What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 308 added, 462 removed, 710 unchanged (52% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

Net sales $ 2,666,221 $ 2,295,948

4 unchanged sentences

524,216 494,665

Long-lived asset impairment charges

Business realignment costs (benefits) 365 — 2,748 ( 475 )

Business realignment costs 274 1,242

Operating profit

1 unchanged sentence

Interest expense, net 33,179 36,436

30,154 37,258 97,655 111,592

Other (income) expense, net 10,407 2,414

23,004 11,644 32,612 34,394

Income before income taxes 677,404 514,194

Provision for income taxes 143,926 117,323

76,746 115,250 311,255 247,514

Net income including noncontrolling interest 533,478 396,871

Net (loss) gain attributable to noncontrolling interest — ( 25 ) 1,072 ( 3,238 )

Net gain attributable to noncontrolling interest — 1,072

Net income attributable to The Hershey Company

1 unchanged sentence

Net income per share—basic:

$ 2.22 $ 2.21 $ 5.67 $ 4.87

Common stock $ 2.66 $ 1.96

Class B common stock $ 2.42 $ 1.78

$ 2.01 $ 2.00 $ 5.16 $ 4.42

Net income per share—diluted:

$ 2.14 $ 2.14 $ 5.49 $ 4.71

Common stock $ 2.57 $ 1.90

Class B common stock $ 2.41 $ 1.77

$ 2.01 $ 2.00 $ 5.14 $ 4.40

Dividends paid per share:

$ 0.901 $ 0.804 $ 2.509 $ 2.350

Common stock $ 0.901 $ 0.804

Class B common stock $ 0.819 $ 0.731

$ 0.819 $ 0.731 $ 2.281 $ 2.135

See Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

(in thousands)

For the Three Months Ended For the Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 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

For the Three Months Ended

April 3, 2022 April 4, 2021

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

Net income including noncontrolling interest $ 533,478 $ 396,871

Other comprehensive (loss) income, net of tax:

Other comprehensive income, net of tax:

Foreign currency translation adjustments:

Foreign currency translation (losses) gains during period $ ( 11,571 ) $ — ( 11,571 ) $ 7,050 $ — 7,050 $ 2,623 $ — 2,623 $ ( 41,242 ) $ — ( 41,242 )

Foreign currency translation gains during period $ 14,419 $ — 14,419 $ 1,198 $ — 1,198

Reclassification to earnings due to the sale of businesses — — — 5,210 — 5,210

3 unchanged sentences

Cash flow hedges:

Gains (losses) on cash flow hedging derivatives 5,779 ( 2,153 ) 3,626 ( 807 ) 441 ( 366 ) ( 2,200 ) ( 2,312 ) ( 4,512 ) 5,249 174 5,423

Losses on cash flow hedging derivatives ( 5,924 ) 874 ( 5,050 ) ( 1,635 ) 287 ( 1,348 )

Reclassification to earnings 2,596 ( 727 ) 1,869 3,137 ( 540 ) 2,597

Total other comprehensive (loss) income, net of tax $ ( 1,419 ) $ ( 850 ) ( 2,269 ) $ 16,733 $ ( 1,347 ) 15,386 $ 55,318 $ ( 10,387 ) 44,931 $ ( 25,594 ) $ ( 2,322 ) ( 27,916 )

Total other comprehensive income, net of tax $ 8,577 $ ( 1,371 ) 7,206 $ 16,987 $ ( 2,649 ) 14,338

Total comprehensive income including noncontrolling interest $ 540,684 $ 411,209

Comprehensive (loss) income attributable to noncontrolling interest ( 5 ) 475 6,321 ( 2,813 )

Comprehensive income attributable to noncontrolling interest — 6,334

Comprehensive income attributable to The Hershey Company $ 540,684 $ 404,875

4 unchanged sentences

(in thousands, except share data)

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Current assets:

27 unchanged sentences

Common stock, shares issued:

160,939,248 at October 3, 2021 and December 31, 2020

161,939,248 at April 3, 2022 and 160,939,248 at December 31, 2021

161,939 160,939

Class B common stock, shares issued:

60,613,777 at October 3, 2021 and December 31, 2020

59,613,777 at April 3, 2022 and 60,613,777 at December 31, 2021

59,614 60,614

2 unchanged sentences

Treasury—common stock shares, at cost:

15,564,962 at October 3, 2021 and 13,325,898 at December 31, 2020

15,961,542 at April 3, 2022 and 15,444,011 at December 31, 2021

( 1,378,651 ) ( 1,195,376 )

Accumulated other comprehensive loss ( 242,009 ) ( 249,215 )

Total—The Hershey Company stockholders’ equity 2,528,294 2,234,352

Noncontrolling interest in subsidiary 8,839 3,531

Total stockholders’ equity 2,915,549 2,757,229

5 unchanged sentences

(in thousands)

Nine Months Ended

October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

Operating Activities

4 unchanged sentences

Deferred income taxes 5,064 ( 713 )

Impairment of long-lived assets — 9,143

Write-down of equity investments 12,592 2,891

12 unchanged sentences

Equity investments in tax credit qualifying partnerships ( 22,503 ) ( 25,064 )

Business acquisitions, net of cash and cash equivalents acquired ( 419,501 ) —

Other investing activities ( 400 ) 2,530

1 unchanged sentence

Financing Activities

Net increase in short-term debt 339,981 13,398

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

Net decrease in short-term debt ( 65,640 ) ( 6,079 )

Repayment of long-term debt and finance leases ( 1,050 ) ( 85,863 )

1 unchanged sentence

Repurchase of common stock ( 203,350 ) ( 240,359 )

Exercise of stock options 23,362 19,111

Proceeds from exercised stock options 16,711 15,117

Taxes withheld and paid on employee stock awards

( 29,041 ) ( 11,939 )

Net cash used in financing activities ( 463,454 ) ( 491,862 )

Effect of exchange rate changes on cash and cash equivalents ( 20,258 ) ( 3,952 )

(Decrease) increase in cash and cash equivalents, including cash classified as held for sale ( 479,905 ) 723,310

Decrease (increase) in cash and cash equivalents classified as held for sale 11,434 ( 10,683 )

Net (decrease) increase in cash and cash equivalents ( 468,471 ) 712,627

Increase (decrease) in cash and cash equivalents, including cash classified as held for sale 8,789 ( 23,179 )

