. Gross margin increased from 35. 5 % in 2001 to 37. 8 % in 2002.

Gross margin in 2001 was negatively impacted 1. 2 percentage points from the inclusion in cost of sales of a charge of $ 50. 1 million associated with business realignment initiatives recorded during the fourth quarter of that year. Gross margin in 2002 was reduced by. 2 percentage points from business realignment charges of $ 6. 4 million recorded in cost of sales during the year. Excluding the impact of the business realignment initiatives in both years, the increase in gross margin from 36. 7 % in 2001 to 38. 0 % in 2002 primarily reflected decreased costs for certain major raw materials, higher profitability resulting from the mix of confectionery items sold in 2002 compared with sales in 2001 and the impact of supply chain efficiencies. These increases in gross margin were partially offset by higher promotion Costs and returns, discounts, and allowances, which were higher as a percent of sales compared to the prior year. Gross margin was also unfavorably impacted in 2002 by poor profitability in the Corporation's Canadian and Brazilian businesses. Cost of sales increased $ 197. 4 million, or 8 %, from 2000 to 2001.

Cost of sales in 2001 included a charge of $ 50. 1 million associated with business realignment initiatives recorded during the fourth quarter. The $ 50. 1 million charge to cost of sales resulted from the reduction of raw material inventories, principally cocoa beans and cocoa butter, no longer required to support operations as a result of outsourcing the manufacturing of certain ingredients. Excluding the impact of the business realignment initiatives, cost of sales increased $ 147. 3 million, primarily reflecting higher costs associated with increased sales volume, partially offset by lower costs for freight, distribution and warehousing, as well as improved supply chain efficiencies including decreased costs for the disposal of aged finished goods inventory and obsolete packaging. Gross margin increased from 35. 3 % in 2000 to 35. 5 % in 2001.

Gross margin in 2001 was negatively impacted 1. 2 percentage points from the inclusion in cost of sales of a charge of $ 50. 1 million associated with business realignment initiatives recorded during the fourth quarter. Excluding the impact of the business realignment initiatives, the increase in gross margin to 36. 7 % in 2001 resulted from lower costs for freight, distribution and warehousing, as well as improved supply chain efficiencies, including decreased costs for the disposal of aged finished goods inventory and obsolete packaging. Selected confectionery selling price increases and the profitability of the mint and gum business acquired from Nabisco also contributed to the higher gross margin in 2001. The impact of these items was partially offset by higher manufacturing costs, primarily related to higher labor rates and employee benefits costs, as well as start-up costs associated with the installation of new manufacturing equipment.

SELLING, MARKETING AND ADMINISTRATIVE Selling, marketing and administrative expenses decreased by $ 13. 6 million, or 1. 6 % in 2002, primarily as a result of savings from the business realignment initiatives and the elimination of goodwill amortization in 2002, offset by $ 17. 2 million of expenses incurred to explore the possible sale of the Corporation, as discussed below. Excluding incremental expenses incurred to explore the Corporation's sale in 2002 and the impact of the amortization of intangibles in 2001, selling, marketing, and administrative expenses decreased $ 16. 0 million, or 2 %, from 2001 to 2002. The decrease in 2002 primarily reflected lower advertising, depreciation and administrative expenses, partially offset by higher expenses associated with increased consumer marketing programs and selling activities. On July 25, 2002, the Corporation confirmed that the Hershey Trust Company, as Trustee for the Benefit of Milton Hershey School (the "Milton Hershey School Trust") which controls 77. 6 % of the combined voting power of the Corporation's Common Stock and Class B Common Stock, had informed the Corporation that it had decided to diversify its holdings and in this regard wanted Hershey Foods to explore a sale of the entire Corporation. On September 17, 2002, the Milton Hershey School Trust informed the Corporation that it had elected not to sell its controlling interest and requested that the process to explore a sale be terminated. Selling, marketing and administrative expenses increased $ 120. 4 million, or 17 %, from 2000 to 2001, primarily reflecting selling, marketing and administrative expenditures for the newly acquired mint and gum business, increased administrative expenses primarily resulting from higher staffing levels to support sales activity in North America and international businesses, increased marketing expenses and higher incentive compensation expense.

Selling, marketing and administrative costs in 2000 included a one-time gain of $ 7. 3 million arising from the sale of certain corporate aircraft GAIN ON SALE OF BUSINESS In September 2001, the Corporation completed the sale of the Luden's throat drops business to Pharmacia Consumer Healthcare, a unit of Pharmacia Corporation. Included in the sale were the trademarks and manufacturing equipment for the throat drops...


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