What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-29 compared with 2021-04-29 · 328 added, 151 removed, 843 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Net sales $ 1,989,422 $ 1,707,329 $ 4,285,370 $ 3,744,646

5 unchanged sentences

Long-lived asset impairment charges

Business realignment costs 1,242 895

— 1,600 — 9,143

Business realignment costs (benefits) 1,141 ( 1,370 ) 2,383 ( 475 )

Operating profit

3 unchanged sentences

Other (income) expense, net

7,194 11,217 9,608 22,750

Income before income taxes 418,416 334,077 932,610 669,089

2 unchanged sentences

Net income including noncontrolling interest 301,230 268,042 698,101 536,825

Net gain (loss) attributable to noncontrolling interest 1,072 ( 2,354 )

Net (loss) gain attributable to noncontrolling interest — ( 859 ) 1,072 ( 3,213 )

Net income attributable to The Hershey Company

17 unchanged sentences

(in thousands)

For the Three Months Ended

April 4, 2021 March 29, 2020

Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount

For the Three Months Ended For the Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount

Net income including noncontrolling interest $ 301,230 $ 268,042 $ 698,101 $ 536,825

11 unchanged sentences

Total comprehensive income including noncontrolling interest $ 334,092 $ 266,623 $ 745,301 $ 493,523

Comprehensive income (loss) attributable to noncontrolling interest 6,334 ( 2,462 )

Comprehensive (loss) income attributable to noncontrolling interest ( 8 ) ( 826 ) 6,326 ( 3,288 )

Comprehensive income attributable to The Hershey Company $ 334,100 $ 267,449 $ 738,975 $ 496,811

4 unchanged sentences

(in thousands, except share data)

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Current assets:

27 unchanged sentences

Common stock, shares issued:

160,939,248 at April 4, 2021 and December 31, 2020

160,939,248 at July 4, 2021 and December 31, 2020

160,939 160,939

Class B common stock, shares issued:

60,613,777 at April 4, 2021 and December 31, 2020

60,613,777 at July 4, 2021 and December 31, 2020

60,614 60,614

2 unchanged sentences

Treasury—common stock shares, at cost:

14,583,846 at April 4, 2021 and 13,325,898 at December 31, 2020

15,528,828 at July 4, 2021 and 13,325,898 at December 31, 2020

( 1,180,881 ) ( 768,992 )

9 unchanged sentences

(in thousands)

Three Months Ended

April 4, 2021 March 29, 2020

Six Months Ended

July 4, 2021 June 28, 2020

Operating Activities

19 unchanged sentences

Equity investments in tax credit qualifying partnerships ( 57,445 ) ( 26,392 )

Business acquisitions, net of cash and cash equivalents acquired ( 418,191 ) —

Other investing activities 3,123 2,374

1 unchanged sentence

Financing Activities

Net (decrease) increase in short-term debt ( 6,079 ) 807,290

Net increase in short-term debt 137,027 166,017

Long-term borrowings, net of debt issuance costs — 989,876

Repayment of long-term debt and finance leases ( 436,957 ) ( 352,104 )

16 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended July 4, 2021 and June 28, 2020

(in thousands)

8 unchanged sentences

Stockholders’

Balance, April 4, 2021

— $ 160,939 $ 60,614 $ 1,195,748 $ 2,162,464 $ ( 994,765 ) $ ( 329,006 ) $ 8,852 $ 2,264,846

Net income 301,230 — 301,230

Other comprehensive income (loss) 32,870 ( 8 ) 32,862

Dividends (including dividend equivalents):

Common Stock, $ 0.804 per share

( 117,581 ) ( 117,581 )

Class B Common Stock, $ 0.731 per share

( 44,308 ) ( 44,308 )

Stock-based compensation 17,121 17,121

Exercise of stock options and incentive-based transactions 5,839 7,871 13,710

Repurchase of common stock ( 193,987 ) ( 193,987 )

Balance, July 4, 2021

$ — $ 160,939 $ 60,614 $ 1,218,708 $ 2,301,805 $ ( 1,180,881 ) $ ( 296,136 ) $ 8,844 $ 2,273,893

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

Income (Loss) Noncontrolling

Subsidiaries Total

Stockholders’

Balance, March 29, 2020

— $ 160,939 $ 60,614 $ 1,153,130 $ 1,404,453 $ ( 742,164 ) $ ( 365,741 ) $ 3,310 $ 1,674,541

Net income (loss) 268,901 ( 859 ) 268,042

Other comprehensive (loss) income ( 1,452 ) 33 ( 1,419 )

Dividends (including dividend equivalents):

Common Stock, $ 0.773 per share

( 114,260 ) ( 114,260 )

Class B Common Stock, $ 0.702 per share

( 42,551 ) ( 42,551 )

Stock-based compensation 12,612 12,612

Exercise of stock options and incentive-based transactions ( 3,864 ) 5,008 1,144

Repurchase of common stock ( 42,020 ) ( 42,020 )

Balance, June 28, 2020

$ — $ 160,939 $ 60,614 $ 1,161,878 $ 1,516,543 $ ( 779,176 ) $ ( 367,193 ) $ 2,484 $ 1,756,089

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q2 2021 Form 10-Q | Page 6

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended July 4, 2021 and June 28, 2020

(in thousands)

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

Income (Loss) Noncontrolling

Subsidiaries Total

Stockholders’

Balance, December 31, 2020

11 unchanged sentences

Divestiture of noncontrolling interest ( 1,013 ) ( 1,013 )

Balance, April 4, 2021

Balance, July 4, 2021

$ — $ 160,939 $ 60,614 $ 1,218,708 $ 2,301,805 $ ( 1,180,881 ) $ ( 296,136 ) $ 8,844 $ 2,273,893

20 unchanged sentences

Repurchase of common stock ( 211,196 ) ( 211,196 )

Balance, March 29, 2020

Balance, June 28, 2020

$ — $ 160,939 $ 60,614 $ 1,161,878 $ 1,516,543 $ ( 779,176 ) $ ( 367,193 ) $ 2,484 $ 1,756,089

14 unchanged sentences

The financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in our opinion, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods.

