HERSHEY CO | 2013 | FY | 3


SUPPLEMENTAL BALANCE SHEET INFORMATION
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 current and projected economic conditions. Our primary concentrations of credit risk are associated with Wal-Mart Stores, Inc. and McLane Company, 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. As of December 31, 2013, McLane Company, Inc. accounted for approximately 17.3% of our total accounts receivable. Wal-Mart Stores, Inc. accounted for approximately 14.5% of our total accounts receivable as of December 31, 2013. No other customer accounted for more than 10% of our year-end 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 of $14.3 million as of December 31, 2013 and $15.2 million as of December 31, 2012.
Inventories
We value the majority of our inventories in the U.S. under the last-in, first-out (“LIFO”) method. The remainder of our inventories in the U.S. and inventories for our international businesses are valued at the lower of first-in, first-out (“FIFO”) cost or market. Inventories include material, labor and overhead. LIFO cost of inventories valued using the LIFO method was $314.9 million as of December 31, 2013 and $331.7 million as of December 31, 2012. The net impact of LIFO acquisitions and liquidations during 2013 was not material. We stated inventories at amounts that did not exceed realizable values. Total inventories were as follows:  
December 31,
 
2013
 
2012
In thousands of dollars
 
 
 
 
Raw materials
 
$
226,978

 
$
256,969

Goods in process
 
79,861

 
78,292

Finished goods
 
517,968

 
496,981

Inventories at FIFO
 
824,807

 
832,242

Adjustment to LIFO
 
(165,266
)
 
(198,980
)
Total inventories
 
$
659,541

 
$
633,262


Property, Plant and Equipment
The property, plant and equipment balance included construction in progress of $273.1 million as of December 31, 2013 and $217.5 million as of December 31, 2012. As of December 31, 2012, construction in progress included $41.1 million associated with payments made by Ferrero under an agreement for the construction of a warehouse and distribution facility of which the Company has been deemed to be the owner for accounting purposes. Major classes of property, plant and equipment were as follows:  
December 31,
 
2013
 
2012
In thousands of dollars
 
 
 
 
 
 
 
 
 
Land
 
$
96,334

 
$
92,916

Buildings
 
956,890

 
878,527

Machinery and equipment
 
2,726,170

 
2,589,183

 
 
 
 
 
Property, plant and equipment, gross
 
3,779,394

 
3,560,626

Accumulated depreciation
 
(1,974,049
)
 
(1,886,555
)
 
 
 
 
 
Property, plant and equipment, net
 
$
1,805,345

 
$
1,674,071


During 2012, we recorded accelerated depreciation of property, plant and equipment of $15.3 million associated with the Next Century program.
Goodwill and Other Intangible Assets
Goodwill and intangible assets were as follows:
December 31,
 
2013
 
2012
In thousands of dollars
 
 
 
 
 
 
 
 
 
Unamortized intangible assets:
 
 
 
 
Goodwill balance at beginning of year
 
$
588,003

 
$
516,745

Effect of foreign currency translation
 
(11,442
)
 
3,284

Acquisitions
 

 
67,974

 
 
 
 
 
Goodwill balance at end of year
 
$
576,561

 
$
588,003

 
 
 
 
 
Trademarks with indefinite lives
 
$
81,465

 
$
81,465

Amortized intangible assets, gross:
 
 
 
 
Trademarks
 
64,436

 
68,490

Customer-related
 
72,094

 
74,790

Intangible asset associated with cooperative agreement with Bauducco
 
13,683

 
13,683

Patents
 
19,278

 
20,018

Effect of foreign currency translation
 
(9,256
)
 
(6,470
)
 
 
 
 
 
Total other intangible assets, gross
 
241,700

 
251,976

Accumulated amortization:
 
 
 
 
Trademarks
 
(5,190
)
 
(2,250
)
Customer-related
 
(26,853
)
 
(22,990
)
Intangible asset associated with cooperative agreement with Bauducco
 
(7,379
)
 
(6,294
)
Patents
 
(9,737
)
 
(7,411
)
Effect of foreign currency translation
 
2,703

 
1,682

Total accumulated amortization
 
(46,456
)
 
(37,263
)
 
 
 
 
 
Other intangibles
 
$
195,244

 
$
214,713


In January 2012, we acquired all of the outstanding stock of Brookside, a privately held confectionery company based in Abbotsford, British Columbia, Canada. For more information, see Note 2, Business Acquisitions.
Accumulated impairment losses associated with goodwill were $70.1 million as of December 31, 2013, and 2012. Accumulated impairment losses associated with trademarks were $46.7 million as of December 31, 2013, and 2012.
The useful lives of certain trademarks were determined to be indefinite and, therefore, we are not amortizing these assets. We amortize customer-related intangible assets over their estimated useful lives of approximately 15 years. We amortize trademarks with finite lives over their estimated useful lives of 25 years. We amortize patents over their remaining legal lives of approximately 5 years. Total amortization expense for other intangible assets was $10.8 million in 2013, $10.6 million in 2012 and $4.6 million in 2011.
Estimated annual amortization expense for other intangible assets over the next five years is as follows:
Annual Amortization Expense
 
2014
 
2015
 
2016
 
2017
 
2018
In thousands of dollars
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated amortization expense
 
$
10,452

 
$
9,916

 
$
9,913

 
$
9,245

 
$
8,151



Accrued Liabilities
Accrued liabilities were as follows:
December 31,
 
2013
 
2012
In thousands of dollars
 
 
 
 
 
 
 
 
 
Payroll, compensation and benefits
 
$
245,641

 
$
236,598

Advertising and promotion
 
348,966

 
289,221

Other
 
105,115

 
125,087

 
 
 
 
 
Total accrued liabilities
 
$
699,722

 
$
650,906


Other Long-term Liabilities
Other long-term liabilities were as follows:  
December 31,
 
2013
 
2012
In thousands of dollars
 
 
 
 
 
 
 
 
 
Post-retirement benefits liabilities
 
$
245,460

 
$
292,234

Pension benefits liabilities
 
50,842

 
240,215

Other
 
137,766

 
136,283

 
 
 
 
 
Total other long-term liabilities
 
$
434,068

 
$
668,732


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