What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 291 added, 135 removed, 883 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended

April 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Net sales $ 2,372,582 $ 1,989,422 $ 5,038,803 $ 4,285,370

29 unchanged sentences

(in thousands)

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

For the Three Months Ended For the Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

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 $ 315,556 $ 301,230 $ 849,034 $ 698,101

1 unchanged sentence

Foreign currency translation adjustments:

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

Foreign currency translation (losses) gains during period $ ( 16,758 ) $ — ( 16,758 ) $ 12,996 $ — 12,996 $ ( 2,340 ) $ — ( 2,340 ) $ 14,194 $ — 14,194

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

3 unchanged sentences

Cash flow hedges:

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

Gains (losses) on cash flow hedging derivatives 5,278 ( 1,511 ) 3,767 ( 6,344 ) ( 446 ) ( 6,790 ) ( 646 ) ( 637 ) ( 1,283 ) ( 7,979 ) ( 159 ) ( 8,138 )

Reclassification to earnings 4,289 ( 296 ) 3,993 5,681 158 5,839 6,885 ( 1,023 ) 5,862 8,818 ( 382 ) 8,436

1 unchanged sentence

Total comprehensive income including noncontrolling interest $ 289,185 $ 334,092 $ 829,868 $ 745,301

Comprehensive income attributable to noncontrolling interest — 6,334

Comprehensive (loss) income attributable to noncontrolling interest — ( 8 ) — 6,326

Comprehensive income attributable to The Hershey Company $ 289,185 $ 334,100 $ 829,868 $ 738,975

4 unchanged sentences

(in thousands, except share data)

April 3, 2022 December 31, 2021

July 3, 2022 December 31, 2021

Current assets:

27 unchanged sentences

Common stock, shares issued:

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

163,439,248 at July 3, 2022 and 160,939,248 at December 31, 2021

163,439 160,939

Class B common stock, shares issued:

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

58,113,777 at July 3, 2022 and 60,613,777 at December 31, 2021

58,114 60,614

2 unchanged sentences

Treasury—common stock shares, at cost:

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

16,581,634 at July 3, 2022 and 15,444,011 at December 31, 2021

( 1,528,121 ) ( 1,195,376 )

7 unchanged sentences

(in thousands)

Three Months Ended

April 3, 2022 April 4, 2021

Six Months Ended

July 3, 2022 July 4, 2021

Operating Activities

18 unchanged sentences

Equity investments in tax credit qualifying partnerships ( 116,191 ) ( 57,445 )

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

Other investing activities 6,166 3,123

1 unchanged sentence

Financing Activities

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

Net (decrease) increase in short-term debt ( 24,507 ) 137,027

Repayment of long-term debt and finance leases ( 2,473 ) ( 436,957 )

18 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended July 3, 2022 and July 4, 2021

(in thousands)

5 unchanged sentences

Comprehensive

Stockholders’

Balance, April 3, 2022

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

Net income 315,556 315,556

Other comprehensive loss ( 26,372 ) ( 26,372 )

Dividends (including dividend equivalents):

Common Stock, $ 0.901 per share

( 129,551 ) ( 129,551 )

Class B Common Stock, $ 0.819 per share

( 48,823 ) ( 48,823 )

Conversion of Class B Common Stock into Common Stock 1,500 ( 1,500 ) —

Stock-based compensation 17,146 17,146

Exercise of stock options and incentive-based transactions ( 2,295 ) 2,451 156

Repurchase of common stock ( 151,921 ) ( 151,921 )

Balance, July 3, 2022

$ — $ 163,439 $ 58,114 $ 1,258,091 $ 3,208,598 $ ( 1,528,121 ) $ ( 268,381 ) $ 2,891,740

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

(Loss) Income Noncontrolling

Subsidiaries Total

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 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

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q2 2022 Form 10-Q | Page 6

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended July 3, 2022 and July 4, 2021

(in thousands)

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

(Loss) Income Total

13 unchanged sentences

Repurchase of common stock ( 355,271 ) ( 355,271 )

Balance, April 3, 2022

Balance, July 3, 2022

$ — $ 163,439 $ 58,114 $ 1,258,091 $ 3,208,598 $ ( 1,528,121 ) $ ( 268,381 ) $ 2,891,740

21 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

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 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.