Operating results for the quarter ended April 4, 2021 may not be indicative of the results that may be expected for the year ending December 31, 2021 because of seasonal effects on our business.

Operating results for the quarter ended July 4, 2021 may not be indicative of the results that may be expected for the year ending December 31, 2021 because of seasonal effects on our business.

These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Annual Report on Form 10-K”), which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.

4 unchanged sentences

We are also working closely with our business units, contract manufacturers, distributors, contractors and other external business partners to minimize the potential impact on our business.

The ultimate impact that COVID-19 will have on our consolidated financial statements remains uncertain and ultimately will be dictated by the length and severity of the pandemic, as well as the economic recovery and actions taken in response by local, state and national governments around the world, including the distribution of vaccinations.

The ultimate impact that COVID-19 will have on our consolidated financial statements remains uncertain and ultimately will be dictated by the length and severity of the pandemic, including COVID-19 variants or potential resurgences, as well as the economic recovery and actions taken in response by local, state and national governments around the world, including the distribution of vaccinations.

We will continue to evaluate the nature and extent of these potential impacts to our business and consolidated financial statements.

23 unchanged sentences

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.

BUSINESS DIVESTITURE

BUSINESS ACQUISITION AND DIVESTITURES

2021 Activity

Lily's Sweets, LLC

On June 25, 2021, we completed the acquisition of Lily's Sweets, LLC ("Lily's"), previously a privately held company that sells a line of sugar-free and low-sugar confectionery foods to retailers and distributors in the United States and Canada.

Lily's products include dark and milk chocolate style bars, baking chips, peanut butter cups and other confection products that complement Hershey’s confectionery and confectionery-based portfolio.

The initial cash consideration paid for Lily's totaled $ 418,191 and the Company may be required to pay additional cash consideration if certain defined targets related to net sales and gross margin are exceeded during the period of the closing date through December 31, 2021.

As of the acquisition date, the estimated fair value of the contingent consideration obligation was classified as a liability of $ 5,000 and was determined using a scenario-based analysis on forecasted future results.

Acquisition-related costs for the Lily's acquisition were immaterial.

The acquisition has been accounted for as a business combination and, accordingly, Lily's has been included within the North America segment from the date of acquisition.

The purchase consideration, inclusive of the acquisition date fair value of the contingent consideration, was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

Goodwill $ 174,516

Other intangible assets 235,800

Other assets acquired, primarily current assets 30,383

Other liabilities assumed, primarily current liabilities ( 9,620 )

Deferred income taxes ( 7,888 )

Net assets acquired $ 423,191

The purchase price allocation presented above is preliminary.

We are in the process of refining the valuation of acquired assets and liabilities, including goodwill, and expect to finalize the purchase price allocation by the end of 2021.

Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired (including the identifiable intangible assets).

The majority of goodwill derived from this acquisition is expected to be deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Lily's products.

The Hershey Company | Q2 2021 Form 10-Q | Page 9

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

Other intangible assets include trademarks valued at $ 151,600 and customer relationships valued at $ 84,200 .

Trademarks were assigned an estimated useful life of 33 years and customer relationships were assigned estimated useful lives ranging from 17 to 18 years.

Lotte Shanghai Foods Co., Ltd.

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd.

1 unchanged sentence

Total proceeds from the divestiture and the impact on our consolidated financial statements were immaterial and were recorded in the selling, marketing and administrative ("SM&A") expense caption within the Consolidated Statements of Income.

2020 Activity

During the second quarter of 2020, we completed the divestitures of KRAVE Pure Foods, Inc.

and the Scharffen Berger and Dagoba brands, all of which were previously included within the North America segment results in our consolidated financial statements.

Total proceeds from the divestitures and the impact on our Consolidated Statements of Income, both individually and on an aggregate basis, were immaterial.

GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill by reportable segment for the three months ended April 4, 2021 are as follows:

The changes in the carrying value of goodwill by reportable segment for the six months ended July 4, 2021 are as follows:

North America

International and Other

International

and Other Total

Balance at December 31, 2020

$ 1,970,445 $ 17,770 $ 1,988,215

Acquired during the period (see Note 2 )

174,516 — 174,516

Foreign currency translation 3,876 ( 161 ) 3,715

Balance at April 4, 2021

Balance at July 4, 2021

$ 2,148,837 $ 17,609 $ 2,166,446

The following table provides the gross carrying amount and accumulated amortization for each major class of intangible asset:

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

8 unchanged sentences

$ 1,509,435 $ 1,295,214

Total amortization expense for the three months ended April 4, 2021 and March 29, 2020 was $ 11,621 and $ 11,640 , respectively.

Total amortization expense for the three months ended July 4, 2021 and June 28, 2020 was $ 11,635 and $ 11,580 , respectively.

Total amortization expense for the six months ended July 4, 2021 and June 28, 2020 was $ 23,256 and $ 23,220 , respectively.

SHORT AND LONG-TERM DEBT

Short-term Debt

As a source of short-term financing, we utilize cash on hand and commercial paper or bank loans with an original maturity of three months or less.

We maintain a $ 1.5 billion unsecured revolving credit facility with the option to

The Hershey Company | Q2 2021 Form 10-Q | Page 10

2 unchanged sentences

(amounts in thousands, except share data or if otherwise indicated)

SHORT AND LONG-TERM DEBT

Short-term Debt

As a source of short-term financing, we utilize cash on hand and commercial paper or bank loans with an original maturity of three months or less.