Increase in cash and cash equivalents classified as held for sale — 11,434

Net increase (decrease) in cash and cash equivalents 8,789 ( 11,745 )

Cash and cash equivalents, beginning of period 329,266 1,143,987

7 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended October 3, 2021 and September 27, 2020

(in thousands)

5 unchanged sentences

Comprehensive

Loss Noncontrolling

Subsidiaries Total

Stockholders’

Balance, July 4, 2021

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

Net income 444,927 — 444,927

Other comprehensive loss ( 2,264 ) ( 5 ) ( 2,269 )

Dividends (including dividend equivalents):

Common Stock, $ 0.901 per share

( 131,551 ) ( 131,551 )

Class B Common Stock, $ 0.819 per share

( 49,643 ) ( 49,643 )

Stock-based compensation 18,903 18,903

Exercise of stock options and incentive-based transactions 2,401 4,072 6,473

Repurchase of common stock ( 23,600 ) ( 23,600 )

Balance, October 3, 2021

$ — $ 160,939 $ 60,614 $ 1,240,012 $ 2,565,538 $ ( 1,200,409 ) $ ( 298,400 ) $ 8,839 $ 2,537,133

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

(Loss) Income Noncontrolling

Subsidiaries Total

Stockholders’

Balance, June 28, 2020

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

Net income (loss) 447,283 ( 25 ) 447,258

Other comprehensive income 14,886 500 15,386

Dividends (including dividend equivalents):

Common Stock, $ 0.804 per share

( 119,332 ) ( 119,332 )

Class B Common Stock, $ 0.731 per share

( 44,308 ) ( 44,308 )

Stock-based compensation 12,153 12,153

Exercise of stock options and incentive-based transactions ( 4,448 ) 6,015 1,567

Balance, September 27, 2020

$ — $ 160,939 $ 60,614 $ 1,169,583 $ 1,800,186 $ ( 773,161 ) $ ( 352,307 ) $ 2,959 $ 2,068,813

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q3 2021 Form 10-Q | Page 6

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended October 3, 2021 and September 27, 2020

(in thousands)

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

(Loss) Income Noncontrolling

Subsidiaries Total

(Loss) Income Total

Stockholders’

8 unchanged sentences

( 48,824 ) ( 48,824 )

Conversion of Class B Common Stock into Common Stock 1,000 ( 1,000 ) —

Stock-based compensation 15,314 15,314

1 unchanged sentence

Repurchase of common stock ( 203,350 ) ( 203,350 )

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

Balance, October 3, 2021

Balance, April 3, 2022

$ — $ 161,939 $ 59,614 $ 1,243,240 $ 3,071,416 $ ( 1,378,651 ) $ ( 242,009 ) $ 2,915,549

10 unchanged sentences

$ — $ 160,939 $ 60,614 $ 1,191,200 $ 1,928,673 $ ( 768,992 ) $ ( 338,082 ) $ 3,531 $ 2,237,883

Net income (loss) 987,321 ( 3,238 ) 984,083

Other comprehensive (loss) income ( 28,341 ) 425 ( 27,916 )

Net income 395,799 1,072 396,871

Other comprehensive income 9,076 5,262 14,338

Dividends (including dividend equivalents):

6 unchanged sentences

Repurchase of common stock ( 240,359 ) ( 240,359 )

Balance, September 27, 2020

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

Balance, April 4, 2021

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

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 October 3, 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 April 3, 2022 may not be indicative of the results that may be expected for the year ending December 31, 2022 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, 2021 (our “2021 Annual Report on Form 10-K”), which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.

3 unchanged sentences

Since the onset of COVID-19, there has been minimal disruption to our supply chain network, and all our manufacturing plants are currently open.

However, during the third quarter of 2021, continued strong demand for consumer goods and the effects of COVID-19 mitigation strategies have led to broad-based supply chain disruptions across the United States, including inflation on many consumer products, labor shortages and demand outpacing supply.

We are 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, including broad-based supply chain disruptions, COVID-19 variants or 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.

However, beginning in 2021 and continuing into 2022, ongoing strong demand for consumer goods and the effects of COVID-19 mitigation strategies have led to broad-based supply chain disruptions across the U.S.

and globally, including inflation on many consumer products, labor shortages and demand outpacing supply.

We continue to work 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, including broad-based supply chain disruptions, rising levels of inflation, the spread of COVID-19 variants or 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 and evolving impacts to our business and consolidated financial statements.

1 unchanged sentence

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted.

An entity that elects early adoption must adopt all the

In March 2020, the the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

The ASU is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to

The Hershey Company | Q1 2022 Form 10-Q | Page 7

2 unchanged sentences

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

amendments in the same period.

Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

We adopted the provisions of this ASU in the fourth quarter of 2020.

alternative reference rates.

Entities may apply this ASU upon issuance through December 31, 2022 on a prospective basis.

We early adopted the provisions of this ASU in the first quarter of 2022.

Adoption of the new standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

Entities may apply this ASU upon issuance through December 31, 2022 on a prospective basis.

We are currently evaluating the impact of the new standard on our consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

This ASU requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) rather than adjust them to fair value at the acquisition date.

ASU 2021-08 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods.

This ASU should be applied prospectively to business combinations occurring on or after the date of adoption.

Evaluation of this new standard is dependent on multiple circumstances including the timing and complexity of completed business combinations.

As a result, we intend to adopt the provisions of this ASU in the first quarter of 2023.

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 ACQUISITION AND DIVESTITURES

BUSINESS ACQUISITIONS AND DIVESTITURE

2021 Activity

Pretzels Inc.

On December 14, 2021, we completed the acquisition of Pretzels Inc.

(“Pretzels”), previously a privately held company that manufactures and sells pretzels and other salty snacks for other branded products and private labels in the United States.

Pretzels is an industry leader in the pretzel category with a product portfolio that includes filled, gluten free and seasoned pretzels, as well as extruded snacks that complements Hershey’s snacks portfolio.

Based in Bluffton, Indiana, Pretzels operates three manufacturing locations in Indiana and Kansas.

Pretzels provides Hershey deep pretzel category and product expertise and the manufacturing capabilities to support brand growth and future pretzel innovation.

The initial cash consideration paid for Pretzels totaled $ 304,477 and consisted of cash on hand and short-term borrowings.

Acquisition-related costs for the Pretzels acquisition were immaterial.

