Hershey's Account Receivables Analysis

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HSY has slight increase in accounts receivable reflecting the timing of seasonal sales at the end of 2011 as compared with 2010. Although its primary credit risk concentrates on two clients, McLane and Wal-Mart, its accounts receivable turnover is increasing. It means Hershey’s collection ability is good. Accounts Receivable—Trade

In the normal course of business, we extend credit to customers that satisfy pre-defined credit criteria based upon the results of our recurring financial account reviews and our evaluation of the current and projected economic conditions. Our primary concentrations of credit risk are associated with McLane Company, Inc. and Wal-Mart Stores, Inc. McLane Company, Inc. is one of the largest wholesale distributors in the United States to convenience stores, drug stores, wholesale clubs and mass merchandisers. Wal-Mart Stores, Inc. accounted for approximately 17.2% of our total accounts receivable as of December 31, 2011. McLane Company, Inc. accounted for approximately 13.5% of our total accounts receivable as of December 31, 2011. As of December 31, 2011, no other customers accounted for more than 10% of our total accounts receivable. We believe that we have little concentration of credit risk associated with the remainder of our customer base. Accounts Receivable—Trade, as shown on the Consolidated Balance Sheets, were net of allowances and anticipated discounts. An allowance for doubtful accounts is determined through analysis of the following: • Aging of accounts receivable at the date of the financial statements; • Assessments of collectability based on historical trends; and • Evaluation of the impact of current and projected economic conditions. We monitor the collectability of our accounts receivable on an ongoing basis by analyzing aged accounts receivable, assessing the credit worthiness of our customers and evaluating the impact of reasonably likely changes in economic conditions that may impact credit risks. Estimates with...
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