We maintain a $ 1.5 billion unsecured revolving credit facility with the option to increase borrowings by an additional $ 500 million with the consent of the lenders.

increase borrowings by an additional $ 500 million with the consent of the lenders.

This facility is scheduled to expire on July 2, 2024;

1 unchanged sentence

The credit agreement contains certain financial and other covenants, customary representations, warranties and events of default.

As of April 4, 2021, we were in compliance with all covenants pertaining to the credit agreement, and we had no significant compensating balance agreements that legally restricted these funds.

As of July 4, 2021, we were in compliance with all covenants pertaining to the credit agreement, and we had no significant compensating balance agreements that legally restricted these funds.

For more information, refer to the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K.

In addition to the revolving credit facility, we maintain lines of credit with domestic and international commercial banks.

We had short-term foreign bank loans against these lines of credit for $ 64,458 at April 4, 2021 and $ 74,041 at December 31, 2020.

Commitment fees relating to our revolving credit facility and lines of credit are not material.

At April 4, 2021 and December 31, 2020, we had no outstanding commercial paper.

Short-term debt consisted of the following:

July 4, 2021 December 31, 2020

Short-term foreign bank borrowings against lines of credit $ 57,574 $ 74,041

commercial paper 149,990 —

Total short-term debt $ 207,564 $ 74,041

Weighted average interest rate on outstanding commercial paper 0.1 % N/A

Long-term Debt

2 unchanged sentences

Maturity Date

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

8.800 % Debentures (1)

33 unchanged sentences

(1) In February 2021, we repaid $ 84,715 of 8.800 % Debentures due upon their maturity.

(2) In May 2021, we repaid $ 350,000 of 3.100 % Notes due upon their maturity.

The Hershey Company | Q2 2021 Form 10-Q | Page 11

4 unchanged sentences

Net interest expense consists of the following:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Interest expense $ 34,768 $ 40,520 $ 73,531 $ 79,776

16 unchanged sentences

We generally hedge commodity price risks for 3 - to 24 -month periods.

Our open commodity derivative contracts had a notional value of $ 194,068 as of April 4, 2021 and $ 279,843 as of December 31, 2020.

Our open commodity derivative contracts had a notional value of $ 387,871 as of July 4, 2021 and $ 279,843 as of December 31, 2020.

Derivatives used to manage commodity price risk are not designated for hedge accounting treatment.

7 unchanged sentences

The contracts are either designated as cash flow hedges or are undesignated.

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 146,323 at April 4, 2021 and $ 130,131 at December 31, 2020.

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 183,136 at July 4, 2021 and $ 130,131 at December 31, 2020.

The effective portion of the changes in fair value on these contracts is recorded in other comprehensive income and reclassified into earnings in the same period in which the hedged transactions affect earnings.

The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 6,117 at April 4, 2021 and $ 2,519 at December 31, 2020.

The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 1,775 at July 4, 2021 and $ 2,519 at December 31, 2020.

The change in fair value on these instruments is recorded directly in cost of sales or selling, marketing and administrative expense, depending on the nature of the underlying exposure.

7 unchanged sentences

In December 2020, our fixed-to-floating interest rate swap matured in connection with the repayment of certain long-term debt upon its maturity.

Therefore, as of April 4, 2021 and December 31, 2020, we had no open interest rate swap derivative instruments in a fair value hedging relationship.

Therefore, as of July 4, 2021 and December 31, 2020, we had no open interest rate swap derivative instruments in a fair value hedging relationship.

In order to manage interest rate exposure, in previous years we utilized interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions.

5 unchanged sentences

The change in fair value of these derivatives is recorded in selling, marketing and administrative expense, together with the change in the related liabilities.

The notional amount of the contracts outstanding at April 4, 2021 and December 31, 2020 was $ 21,299 and $ 30,194 , respectively.

The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of April 4, 2021 and December 31, 2020:

April 4, 2021 December 31, 2020

The notional amount of the contracts outstanding at July 4, 2021 and December 31, 2020 was $ 22,882 and $ 30,194 , respectively.

The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of July 4, 2021 and December 31, 2020:

July 4, 2021 December 31, 2020

Assets (1) Liabilities (1) Assets (1) Liabilities (1)

9 unchanged sentences

Derivative liabilities are classified on our Consolidated Balance Sheets within accrued liabilities and other long-term liabilities.

(2) As of April 4, 2021, amounts reflected on a net basis in liabilities were assets of $ 26,173 and liabilities of $ 24,651 , which are associated with cash transfers receivable or payable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.

(2) As of July 4, 2021, amounts reflected on a net basis in liabilities were assets of $ 51,073 and liabilities of $ 54,087 , which are associated with cash transfers receivable or payable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.

The comparable amounts reflected on a net basis in assets at December 31, 2020 were assets of $ 32,674 and liabilities of $ 29,376 .

At April 4, 2021 and December 31, 2020, the remaining amount reflected in assets and liabilities related to the fair value of other non-exchange traded derivative instruments, respectively.

At July 4, 2021 and December 31, 2020, the remaining amount reflected in assets and liabilities related to the fair value of other non-exchange traded derivative instruments, respectively.