The acquisition has been accounted for as a business combination and, accordingly, Pretzels has been included within the North America Salty Snacks segment from the date of acquisition.

The purchase consideration was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

Initial Allocation (1) Adjustments Updated Allocation

Goodwill $ 165,301 $ 1,033 $ 166,334

Other intangible assets 32,100 ( 6,000 ) 26,100

Current assets acquired 30,717 118 30,835

Property, plant and equipment, net 96,099 4,617 100,716

Other non-current assets, primarily operating lease ROU assets 111,787 — 111,787

Deferred income taxes 541 232 773

Current liabilities assumed ( 22,713 ) — ( 22,713 )

Other long-term liabilities, primarily operating lease liabilities ( 109,355 ) — ( 109,355 )

Net assets acquired $ 304,477 $ — $ 304,477

(1) As reported in the Company’s 2021 Annual Report on Form 10-K.

The Hershey Company | Q1 2022 Form 10-Q | Page 8

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The purchase price allocation presented above is preliminary.

The measurement period adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired.

We are in the process of evaluating additional information necessary to finalize the valuation of assets acquired and liabilities assumed as of the acquisition date including, but not limited to, post-closing adjustments to the working capital acquired including certain holdbacks.

The final fair value determination could result in material adjustments to the values presented in the preliminary purchase price allocation, including other intangible assets, goodwill and the related tax impact of such adjustments.

We expect to finalize the purchase price allocation by mid-2022.

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

A portion 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 Pretzels’ products.

Other intangible assets include trademarks valued at $ 5,700 and customer relationships valued at $ 20,400 .

Trademarks were assigned an estimated useful life of five years and customer relationships were assigned an estimated useful life of 19 years.

Dot's Pretzels, LLC

On December 13, 2021, we completed the acquisition of Dot’s Pretzels, LLC (“Dot’s”), previously a privately held company that produces and sells pretzels and other snack food products to retailers and distributors in the United States, with Dot’s Homestyle Pretzels snacks as its primary product.

Dot’s is the fastest-growing scale brand in the pretzel category and complements Hershey’s snacks portfolio.

The initial cash consideration paid for Dot’s totaled $ 894,166 and consisted of cash on hand and short-term borrowings.

Acquisition-related costs for the Dot’s acquisition were immaterial.

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

The purchase consideration was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

Initial Allocation (1) Adjustments Updated Allocation

Goodwill $ 303,345 $ ( 14,960 ) $ 288,385

Other intangible assets 526,300 16,800 543,100

Current assets acquired 51,121 — 51,121

Property, plant and equipment, net 39,256 1,010 40,266

Other non-current assets 2,201 — 2,201

Other liabilities assumed, primarily current liabilities ( 28,057 ) ( 2,850 ) ( 30,907 )

Net assets acquired $ 894,166 $ — $ 894,166

(1) As reported in the Company’s 2021 Annual Report on Form 10-K.

The purchase price allocation presented above is preliminary.

The measurement period adjustments, specifically to other intangible assets and resulting impact on the valuation of goodwill, are principally related to the refinement of certain assumptions in the value of customer relationships based on an analysis of historical customer-specific data.

The remaining measurement period adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired and liabilities assumed.

The final fair value determination could result in material adjustments to the values presented in the preliminary purchase price allocation, including other intangible assets and goodwill.

We expect to finalize the purchase price allocation by mid-2022.

The Hershey Company | Q1 2022 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)

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 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 Dot’s products.

Other intangible assets include trademarks valued at $ 336,600 and customer relationships valued at $ 206,500 .

Trademarks were assigned an estimated useful life of 33 years and customer relationships were assigned an estimated useful life of 18 years.

Lily's Sweets, LLC

1 unchanged sentence

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 $ 422,210 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 from the closing date through December 31, 2021.

The cash consideration paid for Lily’s totaled $ 422,210 and the Company may be required to pay additional cash consideration if certain defined targets related to net sales and gross margin were exceeded during the period from 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.

Based on financial results through December 31, 2021, the fair value was reduced during the fourth quarter of 2021 to $ 1,250 , with the adjustment to fair value recorded in the selling, marketing and administrative (“SM&A”) expense caption within the Consolidated Statements of Income.

We expect to pay the contingent consideration during 2022.

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 acquisition has been accounted for as a business combination and, accordingly, Lily’s has been included within the North America Confectionery 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:

Initial Allocation (1) Adjustments Updated Allocation

Goodwill $ 175,826

4 unchanged sentences

Net assets acquired $ 427,210

(1) As reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2021.

The purchase price allocation presented above is preliminary.

The measurement period adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired.

We continue to refine our purchase price allocation, including goodwill, and expect to finalize by the end of 2021.

The purchase price allocation presented above has been finalized as of the fourth quarter of 2021 and includes an immaterial amount of measurement period adjustments.

The measurement period adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed.

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

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.

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., which was previously included within the International segment results in our consolidated financial statements.

Total proceeds from the divestiture and the impact on our consolidated financial statements were immaterial and were recorded in the SM&A expense caption within the Consolidated Statements of Income.

The Hershey Company | Q1 2022 Form 10-Q | Page 10

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

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.

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.

(“LSFC”), which was previously included within the International and Other segment results in our consolidated financial statements.

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 nine months ended October 3, 2021 are as follows:

North America

International

and Other Total

The changes in the carrying value of goodwill by reportable segment for the three months ended April 3, 2022 are as follows:

North America Confectionery North America Salty Snacks International Total

Balance at December 31, 2021

$ 2,026,006 $ 589,798 $ 17,370 $ 2,633,174

Acquired during the period (see Note 2 )

174,516 — 174,516

Measurement period adjustments (see Note 2 )

1 unchanged sentence

Foreign currency translation 1,195 — 152 1,347

Balance at October 3, 2021

Balance at April 3, 2022

$ 2,027,201 $ 575,871 $ 17,522 $ 2,620,594

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

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

8 unchanged sentences

$ 2,029,220 $ 2,037,588

Total amortization expense for the three months ended October 3, 2021 and September 27, 2020 was $ 13,936 and $ 11,618 , respectively.

Total amortization expense for the nine months ended October 3, 2021 and September 27, 2020 was $ 37,192 and $ 34,838 , respectively.