Operating results for the quarter ended July 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.

10 unchanged sentences

Recently Adopted Accounting Pronouncements

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

In March 2020, 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 | Q2 2022 Form 10-Q | Page 8

2 unchanged sentences

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

alternative reference rates.

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

42 unchanged sentences

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.

We expect to finalize the purchase price allocation by the end of the third quarter of 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).

23 unchanged sentences

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.

We expect to finalize the purchase price allocation by the end of the third quarter of 2022.

The Hershey Company | Q2 2022 Form 10-Q | Page 10

12 unchanged sentences

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.

We paid this contingent consideration during the second quarter of 2022.

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

21 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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

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

North America Confectionery North America Salty Snacks International Total

4 unchanged sentences

Foreign currency translation ( 2,196 ) — ( 411 ) ( 2,607 )

Balance at April 3, 2022

Balance at July 3, 2022

$ 2,023,810 $ 575,728 $ 16,959 $ 2,616,497

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

April 3, 2022 December 31, 2021

July 3, 2022 December 31, 2021

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

8 unchanged sentences

$ 2,007,748 $ 2,037,588

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

Total amortization expense for the three months ended July 3, 2022 and July 4, 2021 was $ 20,060 and $ 11,635 , respectively.

Total amortization expense for the six months ended July 3, 2022 and July 4, 2021 was $ 39,918 and $ 23,256 , respectively.

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

6 unchanged sentences

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

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.

As of July 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.

6 unchanged sentences

Short-term debt consisted of the following:

April 3, 2022 December 31, 2021

July 3, 2022 December 31, 2021

Short-term foreign bank borrowings against lines of credit $ 130,919 $ 119,038

6 unchanged sentences

Maturity Date

April 3, 2022 December 31, 2021

July 3, 2022 December 31, 2021

2.625 % Notes

30 unchanged sentences

Net interest expense consists of the following:

Three Months Ended

April 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Interest expense $ 35,635 $ 34,768 $ 71,006 $ 73,531

20 unchanged sentences

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

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.

Our open commodity derivative contracts had a notional value of $ 479,441 as of July 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 $ 149,170 at April 3, 2022 and $ 94,623 at December 31, 2021.

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 111,898 at July 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 $ 2,098 at April 3, 2022 and $ 2,993 at December 31, 2021.

The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 358 at July 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.

7 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 3, 2022 and December 31, 2021 was $ 24,697 and $ 24,975 , respectively.

The notional amount of the contracts outstanding at July 3, 2022 and December 31, 2021 was $ 23,934 and $ 24,975 , respectively.

The Hershey Company | Q2 2022 Form 10-Q | Page 14

2 unchanged sentences

(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

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

July 3, 2022 December 31, 2021

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

7 unchanged sentences

Total $ 6,955 $ 12,183 $ 8,334 $ 2,087

(1) Derivatives assets are classified on our Consolidated Balance Sheets within prepaid expenses and other as well as other non-current assets.

(1) Derivative assets are classified on our Consolidated Balance Sheets within prepaid expenses and other as well as other non-current assets.

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

(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.

(2) As of July 3, 2022, amounts reflected on a net basis in liabilities were assets of $ 44,546 and liabilities of $ 50,192 , 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.

At July 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 April 3, 2022 and April 4, 2021 was as follows:

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

Non-designated Hedges Cash Flow Hedges

9 unchanged sentences

$ ( 13,112 ) $ 19,268 $ 5,278 $ ( 6,344 ) $ ( 4,289 ) $ ( 5,681 )

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

Gains (losses) recognized in income for non-designated foreign currency forward exchange contracts and deferred compensation derivatives were included in selling, marketing and administrative expenses.