The Hershey Company | Q2 2021 Form 10-Q | Page 13

3 unchanged sentences

Income Statement Impact of Derivative Instruments

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended April 4, 2021 and March 29, 2020 was as follows:

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended July 4, 2021 and June 28, 2020 was as follows:

Non-designated Hedges Cash Flow Hedges

9 unchanged sentences

$ 19,268 $ 6,696 $ ( 6,344 ) $ 675 $ ( 5,681 ) $ ( 1,205 )

The effect of derivative instruments on the Consolidated Statements of Income for the six months ended July 4, 2021 and June 28, 2020 was as follows:

Non-designated Hedges Cash Flow Hedges

Gains (losses) recognized in income (a) Gains (losses) recognized in OCI Gains (losses) reclassified from AOCI into income (b)

2021 2020 2021 2020 2021 2020

Commodities futures and options

$ 30,556 $ ( 74,468 ) $ — $ — $ — $ —

Foreign exchange contracts 573 ( 3,876 ) ( 7,979 ) 6,056 ( 3,144 ) 1,390

Interest rate swap agreements

— — — — ( 5,674 ) ( 4,687 )

Deferred compensation derivatives

3,510 ( 1,133 ) — — — —

$ 34,639 $ ( 79,477 ) $ ( 7,979 ) $ 6,056 $ ( 8,818 ) $ ( 3,297 )

(a) Gains (losses) recognized in income for non-designated commodities futures and options contracts were included in cost of sales.

2 unchanged sentences

Losses reclassified from AOCI into income for interest rate swap agreements were included in interest expense.

The amount of pretax net losses on derivative instruments, including interest rate swap agreements and foreign currency forward exchange contracts expected to be reclassified into earnings in the next 12 months was approximately $ 16,457 as of April 4, 2021.

This amount is primarily associated with interest rate swap agreements.

Fair Value Hedging Relationships

For the three months ended April 4, 2021, we had no interest rate swap derivative instruments in a fair value hedging relationship.

For the three months ended March 29, 2020, we recognized a net pretax benefit to interest expense of $ 151 relating to our fixed-to-floating interest swap arrangements.

For the three and six months ended July 4, 2021, we had no interest rate swap derivative instruments in a fair value hedging relationship.

For the three and six months ended June 28, 2020, we recognized a net pretax benefit to interest expense of $ 608 and $ 759 , respectively, relating to our fixed-to-floating interest swap arrangements.

The Hershey Company | Q2 2021 Form 10-Q | Page 14

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

FAIR VALUE MEASUREMENTS

4 unchanged sentences

We did no t have any Level 3 financial assets or liabilities, nor were there any transfers between levels during the periods presented.

The Hershey Company | Q1 2021 Form 10-Q | Page 12

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of April 4, 2021 and December 31, 2020:

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of July 4, 2021 and December 31, 2020:

Assets (Liabilities)

Level 1 Level 2 Level 3 Total

April 4, 2021:

July 4, 2021:

Derivative Instruments:

14 unchanged sentences

(3) The fair value of commodities futures and options contracts is based on quoted market prices.

The Hershey Company | Q2 2021 Form 10-Q | Page 15

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of April 4, 2021 and December 31, 2020 because of the relatively short maturity of these instruments.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of July 4, 2021 and December 31, 2020 because of the relatively short maturity of these instruments.

The estimated fair value of our long-term debt is based on quoted market prices for similar debt issues and is, therefore, classified as Level 2 within the valuation hierarchy.

1 unchanged sentence

Fair Value Carrying Value

April 4, 2021 December 31, 2020 April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020 July 4, 2021 December 31, 2020

Current portion of long-term debt $ 3,470 $ 443,215 $ 3,470 $ 438,829

3 unchanged sentences

In addition to assets and liabilities that are recorded at fair value on a recurring basis, GAAP requires that, under certain circumstances, we also record assets and liabilities at fair value on a nonrecurring basis.

The Hershey Company | Q1 2021 Form 10-Q | Page 13

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

During the three months ended April 4, 2021, we recorded no impairment charges.

During the three months ended March 29, 2020, we recorded the following impairment charges, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy:

In connection with the acquisition of Lily's in the second quarter of 2021, as discussed in Note 2 , we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty and a form of the multi-period excess earnings, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

During the six months ended July 4, 2021, we recorded no impairment charges.

During the six months ended June 28, 2020, we recorded the following impairment charges, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy:

Adjustment to disposal group (1) $ 6,200

12 unchanged sentences

The estimated incremental borrowing rate is derived from information available at the lease commencement date.

The Hershey Company | Q2 2021 Form 10-Q | Page 16

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

5 unchanged sentences

Consideration for such contracts are allocated to the lease component and non-lease components based upon relative standalone prices either observable or estimated if observable prices are not readily available.

The components of lease expense for the three months ended April 4, 2021 and March 29, 2020 were as follows:

The components of lease expense for the three months ended July 4, 2021 and June 28, 2020 were as follows:

Three Months Ended

Lease expense Classification April 4, 2021 March 29, 2020

Lease expense Classification July 4, 2021 June 28, 2020

Operating lease cost Cost of sales or SM&A (1) $ 11,088 $ 10,673

3 unchanged sentences

Net lease cost (2) $ 14,196 $ 13,734

The components of lease expense for the six months ended July 4, 2021 and June 28, 2020 were as follows:

Six Months Ended

Lease expense Classification July 4, 2021 June 28, 2020

Operating lease cost Cost of sales or SM&A (1) $ 22,554 $ 21,217

Finance lease cost:

Amortization of ROU assets Depreciation and amortization (1) 4,061 3,979

Interest on lease liabilities Interest expense, net 2,221 2,234

Net lease cost (2) $ 28,836 $ 27,430

(1) Supply chain-related amounts were included in cost of sales.

(2) Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial.

The Hershey Company | Q1 2021 Form 10-Q | Page 14

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

Information regarding our lease terms and discount rates were as follows:

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance leases 5.9 % 5.9 %

The Hershey Company | Q2 2021 Form 10-Q | Page 17

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

Supplemental balance sheet information related to leases were as follows:

Leases Classification April 4, 2021 December 31, 2020

Leases Classification July 4, 2021 December 31, 2020

Operating lease ROU assets Other non-current assets $ 206,068 $ 224,268

8 unchanged sentences

Total lease liabilities $ 280,514 $ 299,204

The maturity of our lease liabilities as of April 4, 2021 were as follows:

The maturity of our lease liabilities as of July 4, 2021 were as follows:

Operating leases Finance leases Total

8 unchanged sentences

Total lease liabilities $ 200,911 $ 79,603 $ 280,514

As of July 4, 2021, the Company had entered in an additional lease as a lessee, primarily for real estate.