The Hershey Company | Q3 2021 Form 10-Q | Page 10

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Total amortization expense for the three months ended April 3, 2022 and April 4, 2021 was $ 19,859 and $ 11,621 , respectively.

In 2022, our amortization expense increased as a result of our 2021 business combination activity (see Note 2 ).

SHORT AND LONG-TERM DEBT

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

As of October 3, 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 April 3, 2022, 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 2021 Annual Report on Form 10-K.

The Hershey Company | Q1 2022 Form 10-Q | Page 11

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

1 unchanged sentence

Short-term debt consisted of the following:

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Short-term foreign bank borrowings against lines of credit $ 149,102 $ 119,038

1 unchanged sentence

Total short-term debt $ 873,783 $ 939,423

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

Weighted average interest rate on outstanding commercial paper 0.4 % 0.1 %

Long-term Debt

2 unchanged sentences

Maturity Date

October 3, 2021 December 31, 2020

8.800 % Debentures (1)

February 15, 2021 $ — $ 84,715

3.100 % Notes (2)

May 15, 2021 — 350,000

April 3, 2022 December 31, 2021

2.625 % Notes

28 unchanged sentences

Long-term portion $ 4,088,437 $ 4,086,627

(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 | Q3 2021 Form 10-Q | Page 11

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Interest Expense

Net interest expense consists of the following:

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

Interest expense $ 35,371 $ 38,763

6 unchanged sentences

$ 33,179 $ 36,436

The Hershey Company | Q1 2022 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)

DERIVATIVE INSTRUMENTS

3 unchanged sentences

In entering into these contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts.

We mitigate this risk by entering into exchanged-traded contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties.

We mitigate this risk by entering into exchange-traded contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties.

We do not expect any significant losses from counterparty defaults.

2 unchanged sentences

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

Our open commodity derivative contracts had a notional value of $ 383,928 as of October 3, 2021 and $ 279,843 as of December 31, 2020.

Our open commodity derivative contracts had a notional value of $ 284,752 as of April 3, 2022 and $ 313,200 as of December 31, 2021.

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 $ 98,949 at October 3, 2021 and $ 130,131 at December 31, 2020.

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 149,170 at April 3, 2022 and $ 94,623 at December 31, 2021.

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 $ 2,747 at October 3, 2021 and $ 2,519 at December 31, 2020.

The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 2,098 at April 3, 2022 and $ 2,993 at December 31, 2021.

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.

The Hershey Company | Q3 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)

Interest Rate Risk

We manage our targeted mix of fixed and floating rate debt with debt issuances and by entering into fixed-to-floating interest rate swaps in order to mitigate fluctuations in earnings and cash flows that may result from interest rate volatility.

These swaps are designated as fair value hedges, for which the gain or loss on the derivative and the offsetting loss or gain on the hedged item are recognized in current earnings as interest expense (income), net.

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 October 3, 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 October 3, 2021 and December 31, 2020 was $ 24,866 and $ 30,194 , respectively.

The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of October 3, 2021 and December 31, 2020:

October 3, 2021 December 31, 2020

The notional amount of the contracts outstanding at April 3, 2022 and December 31, 2021 was $ 24,697 and $ 24,975 , respectively.

The Hershey Company | Q1 2022 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)

The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of April 3, 2022 and December 31, 2021:

April 3, 2022 December 31, 2021

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 October 3, 2021, amounts reflected on a net basis in assets were assets of $ 63,132 and liabilities of $ 62,977 , 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 October 3, 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 | Q3 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)

(2) As of April 3, 2022, amounts reflected on a net basis in liabilities were assets of $ 62,985 and liabilities of $ 63,378 , 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 liabilities at December 31, 2021 were assets of $ 31,774 and liabilities of $ 32,701 .

At April 3, 2022 and December 31, 2021, the remaining amount reflected in assets and liabilities related to the fair value of other non-exchange traded derivative instruments, respectively.

Income Statement Impact of Derivative Instruments

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended October 3, 2021 and September 27, 2020 was as follows:

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended April 3, 2022 and April 4, 2021 was as follows:

Non-designated Hedges Cash Flow Hedges

9 unchanged sentences

$ 50,005 $ 15,371 $ ( 5,924 ) $ ( 1,635 ) $ ( 2,596 ) $ ( 3,137 )

The effect of derivative instruments on the Consolidated Statements of Income for the nine months ended October 3, 2021 and September 27, 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

$ 64,199 $ ( 189 ) $ — $ — $ — $ —

Foreign exchange contracts 574 ( 2,472 ) ( 2,200 ) 5,249 ( 5,174 ) 1,393

Interest rate swap agreements

— — — — ( 8,353 ) ( 7,031 )

Deferred compensation derivatives

3,592 1,304 — — — —

$ 68,365 $ ( 1,357 ) $ ( 2,200 ) $ 5,249 $ ( 13,527 ) $ ( 5,638 )

(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 pre-tax 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 $ 11,529 as of October 3, 2021.

This amount is primarily associated with interest rate swap agreements.

Fair Value Hedging Relationships

For the three and nine months ended October 3, 2021, we had no interest rate swap derivative instruments in a fair value hedging relationship.

For the three and nine months ended September 27, 2020, we recognized a net pre-tax benefit to interest expense of $ 1,389 and $ 2,148 , respectively, relating to our fixed-to-floating interest swap arrangements.

The Hershey Company | Q1 2022 Form 10-Q | Page 14

2 unchanged sentences

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

This amount is primarily associated with interest rate swap agreements.

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 following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of October 3, 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 April 3, 2022 and December 31, 2021:

Assets (Liabilities)

Level 1 Level 2 Level 3 Total

October 3, 2021:

April 3, 2022:

Derivative Instruments:

Foreign exchange contracts (1) $ — $ 306 $ — $ 306

Deferred compensation derivatives (2) — 82 — 82

Commodities futures and options (3) 3,709 — — 3,709

Foreign exchange contracts (1) — 3,525 — 3,525

Deferred compensation derivatives (2) — 800 — 800

Commodities futures and options (3) 1,792 — — 1,792

14 unchanged sentences

Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of October 3, 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 April 3, 2022 and December 31, 2021 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

October 3, 2021 December 31, 2020 October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021 April 3, 2022 December 31, 2021

Current portion of long-term debt $ 2,328 $ 2,844 $ 2,328 $ 2,844

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.

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 nine months ended October 3, 2021, we recorded no impairment charges.