(b) Gains (losses) reclassified from AOCI into income for foreign currency forward exchange contracts were included in selling, marketing and administrative expenses.

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

The Hershey Company | Q2 2022 Form 10-Q | Page 15

2 unchanged sentences

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

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 $ 14,679 as of April 3, 2022.

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

Non-designated Hedges Cash Flow Hedges

Gains (losses) recognized in income (a) Gains (losses) recognized in other comprehensive income (“OCI”) Gains (losses) reclassified from accumulated OCI (“AOCI”) into income (b)

2022 2021 2022 2021 2022 2021

Commodities futures and options

$ 42,071 $ 30,556 $ — $ — $ — $ —

Foreign exchange contracts ( 134 ) 573 ( 646 ) ( 7,979 ) ( 1,377 ) ( 3,144 )

Interest rate swap agreements

— — — — ( 5,508 ) ( 5,674 )

Deferred compensation derivatives

( 5,044 ) 3,510 — — — —

$ 36,893 $ 34,639 $ ( 646 ) $ ( 7,979 ) $ ( 6,885 ) $ ( 8,818 )

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

(b) Gains (losses) reclassified from AOCI into income for foreign currency forward exchange contracts were included in selling, marketing and administrative expenses.

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

This amount is primarily associated with interest rate swap agreements.

5 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 April 3, 2022 and December 31, 2021:

The Hershey Company | Q2 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 following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of July 3, 2022 and December 31, 2021:

Assets (Liabilities)

Level 1 Level 2 Level 3 Total

April 3, 2022:

July 3, 2022:

Derivative Instruments:

19 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 April 3, 2022 and December 31, 2021 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 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

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

July 3, 2022 December 31, 2021 July 3, 2022 December 31, 2021

Current portion of long-term debt $ 754,596 $ 2,844 $ 752,573 $ 2,844

4 unchanged sentences

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.

During the six months ended July 3, 2022 and July 4, 2021, we recorded no impairment charges.

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

16 unchanged sentences

(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:

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

Three Months Ended

Lease expense Classification April 3, 2022 April 4, 2021

Lease expense Classification July 3, 2022 July 4, 2021

Operating lease cost Cost of sales or SM&A (1) $ 12,710 $ 11,088

3 unchanged sentences

Net lease cost (2) $ 15,514 $ 14,196

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

Six Months Ended

Lease expense Classification July 3, 2022 July 4, 2021

Operating lease cost Cost of sales or SM&A (1) $ 25,497 $ 22,554

Finance lease cost:

Amortization of ROU assets Depreciation and amortization (1) 3,450 4,061

Interest on lease liabilities Interest expense, net 2,053 2,221

Net lease cost (2) $ 31,000 $ 28,836

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

1 unchanged sentence

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

April 3, 2022 December 31, 2021

July 3, 2022 December 31, 2021

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance leases 6.1 % 6.1 %

The Hershey Company | Q2 2022 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)

Supplemental balance sheet information related to leases were as follows:

Leases Classification April 3, 2022 December 31, 2021

Leases Classification July 3, 2022 December 31, 2021

Operating lease ROU assets Other non-current assets $ 337,311 $ 351,712

8 unchanged sentences

Total lease liabilities $ 406,044 $ 416,337

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:

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

Operating leases Finance leases Total

9 unchanged sentences

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

Three Months Ended

April 3, 2022 April 4, 2021

Six Months Ended

July 3, 2022 July 4, 2021

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

5 unchanged sentences

Finance leases 4,192 436

The Hershey Company | Q2 2022 Form 10-Q | Page 20

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

8 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 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)

Total investments in unconsolidated affiliates were $ 139,731 and $ 93,089 as of July 3, 2022 and December 31, 2021, 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 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Cost of sales $ ( 23 ) $ 1,042 $ 4 $ 5,037

2 unchanged sentences

Costs associated with business realignment activities $ 699 $ 3,469 $ 1,980 $ 10,396

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

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

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

International Optimization Program:

2 unchanged sentences

Total $ 699 $ 3,469 $ 1,980 $ 10,396

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

2 unchanged sentences

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 segment.