This lease has not yet commenced and will result in ROU assets and corresponding lease liabilities of approximately $ 20,000 .

This lease is expected to commence during the second half of 2021, with a lease term of approximately 8 years.

The Hershey Company | Q2 2021 Form 10-Q | Page 18

3 unchanged sentences

Supplemental cash flow and other information related to leases were as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Six Months Ended

July 4, 2021 June 28, 2020

Cash paid for amounts included in the measurement of lease liabilities:

15 unchanged sentences

We regularly review our investments and adjust accordingly for capital contributions, dividends received and other-than-temporary impairments.

Total investments in unconsolidated affiliates was $ 60,982 and $ 52,351 as of April 4, 2021 and December 31, 2020, respectively.

Total investments in unconsolidated affiliates was $ 81,606 and $ 52,351 as of July 4, 2021 and December 31, 2020, respectively.

BUSINESS REALIGNMENT ACTIVITIES

1 unchanged sentence

Costs associated with business realignment activities are classified in our Consolidated Statements of Income as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Cost of sales $ 1,042 $ — $ 5,037 $ —

Selling, marketing and administrative expense 1,286 2,645 2,976 2,645

Business realignment costs 1,242 895

Business realignment costs (benefits) 1,141 ( 1,370 ) 2,383 ( 475 )

Costs associated with business realignment activities $ 3,469 $ 1,275 $ 10,396 $ 2,170

3 unchanged sentences

(amounts in thousands, except share data or if otherwise indicated)

Costs recorded by program during the three months ended April 4, 2021 and March 29, 2020 related to these activities were as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Costs recorded by program during the six months ended July 4, 2021 and June 28, 2020 related to these activities were as follows:

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

International Optimization Program:

5 unchanged sentences

Total $ 3,469 $ 1,275 $ 10,396 $ 2,170

The following table presents the liability activity for costs qualifying as exit and disposal costs for the three months ended April 4, 2021:

The following table presents the liability activity for costs qualifying as exit and disposal costs for the six months ended July 4, 2021:

Liability balance at December 31, 2020 (1)

1 unchanged sentence

Cash payments

Liability balance at April 4, 2021 (1)

Liability balance at July 4, 2021 (1)

(1) The liability balances reflected above are reported within accrued liabilities and other long-term liabilities.

6 unchanged sentences

However, segment operating results do not include these business realignment expenses because we evaluate segment performance excluding such costs.

For the three months ended April 4, 2021, we recognized total costs associated with the International Optimization Program of $ 6,927 .

For the three and six months ended July 4, 2021, we recognized total costs associated with the International Optimization Program of $ 3,469 and $ 10,396 , respectively.

These charges predominantly included third-party charges in support of our initiative to transform our China operating model, as well as severance and employee benefit costs.

3 unchanged sentences

This project was completed in mid-2020.

For the three months ended March 29, 2020, we recognized total costs associated with the Margin for Growth Program of $ 895 .

For the three and six months ended June 28, 2020, we recognized total costs associated with the Margin for Growth Program of $ 1,275 and $ 2,170 , respectively.

These charges included employee severance, largely relating to initiatives to improve the cost structure of our corporate operating model as part of optimizing our global supply chain.

7 unchanged sentences

The majority of our taxable income is generated in the United States and taxed at the United States statutory rate of 21 %.

The effective tax rates for the three months ended April 4, 2021 and March 29, 2020 were 22.8 % and 19.8 %, respectively.

Relative to the statutory rate, the 2021 effective tax rate was impacted by state taxes, partially offset by investment tax credits and the benefit of employee share-based payments.

Hershey and its subsidiaries file tax returns in the United States, including various state and local returns, and in other foreign jurisdictions.

We are routinely audited by taxing authorities in our filing jurisdictions, and a number of these audits are currently underway, including multi-year audits at various stages of review in Malaysia, Mexico and the United States.

The effective tax rates for the six months ended July 4, 2021 and June 28, 2020 were 25.1 % and 19.8 %, respectively.

Relative to the statutory rate, the 2021 effective tax rate was impacted by incremental tax reserves incurred as a result of an adverse ruling in connection with a non-U.S.

tax litigation matter as well as state taxes, partially offset by investment tax credits and the benefit of employee share-based payments.

The Company and its subsidiaries file tax returns in the United States, including various state and local returns, and in other foreign jurisdictions.

We are routinely audited by taxing authorities in our filing jurisdictions, and a number of these disputes are currently underway, including multi-year controversies at various stages of review, negotiation and litigation in Malaysia, Mexico, and the United States.

The outcome of tax audits cannot be predicted with certainty, including the timing of resolution or potential settlements.

If any issues addressed in our tax audits are resolved in a manner not consistent with management’s expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

During the second quarter of 2021, we recorded incremental tax reserves as a result of an adverse ruling in connection with a non-U.S.

tax litigation matter.

Based on our current assessments, we believe adequate provision has been made for all income tax uncertainties.

3 unchanged sentences

The ARPA strengthens and extends certain federal programs enacted through the CARES Act and other COVID-19 relief measures, and establishes new federal programs, including provisions on taxes, healthcare and unemployment benefits.

The ARPA did not have a material impact on our consolidated financial statements for the three months ended April 4, 2021.

The ARPA did not have a material impact on our consolidated financial statements for the six months ended July 4, 2021.

Coronavirus Aid, Relief, and Economic Security Act

1 unchanged sentence

The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments.

The CARES Act did not have a material impact on our consolidated financial statements for the three months ended April 4, 2021 and March 29, 2020.