During the nine months ended September 27, 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

Other asset write-down (2) 2,943

Long-lived asset impairment charges $ 9,143

(1) In connection with the sale of the LSFC joint venture (disposal group previously classified as held for sale), we recorded impairment charges to adjust long-lived asset values.

The fair value of the disposal group was supported by potential sales prices with third-party buyers.

The sale of the LSFC joint venture was completed in January 2021.

(2) In connection with a previous sale, the Company wrote-down certain receivables deemed uncollectible.

In connection with the acquisitions of Pretzels, Dot’s and Lily’s during 2021, as discussed in Note 2 , we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis and the relief-from-royalty, 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 three months ended April 3, 2022 and April 4, 2021, we recorded no impairment charges.

We lease office and retail space, warehouse and distribution facilities, land, vehicles, and equipment.

We determine if an agreement is or contains a lease at inception.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

2 unchanged sentences

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

The Hershey Company | Q3 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.

4 unchanged sentences

The lease and non-lease components of real estate and equipment leases supporting production activities are not accounted for as a single lease component.

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 October 3, 2021 and September 27, 2020 were as follows:

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

The Hershey Company | Q1 2022 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)

The components of lease expense for the three months ended April 3, 2022 and April 4, 2021 were as follows:

Three Months Ended

Lease expense Classification October 3, 2021 September 27, 2020

Operating lease cost Cost of sales or SM&A (1) $ 10,764 $ 11,485

Finance lease cost:

Amortization of ROU assets Depreciation and amortization (1) 1,971 1,959

Interest on lease liabilities Interest expense, net 1,100 1,106

Net lease cost (2) $ 13,835 $ 14,550

The components of lease expense for the nine months ended October 3, 2021 and September 27, 2020 were as follows:

Nine Months Ended

Lease expense Classification October 3, 2021 September 27, 2020

Lease expense Classification April 3, 2022 April 4, 2021

Operating lease cost Cost of sales or SM&A (1) $ 12,787 $ 11,466

6 unchanged sentences

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

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance leases 6.2 % 6.1 %

The Hershey Company | Q3 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 October 3, 2021 December 31, 2020

Leases Classification April 3, 2022 December 31, 2021

Operating lease ROU assets Other non-current assets $ 352,385 $ 351,712

8 unchanged sentences

Total lease liabilities $ 417,677 $ 416,337

The maturity of our lease liabilities as of October 3, 2021 were as follows:

The Hershey Company | Q1 2022 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)

The maturity of our lease liabilities as of April 3, 2022 were as follows:

Operating leases Finance leases Total

8 unchanged sentences

Total lease liabilities $ 349,076 $ 68,601 $ 417,677

As of October 3, 2021, the Company had entered into 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 $ 22,000 .

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

The Hershey Company | Q3 2021 Form 10-Q | Page 18

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

Nine Months Ended

October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

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 $ 77,865 and $ 52,351 as of October 3, 2021 and December 31, 2020, respectively.

Total investments in unconsolidated affiliates were $ 109,380 and $ 93,089 as of April 3, 2022 and December 31, 2021, respectively.

The Hershey Company | Q1 2022 Form 10-Q | Page 18

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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 Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

Cost of sales $ 27 $ 3,995

Selling, marketing and administrative expense 980 1,690

Business realignment costs (benefits) 365 — 2,748 ( 475 )

Business realignment costs 274 1,242

Costs associated with business realignment activities $ 1,281 $ 6,927

The Hershey Company | Q3 2021 Form 10-Q | Page 19

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Costs recorded by program during the nine months ended October 3, 2021 and September 27, 2020 related to these activities were as follows:

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Costs recorded by program during the three months ended April 3, 2022 and April 4, 2021 related to these activities were as follows:

Three Months Ended

April 3, 2022 April 4, 2021

International Optimization Program:

Severance $ 377 $ — $ 3,199 $ —

Other program costs 3,020 — 10,594 —

Margin for Growth Program:

Severance — — — ( 653 )

Severance and employee benefit costs $ 280 $ 1,624

Other program costs 1,001 5,303

Total $ 1,281 $ 6,927

The following table presents the liability activity for costs qualifying as exit and disposal costs for the nine months ended October 3, 2021:

Liability balance at December 31, 2020 (1)

2021 business realignment charges (2)

Cash payments

Liability balance at October 3, 2021 (1)

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

(2) The costs reflected in the liability roll-forward represent employee-related and certain third-party service provider charges.

Amounts classified as liabilities qualifying as exit and disposal costs primarily represent employee-related and certain third-party service provider charges, however, such amounts at April 3, 2022 are not significant.

2020 International Optimization Program

In the fourth quarter of 2020, we commenced a program (“International Optimization Program”) to streamline resources and investments in select international markets, including the optimization of our China operating model that will improve our operational efficiency and provide for a strong, sustainable and simplified base going forward.

The International Optimization Program is expected to be completed by mid-2022, with total pre-tax costs anticipated to be $ 50,000 to $ 75,000 .

The International Optimization Program is expected to be completed in early 2023, with total pre-tax costs anticipated to be $ 50,000 to $ 75,000 .

Cash costs are expected to be $ 40,000 to $ 65,000 , primarily related to workforce reductions of approximately 350 positions outside of the United States, costs to consolidate and relocate production, and third-party costs incurred to execute these activities.

The costs and related benefits of the International Optimization Program relate to the International and Other segment.

The costs and related benefits of the International Optimization Program relate to the International segment.

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

For the three and nine months ended October 3, 2021, we recognized total costs associated with the International Optimization Program of $ 3,397 and $ 13,793 , respectively.

For the three months ended April 3, 2022 and April 4, 2021, we recognized total costs associated with the International Optimization Program of $ 1,281 and $ 6,927 , 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.

Since inception, we have incurred pre-tax charges to execute the program totaling $ 47,223 .

Margin for Growth Program

In the first quarter of 2017, the Company’s Board of Directors (“Board”) unanimously approved several initiatives under a single program focused on improving global efficiency and effectiveness, optimizing the Company’s supply chain, streamlining the Company’s operating model and reducing administrative expenses to generate long-term savings.

This project was completed in mid-2020.

We recognized total costs of $ 2,170 associated with the Margin for Growth Program for the six months ended June 28, 2020, at which time the program ended.

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.

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 3, 2022 and April 4, 2021 were 21.2 % and 22.8 %, respectively.

Relative to the statutory rate, the 2022 effective tax rate was impacted by 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, China, Canada 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

The Hershey Company | Q1 2022 Form 10-Q | Page 19

2 unchanged sentences

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

we incurred other program costs, which related primarily to third-party charges in support of our initiative to improve global efficiency and effectiveness.

The costs and related benefits of the Margin for Growth Program relate approximately 63 % to the North America segment and 37 % to the International and Other segment.

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

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 nine months ended October 3, 2021 and September 27, 2020 were 21.4 % and 20.1 %, 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 utilization (during the third quarter of 2021) of previously generated capital losses.

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

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.

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.

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

2 unchanged sentences

On March 11, 2021, the American Rescue Plan Act (“ARPA”) was signed into law.

The ARPA strengthens and extends certain federal programs enacted through the Coronavirus Aid, Relief, and Economic Security 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 nine months ended October 3, 2021.

The ARPA strengthens and extends certain federal programs enacted through the Coronavirus Aid, Relief, and Economic Security (“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.

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law.

On March 27, 2020, the CARES Act was signed into law.

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 nine months ended October 3, 2021 and September 27, 2020.

The Hershey Company | Q3 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)

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

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Net Periodic Benefit Cost

The components of net periodic benefit cost for the three months ended October 3, 2021 and September 27, 2020 were as follows:

The components of net periodic benefit cost for the three months ended April 3, 2022 and April 4, 2021 were as follows:

Pension Benefits Other Benefits

Three Months Ended Three Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Service cost $ 5,256 $ 5,431 $ 45 $ 39

Interest cost 4,785 6,125 964 1,508

Expected return on plan assets ( 12,249 ) ( 13,243 ) — —

Amortization of prior service (credit) cost

( 1,536 ) ( 1,823 ) — 75

Amortization of net loss (gain) 4,585 7,026 — ( 10 )

Settlement loss 5,408 1,282 — —

Total net periodic benefit cost $ 6,249 $ 4,798 $ 1,009 $ 1,612

We made contributions of $ 25,711 and $ 3,527 to the pension plans and other benefits plans, respectively, during the third quarter of 2021.

In the third quarter of 2020, we made contributions of $ 748 and $ 3,157 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 nine months ended October 3, 2021 and September 27, 2020 were as follows:

Pension Benefits Other Benefits

Nine Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

April 3, 2022 April 4, 2021 April 3, 2022 April 4, 2021

Service cost $ 4,853 $ 5,489 $ 78 $ 45

1 unchanged sentence

Expected return on plan assets ( 12,662 ) ( 12,419 ) — —

Amortization of prior service (credit) cost

( 4,607 ) ( 5,474 ) — 225

Amortization of net loss (gain) 16,005 20,190 — ( 29 )

Amortization of prior service credit ( 1,413 ) ( 1,536 ) — —

Amortization of net loss 2,731 5,816 26 —

Settlement loss 2,616 2,508 — —

Total net periodic benefit cost $ 1,490 $ 4,048 $ 1,259 $ 1,009

We made contributions of $ 26,894 and $ 11,682 to the pension plans and other benefits plans, respectively, during the first nine months of 2021.

In the first nine months of 2020, we made contributions of $ 1,753 and $ 10,485 to our pension plans and other benefit plans, respectively.

We made contributions of $ 3,467 and $ 4,991 to the pension plans and other benefits plans, respectively, during the first three months of 2022.

In the first three months of 2021, we made contributions of $ 858 and $ 4,155 to our pension plans and other benefit plans, respectively.

The contributions in 2022 and 2021 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 17 ).

During the first quarter of 2022, we recognized pension settlement charges in our hourly retirement plan 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 2022 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 107 basis points higher than the rate as of December 31, 2021 and an expected rate of return on plan assets of 4.9 %.

The Hershey Company | Q1 2022 Form 10-Q | Page 20

2 unchanged sentences

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

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

In connection with the third quarter 2021 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 39 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

6 unchanged sentences

• Other stock-based awards.

The EICP also provides for the deferral of stock-based compensation awards by participants if approved by the Compensation and Executive Organization Committee of our Board and if in accordance with an applicable deferred compensation plan of the Company.

Currently, the Compensation and Executive Organization Committee has authorized the deferral of PSU and RSU awards by certain eligible employees under the Company’s Deferred Compensation Plan.

The EICP also provides for the deferral of stock-based compensation awards by participants if approved by the Compensation and Human Capital Committee of our Board and if in accordance with an applicable deferred compensation plan of the Company.

Currently, the Compensation and Human Capital Committee has authorized the deferral of PSU and RSU awards by certain eligible employees under the Company’s Deferred Compensation Plan.

Our Board has authorized our non-employee directors to defer any portion of their cash retainer, committee chair fees and RSUs awarded that they elect to convert into deferred stock units under our Directors’ Compensation Plan.

5 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 Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

Pre-tax compensation expense

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

As of October 3, 2021, total stock-based compensation expense related to non-vested awards not yet recognized was $ 93,180 and the weighted-average period over which this amount is expected to be recognized was approximately 2.1 years.

The Hershey Company | Q3 2021 Form 10-Q | Page 23

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

As of April 3, 2022, total stock-based compensation expense related to non-vested awards not yet recognized was $ 115,245 and the weighted-average period over which this amount is expected to be recognized was approximately 2.2 years.

Stock Options

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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 October 3, 2021 is as follows:

The Hershey Company | Q1 2022 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)

A summary of activity relating to grants of stock options for the period ended April 3, 2022 is as follows:

Stock Options Shares Weighted-Average

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Contractual Term Aggregate Intrinsic Value

Outstanding at beginning of the period

1,839,811 $ 99.72 4.8 years

Outstanding at beginning of the period 1,332,956 $ 102.78 4.4 years

Granted 4,025 $ 202.03

( 420,520 ) $ 96.03

Exercised ( 175,890 ) $ 96.09

Forfeited ( 3,858 ) $ 102.97

Outstanding as of October 3, 2021

Expired ( 1,873 ) $ 103.07

Outstanding as of April 3, 2022

1,155,360 $ 104.14 4.3 years $ 132,440

Options exercisable as of October 3, 2021

Options exercisable as of April 3, 2022

1,116,149 $ 102.49 4.2 years $ 129,789

The weighted-average fair value of options granted was $ 24.12 and $ 21.31 per share for the periods ended October 3, 2021 and September 27, 2020, respectively.

The weighted-average fair value of options granted was $ 37.28 and $ 24.12 per share for the periods ended April 3, 2022 and April 4, 2021, respectively.

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

Nine Months Ended

October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

Dividend yields

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Expected term in years 6.3 6.3

The total intrinsic value of options exercised was $ 28,416 and $ 27,394 for the periods ended October 3, 2021 and September 27, 2020, respectively.

The total intrinsic value of options exercised was $ 18,814 and $ 9,078 for the periods ended April 3, 2022 and April 4, 2021, respectively.

Performance Stock Units and Restricted Stock Units

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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 nine months ended October 3, 2021 and September 27, 2020 can range from 0 % to 250 % of the targeted amounts.

The Hershey Company | Q3 2021 Form 10-Q | Page 24

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The performance scores of PSU grants during the three months ended April 3, 2022 and April 4, 2021 can range from 0 % to 250 % of the targeted amounts.

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

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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 nine months ended October 3, 2021 and September 27, 2020, we awarded RSUs to certain executive officers and other key employees under the EICP.

During the three months ended April 3, 2022 and April 4, 2021, we awarded RSUs to certain executive officers and other key employees under the EICP.

We also awarded RSUs to non-employee directors.

The Hershey Company | Q1 2022 Form 10-Q | Page 22

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

We recognize the compensation expenses associated with employee RSUs over a specified award vesting period based on the grant date fair value of our Common Stock.

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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 October 3, 2021 is as follows:

A summary of activity relating to grants of PSUs and RSUs for the period ended April 3, 2022 is as follows:

Performance Stock Units and Restricted Stock Units

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( 13,372 ) $ 151.15

Outstanding as of October 3, 2021

Outstanding as of April 3, 2022

1,142,454 $ 180.18

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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.

Nine Months Ended

October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

Units granted

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Expected volatility 25.3 % 26.4 %

The fair value of shares vested totaled $ 50,361 and $ 52,181 for the periods ended October 3, 2021 and September 27, 2020, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 263,594 units as of October 3, 2021.

The fair value of shares vested totaled $ 97,803 and $ 43,829 for the periods ended April 3, 2022 and April 4, 2021, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 268,001 units as of April 3, 2022.

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

SEGMENT INFORMATION

The Company reports its operations through three reportable segments:

(i) North America Confectionery, (ii) North America Salty Snacks and (iii) International.

This organizational structure aligns with how our Chief Operating Decision Maker (“CODM”) manages our business, including resource allocation and performance assessment, and further aligns with our product categories and the key markets we serve.

• North America Confectionery – This segment is responsible for our traditional chocolate and non-chocolate confectionery market position in the United States and Canada.

This includes our business in chocolate and non-chocolate confectionery, gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines.

This segment also includes our 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.

• North America Salty Snacks – This segment is responsible for our salty snacking products in the United States.

This includes ready-to-eat popcorn, baked and trans fat free snacks, pretzels and other snacks.

The Hershey Company | Q1 2022 Form 10-Q | Page 23

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

SEGMENT INFORMATION

Our organizational structure is designed to ensure continued focus on North America, coupled with an emphasis on profitable growth in our focus international markets.

Our business is primarily organized around geographic regions, which enables us to build processes for repeatable success in our global markets.

As a result, we have defined our operating segments on a geographic basis, as this aligns with how our Chief Operating Decision Maker (“CODM”) manages our business, including resource allocation and performance assessment.

Our North America business, which generates approximately 90 % of our consolidated revenue, is our only individually reportable segment.

None of our other operating segments individually meet the quantitative thresholds to qualify as reportable segments;

therefore, these operating segments are combined and disclosed below as International and Other.

• North America - This segment is responsible for our traditional chocolate and non-chocolate confectionery market position, as well as our grocery and growing snacks market positions, in the United States and Canada.

This includes developing and growing our business in chocolate and non-chocolate confectionery, pantry, food service and other snacking product lines.

• 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.

• International – International 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 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.

For segment reporting purposes, we use “segment income” to evaluate segment performance and allocate resources.

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We disclose depreciation and amortization that is generated by segment-specific assets, since these amounts are included within the measure of segment income reported to the CODM.

The Hershey Company | Q3 2021 Form 10-Q | Page 26

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Our segment net sales and earnings were as follows:

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

North America $ 2,125,627 $ 2,014,152 $ 5,986,692 $ 5,442,760

International and Other 234,212 205,677 658,517 521,715

Three Months Ended

April 3, 2022 April 4, 2021

North America Confectionery $ 2,217,044 $ 1,985,416

North America Salty Snacks 226,122 121,418

International 223,055 189,114

Total $ 2,666,221 $ 2,295,948

Segment income:

North America $ 666,089 $ 647,109 $ 1,893,554 $ 1,726,251

International and Other 38,699 24,477 114,722 36,512

North America Confectionery $ 781,885 $ 642,605

North America Salty Snacks 21,301 25,378

International 41,979 27,417

Total segment income 845,165 695,400

Unallocated corporate expense (1) 150,273 137,713

Unallocated mark-to-market (gains) losses on commodity derivatives ( 18,468 ) ( 71,758 ) ( 24,137 ) 10,483

Long-lived asset impairment charges (see Note 6 )

Unallocated mark-to-market gains on commodity derivatives ( 27,379 ) ( 2,284 )

Costs associated with business realignment activities (see Note 9 )

3,397 — 13,793 2,170

Operating profit 720,990 553,044

2 unchanged sentences

Other (income) expense, net (see Note 17 )

23,004 11,644 32,612 34,394

Income before income taxes $ 677,404 $ 514,194

(1) Includes centrally-managed (a) corporate functional costs relating to legal, treasury, finance, and human resources, (b) expenses associated with the oversight and administration of our global operations, including warehousing, distribution and manufacturing, information systems and global shared services, (c) non-cash stock-based compensation expense, (d) acquisition-related costs, and (e) other gains or losses that are not integral to segment performance.

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

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in income $ ( 33,643 ) $ ( 74,279 ) $ ( 64,199 ) $ 189

Net gains on commodity derivative positions reclassified from unallocated to segment income 15,175 2,521 40,062 10,294

Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ ( 18,468 ) $ ( 71,758 ) $ ( 24,137 ) $ 10,483

As of October 3, 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 $ 86,675 .

Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pre-tax gains on commodity derivatives of $ 57,391 to segment operating results in the next twelve months.

The Hershey Company | Q1 2022 Form 10-Q | Page 24

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

compensation expense, (d) acquisition-related costs, and (e) other gains or losses that are not integral to segment performance.

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

Three Months Ended

April 3, 2022 April 4, 2021

Net gains on mark-to-market valuation of commodity derivative positions recognized in income $ ( 50,825 ) $ ( 13,679 )

Net gains on commodity derivative positions reclassified from unallocated to segment income 23,446 11,395

Net gains on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ ( 27,379 ) $ ( 2,284 )

As of April 3, 2022, 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 $ 114,293 .

Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pre-tax gains on commodity derivatives of $ 87,597 to segment operating results in the next twelve months.

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

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

North America $ 59,216 $ 56,518 $ 175,238 $ 164,599

International and Other 6,439 6,956 20,187 21,202

Three Months Ended

April 3, 2022 April 4, 2021

North America Confectionery $ 55,908 $ 53,150

North America Salty Snacks 16,679 6,946

International 5,660 5,840

Corporate 12,789 11,961

1 unchanged sentence

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

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

United States $ 2,340,646 $ 1,982,723

1 unchanged sentence

Total $ 2,666,221 $ 2,295,948

The majority of our products are confectionery or confectionery-based and include chocolate and non-chocolate confectionery products, gum and mint refreshment products, spreads, snack bites and mixes, as well as pantry items such as baking ingredients, toppings and sundae syrups.

Our snacks portfolio includes ready-to-eat popcorn, baked and trans fat free snacks, protein bars and other better-for-you snacks.

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

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Confectionery and confectionery-based portfolio $ 2,190,223 $ 2,078,582 $ 6,183,741 $ 5,578,997

Snacks portfolio 169,616 141,247 461,468 385,478

Total $ 2,359,839 $ 2,219,829 $ 6,645,209 $ 5,964,475

The Hershey Company | Q1 2022 Form 10-Q | Page 25

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A summary of our treasury stock activity is as follows:

Nine Months Ended October 3, 2021

Three Months Ended April 3, 2022

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 2,005,500 $ 307,929

Total share repurchases

2,876,644 457,946

Milton Hershey School Trust repurchase 1,000,000 $ 203,350

Shares issued for stock options and incentive compensation ( 482,469 ) ( 20,075 )

( 637,580 ) ( 26,529 )

Net change 517,531 $ 183,275

In February 2022, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the Milton Hershey School Trust, pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the Milton Hershey School Trust at a price equal to $ 203.35 per share, for a total purchase price of $ 203,350 .

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

As of October 3, 2021, $ 109,983 remained available for repurchases of our Common Stock under this program.

As of April 3, 2022, $ 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.

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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.

NONCONTROLLING INTEREST

Noncontrolling Interest in Subsidiary

As discussed in Note 2 , in January 2021 we completed the divestiture of LSFC, a joint venture originally established in 2007 in China for the purpose of manufacturing and selling product to the joint venture partners.

Prior to the sale, we owned a 50 % controlling interest in LSFC.

A roll-forward showing the 2021 activity relating to the noncontrolling interest follows:

Noncontrolling Interest

Balance, December 31, 2020

Net gain attributable to noncontrolling interest 1,072

Divestiture of noncontrolling interest ( 1,013 )

Other comprehensive income - foreign currency translation adjustments 5,249

Balance, October 3, 2021

The remaining noncontrolling interest balance as of October 3, 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.

We expect the distribution to be completed during 2021.

CONTINGENCIES

We are subject to various pending or threatened legal proceedings and claims that arise in the ordinary course of our business.

The Company is subject to certain legal proceedings and claims arising out of the ordinary course of our business, which cover a wide range of matters including trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters, human and workplace rights matters and tax.

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.

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Three Months Ended

October 3, 2021 September 27, 2020

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

Basic earnings per share:

Allocation of distributed earnings (cash dividends paid) $ 131,247 $ 49,643 $ 119,431 $ 44,308

Allocation of undistributed earnings 191,575 72,462 206,491 77,053

Total earnings—basic $ 322,822 $ 122,105 $ 325,922 $ 121,361

Denominator (shares in thousands):

Total weighted-average shares—basic 145,665 60,614 147,688 60,614

Earnings Per Share—basic $ 2.22 $ 2.01 $ 2.21 $ 2.00

Diluted earnings per share:

Allocation of total earnings used in basic computation $ 322,822 $ 122,105 $ 325,922 $ 121,361

Reallocation of total earnings as a result of conversion of Class B common stock to Common stock 122,105 — 121,361 —

Reallocation of undistributed earnings — ( 369 ) — ( 317 )

Total earnings—diluted $ 444,927 $ 121,736 $ 447,283 $ 121,044

Denominator (shares in thousands):

Number of shares used in basic computation 145,665 60,614 147,688 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 625 — 557 —

Performance and restricted stock units 522 — 281 —

Total weighted-average shares—diluted 207,426 60,614 209,140 60,614

Earnings Per Share—diluted $ 2.14 $ 2.01 $ 2.14 $ 2.00

There were no antidilutive stock options for the three months ended October 3, 2021.

The earnings per share calculations for the three months ended September 27, 2020 excluded 15,000 stock options that would have been antidilutive.

The Hershey Company | Q3 2021 Form 10-Q | Page 30

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Nine Months Ended

October 3, 2021 September 27, 2020

April 3, 2022 April 4, 2021

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

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Earnings Per Share—diluted $ 2.57 $ 2.41 $ 1.90 $ 1.77

The earnings per share calculations for the nine months ended October 3, 2021 and September 27, 2020 excluded 43,000 and 15,000 stock options, respectively, that would have been antidilutive.

The earnings per share calculations for the three months ended April 3, 2022 and April 4, 2021 excluded 4 and 15 stock options, respectively, that would have been antidilutive.

The Hershey Company | Q1 2022 Form 10-Q | Page 27

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

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

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

10 unchanged sentences

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

October 3, 2021 December 31, 2020

April 3, 2022 December 31, 2021

Raw materials $ 383,557 $ 395,358

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Other non-current assets:

Pension $ 67,093 $ 71,618

Capitalized software, net 280,651 260,656

22 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