The costs and related benefits of the International Optimization

The Hershey Company | Q2 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)

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 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.

For the six months ended July 3, 2022 and July 4, 2021, we recognized total costs associated with the International Optimization Program of $ 1,980 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.

1 unchanged sentence

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 effective tax rates for the six months ended July 3, 2022 and July 4, 2021 were 21.4 % and 25.1 %, respectively.

Relative to the statutory rate, the 2022 effective tax rate was impacted by state taxes, tax reserves and unfavorable foreign rate differential, 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.

1 unchanged sentence

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

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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.

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.

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 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.

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.

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

The Hershey Company | Q2 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)

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Net Periodic Benefit Cost

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

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

Pension Benefits Other Benefits

Three Months Ended Three Months Ended

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

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Service cost $ 4,758 $ 5,433 $ 80 $ 45

5 unchanged sentences

Total net periodic benefit cost $ 8,324 $ 6,777 $ 1,263 $ 1,010

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.

We made contributions of $ 289 and $ 5,584 to the pension plans and other benefits plans, respectively, during the second quarter of 2022.

In the second quarter of 2021, we made contributions of $ 325 and $ 4,000 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 components of net periodic benefit cost for the six months ended July 3, 2022 and July 4, 2021 were as follows:

Pension Benefits Other Benefits

Six Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Service cost $ 9,611 $ 10,922 $ 158 $ 90

Interest cost 11,628 8,726 2,313 1,929

Expected return on plan assets ( 24,815 ) ( 24,612 ) — —

Amortization of prior service credit ( 2,825 ) ( 3,071 ) — —

Amortization of net loss 5,839 11,420 51 —

Settlement loss 10,376 7,440 — —

Total net periodic benefit cost $ 9,814 $ 10,825 $ 2,522 $ 2,019

We made contributions of $ 3,756 and $ 10,575 to the pension plans and other benefits plans, respectively, during the first six months of 2022.

In the first six months of 2021, we made contributions of $ 1,183 and $ 8,155 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.

During the first six months of 2022, 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.

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 %.

In connection with the second quarter 2022 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 204 basis points higher than the rate as of December 31, 2021 and an expected rate of return on plan assets of 5.8 %.

The Hershey Company | Q2 2022 Form 10-Q | Page 23

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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 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Pre-tax compensation expense

2 unchanged sentences

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

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.

As of July 3, 2022, total stock-based compensation expense related to non-vested awards not yet recognized was $ 102,149 and the weighted-average period over which this amount is expected to be recognized was approximately 2.0 years.

Stock Options

7 unchanged sentences

(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:

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

Stock Options Shares Weighted-Average

6 unchanged sentences

Expired ( 1,873 ) $ 103.07

Outstanding as of April 3, 2022

Outstanding as of July 3, 2022

1,105,439 $ 104.26 4.1 years $ 129,044

Options exercisable as of April 3, 2022

Options exercisable as of July 3, 2022

1,067,113 $ 102.53 4.0 years $ 126,416

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 weighted-average fair value of options granted was $ 37.28 and $ 24.12 per share for the periods ended July 3, 2022 and July 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:

Three Months Ended

April 3, 2022 April 4, 2021

Six Months Ended

July 3, 2022 July 4, 2021

Dividend yields

2 unchanged sentences

Expected term in years 6.3 6.3

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.

The total intrinsic value of options exercised was $ 24,870 and $ 21,453 for the periods ended July 3, 2022 and July 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 three months ended April 3, 2022 and April 4, 2021 can range from 0 % to 250 % of the targeted amounts.

The performance scores of PSU grants during the six months ended July 3, 2022 and July 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.

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

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

We also awarded RSUs to non-employee directors.