The CARES Act did not have a material impact on our consolidated financial statements for the six months ended July 4, 2021 and June 28, 2020.

The Hershey Company | Q2 2021 Form 10-Q | Page 21

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Net Periodic Benefit Cost

The components of net periodic benefit cost for the three months ended April 4, 2021 and March 29, 2020 were as follows:

The components of net periodic benefit cost for the three months ended July 4, 2021 and June 28, 2020 were as follows:

Pension Benefits Other Benefits

Three Months Ended Three Months Ended

April 4, 2021 March 29, 2020 April 4, 2021 March 29, 2020

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Service cost $ 5,433 $ 5,411 $ 45 $ 41

6 unchanged sentences

Total net periodic benefit cost $ 6,777 $ 7,646 $ 1,010 $ 1,611

We made contributions of $ 325 and $ 4,000 to the pension plans and other benefits plans, respectively, during the second quarter of 2021.

In the second quarter of 2020, we made contributions of $ 248 and $ 3,976 to our pension plans and other benefit plans, respectively.

The contributions in 2021 and 2020 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans.

The components of net periodic benefit cost for the six months ended July 4, 2021 and June 28, 2020 were as follows:

Pension Benefits Other Benefits

Six Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Service cost $ 10,922 $ 10,843 $ 90 $ 80

Interest cost 8,726 13,956 1,929 3,012

Expected return on plan assets ( 24,612 ) ( 26,310 ) — —

Amortization of prior service (credit) cost

( 3,071 ) ( 3,651 ) — 150

Amortization of net loss (gain) 11,420 13,164 — ( 19 )

Settlement loss 7,440 3,653 — —

Total net periodic benefit cost $ 10,825 $ 11,655 $ 2,019 $ 3,223

We made contributions of $ 1,183 and $ 8,155 to the pension plans and other benefits plans, respectively, during the first six months of 2021.

In the first six months of 2020, we made contributions of $ 1,005 and $ 7,328 to our pension plans and other benefit plans, respectively.

The contributions in 2021 and 2020 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans.

The non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 18 ).

The Hershey Company | Q2 2021 Form 10-Q | Page 22

2 unchanged sentences

(amounts in thousands, except share data or if otherwise indicated)

We made contributions of $ 858 and $ 4,155 to the pension plans and other benefits plans, respectively, during the first three months of 2021.

In the first three months of 2020, we made contributions of $ 757 and $ 3,352 to our pension plans and other benefit plans, respectively.

The contributions in 2021 and 2020 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans.

During the first quarter of 2021, we recognized pension settlement charges in our hourly retirement plan due to lump sum withdrawals by employees retiring or leaving the Company.

During the first and second quarters of 2021, we recognized pension settlement charges in our hourly retirement plan due to lump sum withdrawals by employees retiring or leaving the Company.

In addition, we recognized pension settlement charges in our salaried retirement plan during the second quarter of 2021 due to lump sum withdrawals by employees retiring or leaving the Company.

The non-cash settlement charges, which represent the acceleration of a portion of the respective plan’s accumulated unrecognized actuarial loss, were triggered when the cumulative lump sum distributions exceeded the plan's anticipated annual service and interest costs.

In connection with the first quarter 2021 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 66 basis points higher than the rate as of December 31, 2020 and an expected rate of return on plan assets of 4.8 %.

In connection with the second quarter 2021 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 34 basis points higher than the rate as of December 31, 2020 and an expected rate of return on plan assets of 4.8 %.

STOCK COMPENSATION PLANS

15 unchanged sentences

For the periods presented, compensation expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Pre-tax compensation expense

1 unchanged sentence

Related income tax benefit 4,500 2,492 8,023 4,894

Compensation expenses for stock compensation plans are primarily included in selling, marketing and administrative expense.

As of July 4, 2021, total stock-based compensation expense related to non-vested awards not yet recognized was $ 101,018 and the weighted-average period over which this amount is expected to be recognized was approximately 2.2 years.

The Hershey Company | Q2 2021 Form 10-Q | Page 23

2 unchanged sentences

(amounts in thousands, except share data or if otherwise indicated)

Compensation expenses for stock compensation plans are primarily included in selling, marketing and administrative expense.

As of April 4, 2021, total stock-based compensation expense related to non-vested awards not yet recognized was $ 105,395 and the weighted-average period over which this amount is expected to be recognized was approximately 2.3 years.

Stock Options

3 unchanged sentences

Expense for stock options is based on grant date fair value and recognized on a straight-line method over the vesting period, net of estimated forfeitures.

A summary of activity relating to grants of stock options for the period ended April 4, 2021 is as follows:

A summary of activity relating to grants of stock options for the period ended July 4, 2021 is as follows:

Stock Options Shares Weighted-Average

6 unchanged sentences

Forfeited ( 3,009 ) $ 102.58

Outstanding as of April 4, 2021

Outstanding as of July 4, 2021

1,530,910 $ 101.44 4.6 years $ 111,076

Options exercisable as of April 4, 2021

Options exercisable as of July 4, 2021

1,344,804 $ 100.00 4.3 years $ 99,512

The weighted-average fair value of options granted was $ 24.12 and $ 21.31 per share for the periods ended April 4, 2021 and March 29, 2020, respectively.

The weighted-average fair value of options granted was $ 24.12 and $ 21.31 per share for the periods ended July 4, 2021 and June 28, 2020, respectively.

The fair value was estimated on the date of grant using a Black-Scholes option-pricing model and the following weighted-average assumptions:

Three Months Ended

April 4, 2021 March 29, 2020

Six Months Ended

July 4, 2021 June 28, 2020

Dividend yields

2 unchanged sentences

Expected term in years 6.3 6.7

The total intrinsic value of options exercised was $ 9,078 and $ 20,740 for the periods ended April 4, 2021 and March 29, 2020, respectively.

The total intrinsic value of options exercised was $ 21,453 and $ 23,597 for the periods ended July 4, 2021 and June 28, 2020, respectively.

Performance Stock Units and Restricted Stock Units

6 unchanged sentences

For market-based condition components, market volatility and other factors are taken into consideration in determining the grant date fair value and the related compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided.

For performance-based condition

For performance-based condition components, we estimate the probability that the performance conditions will be achieved each quarter and adjust compensation expenses accordingly.

The performance scores of PSU grants during the six months ended July 4, 2021 and June 28, 2020 can range from 0 % to 250 % of the targeted amounts.

The Hershey Company | Q2 2021 Form 10-Q | Page 24

2 unchanged sentences

(amounts in thousands, except share data or if otherwise indicated)

components, we estimate the probability that the performance conditions will be achieved each quarter and adjust compensation expenses accordingly.

The performance scores of PSU grants during the three months ended April 4, 2021 and March 29, 2020 can range from 0% to 250% of the targeted amounts.

We recognize the compensation expenses associated with PSUs ratably over the 3 -year term.

1 unchanged sentence

The grant date fair value of PSUs is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s Common Stock on the date of grant for performance-based components.

During the three months ended April 4, 2021 and March 29, 2020, we awarded RSUs to certain executive officers and other key employees under the EICP.

During the six months ended July 4, 2021 and June 28, 2020, we awarded RSUs to certain executive officers and other key employees under the EICP.

We also awarded RSUs to non-employee directors.

2 unchanged sentences

The compensation expenses associated with non-employee director RSUs is recognized ratably over the vesting period, net of estimated forfeitures.

A summary of activity relating to grants of PSUs and RSUs for the period ended April 4, 2021 is as follows:

A summary of activity relating to grants of PSUs and RSUs for the period ended July 4, 2021 is as follows:

Performance Stock Units and Restricted Stock Units

7 unchanged sentences

( 35,938 ) $ 124.56

Outstanding as of April 4, 2021

Outstanding as of July 4, 2021

1,236,293 $ 146.11

2 unchanged sentences

In addition, the table provides assumptions used to determine the fair value of the market-based total shareholder return component using the Monte Carlo simulation model on the date of grant.

Three Months Ended

April 4, 2021 March 29, 2020

Six Months Ended

July 4, 2021 June 28, 2020

Units granted

6 unchanged sentences

Expected volatility 26.4 % 17.3 %

The fair value of shares vested totaled $ 43,829 and $ 39,405 for the periods ended April 4, 2021 and March 29, 2020, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 261,762 units as of April 4, 2021.

The fair value of shares vested totaled $ 46,352 and $ 41,874 for the periods ended July 4, 2021 and June 28, 2020, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 263,269 units as of July 4, 2021.

Each unit is equivalent to one share of the Company’s Common Stock.

13 unchanged sentences

• International and Other - International and Other is a combination of all other operating segments that are not individually material, including those geographic regions where we operate outside of North America.

We currently have operations and manufacture product in China, Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Asia, Latin America, Middle East, Europe, Africa and other regions.

We currently have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Asia, Latin America, Middle East, Europe, Africa and other regions.

This segment also includes our global retail operations, including Hershey's Chocolate World stores in Hershey, Pennsylvania, New York City, Las Vegas, Niagara Falls (Ontario) and Singapore, as well as operations associated with licensing the use of certain of the Company's trademarks and products to third parties around the world.

13 unchanged sentences

Our segment net sales and earnings were as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

North America $ 1,779,193 $ 1,583,787 $ 3,861,065 $ 3,428,608

1 unchanged sentence

Total $ 1,989,422 $ 1,707,329 $ 4,285,370 $ 3,744,646

Segment income:

Segment income (loss):

North America $ 565,905 $ 497,587 $ 1,227,465 $ 1,079,142

4 unchanged sentences

Long-lived asset impairment charges (see Note 6 )

— 1,600 — 9,143

Costs associated with business realignment activities (see Note 9 )

3,469 1,275 10,396 2,170

Operating profit 456,675 383,373 1,009,719 766,173

2 unchanged sentences

Other (income) expense, net (see Note 18 )

7,194 11,217 9,608 22,750

Income before income taxes $ 418,416 $ 334,077 $ 932,610 $ 669,089

1 unchanged sentence

Activity within the unallocated mark-to-market adjustment for commodity derivatives is as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in income $ ( 16,877 ) $ ( 2,624 ) $ ( 30,556 ) $ 74,468

1 unchanged sentence

Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ ( 3,385 ) $ 487 $ ( 5,669 ) $ 82,241

As of April 4, 2021, the cumulative amount of mark-to-market gains on commodity derivatives that have been recognized in our consolidated cost of sales and not yet allocated to reportable segments was $ 64,822 .

As of July 4, 2021, the cumulative amount of mark-to-market gains on commodity derivatives that have been recognized in our consolidated cost of sales and not yet allocated to reportable segments was $ 68,207 .

Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pretax gains on commodity derivatives of $ 52,970 to segment operating results in the next twelve months.

4 unchanged sentences

Depreciation and amortization expense included within segment income presented above is as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

North America $ 56,913 $ 54,379 $ 116,022 $ 108,081

3 unchanged sentences

Additional information regarding our net sales disaggregated by geographical region is as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

United States $ 1,681,397 $ 1,504,266 $ 3,664,120 $ 3,271,542

4 unchanged sentences

Additional information regarding our net sales disaggregated by product line is as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Confectionery and confectionery-based portfolio $ 1,837,881 $ 1,592,181 $ 3,993,518 $ 3,500,415

1 unchanged sentence

Total $ 1,989,422 $ 1,707,329 $ 4,285,370 $ 3,744,646

The Hershey Company | Q2 2021 Form 10-Q | Page 28

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

TREASURY STOCK ACTIVITY

A summary of our treasury stock activity is as follows:

Three Months Ended April 4, 2021

Six Months Ended July 4, 2021

Shares Dollars

Shares repurchased in the open market under pre-approved share repurchase programs 871,144 $ 150,017

Shares repurchased to replace Treasury Stock issued for stock options and incentive compensation 1,871,500 $ 284,329

Total share repurchases

2,742,644 434,346

Shares issued for stock options and incentive compensation

2 unchanged sentences

In July 2018, our Board of Directors approved a $ 500,000 share repurchase authorization to repurchase shares of our Common Stock.