6 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 3, 2022 is as follows:

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

Performance Stock Units and Restricted Stock Units

7 unchanged sentences

( 17,106 ) $ 154.43

Outstanding as of April 3, 2022

Outstanding as of July 3, 2022

1,150,072 $ 181.14

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 3, 2022 April 4, 2021

Six Months Ended

July 3, 2022 July 4, 2021

Units granted

6 unchanged sentences

Expected volatility 25.3 % 26.4 %

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.

The fair value of shares vested totaled $ 100,292 and $ 46,352 for the periods ended July 3, 2022 and July 4, 2021, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 264,911 units as of July 3, 2022.

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

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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.

This segment also includes our retail operations, including Hershey’s Chocolate World stores in Hershey, Pennsylvania;

New York, New York;

Las Vegas, Nevada;

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.

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Our segment net sales and earnings were as follows:

Three Months Ended

April 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

North America Confectionery $ 1,909,101 $ 1,690,372 $ 4,126,145 $ 3,675,788

8 unchanged sentences

Unallocated corporate expense (1) 188,929 151,329 339,202 289,042

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

Unallocated mark-to-market losses (gains) on commodity derivatives 40,838 ( 3,385 ) 13,459 ( 5,669 )

Costs associated with business realignment activities (see Note 9 )

699 3,469 1,980 10,396

Operating profit 456,531 456,675 1,177,521 1,009,719

2 unchanged sentences

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

19,658 7,194 30,065 9,608

Income before income taxes $ 403,460 $ 418,416 $ 1,080,864 $ 932,610

(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

The Hershey Company | Q2 2022 Form 10-Q | Page 27

2 unchanged sentences

(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.

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

April 3, 2022 April 4, 2021

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

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in income $ 8,754 $ ( 16,877 ) $ ( 42,071 ) $ ( 30,556 )

Net gains on commodity derivative positions reclassified from unallocated to segment income 32,084 13,492 55,530 24,887

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 .

Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ 40,838 $ ( 3,385 ) $ 13,459 $ ( 5,669 )

As of July 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 $ 73,456 .

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 $ 74,325 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

April 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

North America Confectionery $ 57,439 $ 51,039 $ 113,347 $ 104,189

4 unchanged sentences

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

Three Months Ended

April 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

United States $ 2,060,047 $ 1,681,397 $ 4,400,693 $ 3,664,120

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A summary of our treasury stock activity is as follows:

Three Months Ended April 3, 2022

Six Months Ended July 3, 2022

Shares Dollars

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

Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation 679,000 151,921

Total share repurchases 1,679,000 355,271

Shares issued for stock options and incentive compensation ( 541,377 ) ( 22,527 )

Net change 1,137,623 $ 332,744

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 February 2022, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the Milton Hershey School Trust (the “School Trust”), pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the 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 April 3, 2022, $ 109,983 remained available for repurchases of our Common Stock under this program.

As of July 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.

4 unchanged sentences

CONTINGENCIES

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.

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 was among several defendants named in the suit.

The defendants filed a joint motion to dismiss the case on July 30, 2021, and on June 28, 2022, the District Court granted the motion and dismissed the case without prejudice.

On July 22, 2022, the plaintiffs filed an appeal in the U.S.

Court of Appeals for the District of Columbia challenging the dismissal of the case.

The Company continues to believe that the suit, including the appeal, is without merit and is defending vigorously against the appeal.

In addition to the above-referenced matter, 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.

6 unchanged sentences

The Class B common stock is convertible into Common Stock on a share-for-share basis at any time.

In June 2022, 1,500,000 shares of Class B Common Stock were converted to Common Stock by Hershey Trust Company, as trustee for the School Trust.

The computation of diluted earnings per share for Common Stock assumes the conversion of Class B common stock using the if-converted method, while the diluted earnings per share of Class B common stock does not assume the conversion of those shares.

Three Months Ended

April 3, 2022 April 4, 2021

July 3, 2022 July 4, 2021

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

19 unchanged sentences

Earnings Per Share—diluted $ 1.53 $ 1.44 $ 1.45 $ 1.36

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 earnings per share calculations for the three months ended July 3, 2022 and July 4, 2021 excluded 4 and 43 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q2 2022 Form 10-Q | Page 30

2 unchanged sentences

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

Six Months Ended

July 3, 2022 July 4, 2021

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

Basic earnings per share:

Allocation of distributed earnings (cash dividends paid) $ 263,337 $ 97,647 $ 235,687 $ 88,617

Allocation of undistributed earnings 356,240 131,810 270,866 101,859

Total earnings—basic $ 619,577 $ 229,457 $ 506,553 $ 190,476

Denominator (shares in thousands):

Total weighted-average shares—basic 146,248 59,530 146,550 60,614

Earnings Per Share—basic $ 4.24 $ 3.85 $ 3.46 $ 3.14

Diluted earnings per share:

Allocation of total earnings used in basic computation $ 619,577 $ 229,457 $ 506,553 $ 190,476

Reallocation of total earnings as a result of conversion of Class B common stock to Common stock 229,457 — 190,476 —

Reallocation of undistributed earnings — ( 722 ) — ( 484 )

Total earnings—diluted $ 849,034 $ 228,735 $ 697,029 $ 189,992

Denominator (shares in thousands):

Number of shares used in basic computation 146,248 59,530 146,550 60,614

Weighted-average effect of dilutive securities:

Conversion of Class B common stock to Common shares outstanding 59,530 — 60,614 —

Employee stock options 592 — 606 —

Performance and restricted stock units 491 — 356 —

Total weighted-average shares—diluted 206,861 59,530 208,126 60,614

Earnings Per Share—diluted $ 4.10 $ 3.84 $ 3.35 $ 3.13

The earnings per share calculations for the six months ended July 3, 2022 and July 4, 2021 excluded 4 and 43 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q2 2022 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 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

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

4 unchanged sentences

Total $ 19,658 $ 7,194 $ 30,065 $ 9,608

RELATED PARTY TRANSACTIONS

Hershey Trust Company, as trustee for the trust established by Milton S.

and Catherine S.

Hershey that has as its sole beneficiary the School Trust, maintains voting control over The Hershey Company.

In any given year, we may engage in certain transactions with Hershey Trust Company, Milton Hershey School, the Milton Hershey School Trust and companies owned by and/or affiliated with any of the foregoing.

Most transactions with these related parties are immaterial and do not require disclosure, but certain transactions are more significant in nature and have been deemed material for disclosure.

A summary of material related party transactions with Hershey Trust Company and/or its affiliates for the six months ended July 3, 2022 is as follows:

Sale and Donation of Property, Plant and Equipment

In May 2022, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company agreed to sell certain real and personal property consisting of approximately six acres of land located in Hershey, Pennsylvania, together with portions of a building located on the land.

Additionally, in June 2022, the Company entered into a Donation Agreement with Hershey Trust Company, as trustee for The M.S.

Hershey Foundation, pursuant to which the Company agreed to donate a portion of the building concurrently with the closing of the Purchase Agreement.

The sale and donation transactions closed in June 2022.

Total proceeds from the sale were approximately $ 6,300 (net of transaction and closing costs), resulting in a loss of $ 13,568 , which was recorded in the SM&A expense caption within the Consolidated Statements of Income.

The fair values of the disposed assets were supported by independent appraisals of fair market value and the proposed sales price submitted by a third-party buyer pursuant to a bona fide, arm’s length offer received prior to executing the Purchase Agreement.

Stock Purchase Agreement

In February 2022, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company purchased shares of its Common Stock from the School Trust (see Note 14 ).

The Hershey Company | Q2 2022 Form 10-Q | Page 32

4 unchanged sentences

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

April 3, 2022 December 31, 2021

July 3, 2022 December 31, 2021

Raw materials $ 390,557 $ 395,358

42 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