As of April 4, 2021, $ 260,000 remained available for repurchases of our Common Stock under this program.

As of July 4, 2021, $ 109,983 remained available for repurchases of our Common Stock under this program.

In May 2021, our Board of Directors approved an additional $ 500,000 share repurchase authorization.

This program is to commence after the existing 2018 authorization is completed and is to be utilized at management's discretion.

We are authorized to purchase our outstanding shares in open market and privately negotiated transactions.

1 unchanged sentence

Purchases under approved share repurchase authorizations are in addition to our practice of buying back shares sufficient to offset those issued under incentive compensation plans.

The Hershey Company | Q1 2021 Form 10-Q | Page 24

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

NONCONTROLLING INTEREST

8 unchanged sentences

Other comprehensive income - foreign currency translation adjustments 5,254

Balance, April 4, 2021

The remaining noncontrolling interest balance as of April 4, 2021 reflects the portion of sales proceeds attributable to the joint venture partner.

Balance, July 4, 2021

The remaining noncontrolling interest balance as of July 4, 2021 reflects the portion of sales proceeds attributable to the joint venture partner.

The distribution of the sales proceeds will commence upon the completion of certain approvals and other conditions.

3 unchanged sentences

While it is not feasible to predict or determine the outcome of such proceedings and claims with certainty, in our opinion these matters, both individually and in the aggregate, are not expected to have a material effect on our financial condition, results of operations or cash flows.

On February 12, 2021, Issouf Coubaly, individually and on behalf of proposed class members, filed a complaint (Coubaly v.

Nestlé U.S.A.

et al., 1:21-cv-00386-DLF (D.D.C.

12, 2021)) in the District Court of the District of Columbia, seeking injunctive relief and unspecified damages for alleged violations of child labor and human trafficking laws under the Trafficking Victims Protection Reauthorization Act.

The Company is among several defendants named in the suit but has not been served with the complaint.

The Company believes that the suit is without merit and intends to defend vigorously against the suit.

The Hershey Company | Q2 2021 Form 10-Q | Page 29

7 unchanged sentences

Three Months Ended

April 4, 2021 March 29, 2020

July 4, 2021 June 28, 2020

Common Stock Class B Common Stock Common Stock Class B Common Stock

19 unchanged sentences

Earnings Per Share—diluted $ 1.45 $ 1.36 $ 1.29 $ 1.20

The earnings per share calculations for the three months ended April 4, 2021 and March 29, 2020 excluded 15 and 15 stock options (in thousands), respectively, that would have been antidilutive.

The earnings per share calculations for the three months ended July 4, 2021 and June 28, 2020 excluded 43 and 15 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q2 2021 Form 10-Q | Page 30

2 unchanged sentences

(amounts in thousands, except share data or if otherwise indicated)

Six Months Ended

July 4, 2021 June 28, 2020

Common Stock Class B Common Stock Common Stock Class B Common Stock

Basic earnings per share:

Allocation of distributed earnings (cash dividends paid) $ 235,687 $ 88,617 $ 229,177 $ 85,102

Allocation of undistributed earnings 270,866 101,859 164,541 61,218

Total earnings—basic $ 506,553 $ 190,476 $ 393,718 $ 146,320

Denominator (shares in thousands):

Total weighted-average shares—basic 146,550 60,614 147,954 60,614

Earnings Per Share—basic $ 3.46 $ 3.14 $ 2.66 $ 2.41

Diluted earnings per share:

Allocation of total earnings used in basic computation $ 506,553 $ 190,476 $ 393,718 $ 146,320

Reallocation of total earnings as a result of conversion of Class B common stock to Common stock 190,476 — 146,320 —

Reallocation of undistributed earnings — ( 484 ) — ( 309 )

Total earnings—diluted $ 697,029 $ 189,992 $ 540,038 $ 146,011

Denominator (shares in thousands):

Number of shares used in basic computation 146,550 60,614 147,954 60,614

Weighted-average effect of dilutive securities:

Conversion of Class B common stock to Common shares outstanding 60,614 — 60,614 —

Employee stock options 606 — 620 —

Performance and restricted stock units 356 — 408 —

Total weighted-average shares—diluted 208,126 60,614 209,596 60,614

Earnings Per Share—diluted $ 3.35 $ 3.13 $ 2.58 $ 2.41

The earnings per share calculations for the six months ended July 4, 2021 and June 28, 2020 excluded 43 and 15 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q2 2021 Form 10-Q | Page 31

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(amounts in thousands, except share data or if otherwise indicated)

OTHER (INCOME) EXPENSE, NET

1 unchanged sentence

A summary of the components of other (income) expense, net is as follows:

Three Months Ended

April 4, 2021 March 29, 2020

Three Months Ended Six Months Ended

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

Write-down of equity investments in partnerships qualifying for historic and renewable energy tax credits (see Note 8 )

1 unchanged sentence

Non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans (see Note 11 )

2,304 3,806 1,820 3,955

Other (income) expense, net 10 ( 36 ) 17 245

6 unchanged sentences

The components of certain Consolidated Balance Sheet accounts are as follows:

April 4, 2021 December 31, 2020

July 4, 2021 December 31, 2020

Raw materials $ 412,728 $ 388,600

41 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements