What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-17 compared with 2022-02-18 · 143 added, 169 removed, 515 unchanged (38% of the section changed)

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(i) North America Confectionery, (ii) North America Salty Snacks and (iii) International, as discussed in Note 13 to the Consolidated Financial Statements.

Our vision is to be a snacking powerhouse.

Our vision is to be a leading snacking powerhouse.

We aspire to be a leader in meeting consumers’ evolving snacking needs while strengthening the capabilities that drive our growth.

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◦ Our products frequently play an important role in special moments among family and friends.

Seasons are an important part of our business model and for consumers, they are highly anticipated, cherished times, centered around traditions.

Seasons are an important part of our business model and for consumers, as they are highly anticipated, cherished times, centered around traditions.

For us, it’s an opportunity for our brands to be part of many connections during the year when family and friends gather.

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◦ To expand our breadth in snacking, we are focused on expanding the boundaries of our core confection brands to capture new snacking occasions and increasing our exposure into new snack categories through acquisitions.

Our expansion into snacking is being fueled by the recent acquisitions of Dot’s and Pretzels in December 2021, which is included in our North America Salty Snacks segment.

Our expansion into snacking recently has been fueled by the acquisitions of Dot’s and Pretzels in December 2021, which are included in our North America Salty Snacks segment.

• Deliver Profitable International Growth .

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◦ We believe our employees are among our most important resources and are critical to our continued success.

In 2021, we changed our global employee survey from an annual basis to continuous listening surveys throughout the year.

These shorter and faster surveys reach all of our employees around the world to hear their thoughts on the Company’s direction and their place in it.

The change from an annual survey to continuous touchpoints allows for real-time feedback and action from the Company and creates stronger employee engagement with the Company’s strategy, initiatives and leadership.

We utilize continuous listening surveys that are distributed throughout the year to all employees globally.

These short and fast surveys reach all of our employees around the world to hear their thoughts on the Company’s direction and their place in it.

These continuous touchpoints allow for real-time feedback and action from the Company.

These surveys are further supplemented with quarterly and informative enterprise and team town halls, which, in conjunction with the continuous listening surveys, generate stronger employee engagement with the Company’s strategy, initiatives and leadership.

◦ Our diverse and inclusive culture makes the difference across all areas of the business.

Our gender representation includes women occupying many of the top positions in the Company, including Chief Executive Officer and Chairman of the Board, Chief Accounting Officer and Chief Growth Officer, and approximately 50% representation across the Company.

In 2020, we achieved 1:1 aggregate gender pay and in 2021, we achieved 1:1 aggregate people of color pay equity for salaried employees in the United States.

Our gender representation includes women occupying many of the top positions in the Company, including Chief Executive Officer and Chairman of the Board, Chief Accounting Officer and President, Salty Snacks, and approximately 50% representation across the Company.

In 2022, we maintained fair and equitable pay achievements, including 1:1 aggregate people of color pay equity for salaried employees in the United States (2021) and 1:1 aggregate gender pay (2020).

◦ We have made strong progress on our ESG priorities and continue to elevate these ESG initiatives for a greater global impact.

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pantry items, such as baking ingredients, toppings and beverages;

and snack items such as spreads, meat snacks, bars and snack bites and mixes, popcorn and protein bars.

and snack items such as spreads, bars, and snack bites and mixes, popcorn and pretzels.

Business Acquisitions and Divestitures

In December 2021, we completed the acquisition of 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.

In December 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.

Additionally, we completed the acquisition of 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.

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

Additionally, 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.

Pretzels and Dot’s are expected to generate aggregate annualized net sales over $300 million.

The Hershey Company | 2022 Form 10-K | Page 21

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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.

Lily’s is expected to generate annualized net sales over $100 million.

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

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(“Krave”), which was previously included within the North America Salty Snacks segment, and the Scharffen Berger and Dagoba brands, both of which were previously included within the North America Confectionery segment results in our consolidated financial statements.

In September 2019, we completed the acquisition of ONE Brands, LLC (“ONE Brands”), previously a privately held company that sells a line of low-sugar, high-protein nutrition bars to retailers and distributors in the United States, with the ONE bar as its primary product.

TRENDS AFFECTING OUR BUSINESS

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic, which has spread worldwide and impacted various markets around the world, including the U.S.

Various policies and initiatives have been implemented to reduce the global transmission of COVID-19.

Since the onset of COVID-19, there has been minimal disruption to our supply chain network.

However, during 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 U.S.

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

Demand for consumer goods has remained strong throughout 2022, with continued positive consumer patterns identified for our products, as well as increased consumer optimism and mobility, including retail foot traffic.

However, negative macroeconomic conditions, including inflation on inputs to consumer products, labor shortages and demand outpacing supply, have led to broad-based supply chain disruptions across the U.S.

and globally.

As a result, we experienced corresponding incremental costs and gross margin pressures during the year ended December 31, 2022 (see Results of Operations included in this MD&A).

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.

During 2021, many state governments began easing COVID-19 restrictions, resulting in increased travel during the summer and holiday seasons, full capacity at major sporting and entertainment events, increased occupancy limits for indoor gatherings and the removal of face covering requirements (subject to certain exceptions).

This contributed to a resurgence of COVID-19 cases and the spread of COVID-19 variants, which experts believe has peaked in recent weeks in many jurisdictions.

The availability of vaccinations (including vaccine boosters) continues to increase around the world, albeit with slower than anticipated rollouts and challenges within certain countries.

We experienced an increase in our net sales and net income during the year ended December 31, 2021, which was primarily driven by strong everyday performance on our core U.S.

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

In addition to broad-based supply chain disruptions, certain geopolitical events, specifically the conflict between Russia and Ukraine, have increased global economic and political uncertainty.

For the year ended December 31, 2022, this conflict did not have a material impact on our commodity prices or supply availability.

However, we are continuing to monitor for any significant escalation or expansion of economic or supply chain disruptions or broader inflationary costs, which may result in material adverse effects on our results of operations.

Net sales and net income increased during the year ended December 31, 2022, which was primarily driven by strong everyday performance on our core U.S.

confection brands and salty snack brands (see Segment Results included in this MD&A), partially offset by the aforementioned supply chain disruptions and gross margin pressures.

As of December 31, 2021, we believe we have sufficient liquidity to satisfy our key strategic initiatives and other material cash requirements;

As of December 31, 2022, we believe we have sufficient liquidity to satisfy our key strategic initiatives and other material cash requirements in both the short-term and in the long-term;

however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can operate effectively during the current economic environment.

We continue to monitor our discretionary spending across the organization (see Liquidity and Capital Resources included in this MD&A).

Based on the length and severity of COVID-19, including broad-based supply chain disruptions, rising levels of inflation, new trends in outbreaks and hotspots, the spread of COVID-19 variants, resurgences and the continued distribution of vaccinations, we may experience continued volatility in retail foot traffic, consumer shopping and consumption behavior and may experience increasing supply chain costs and higher inflation.

We will continue to evaluate the nature and extent of these potential and evolving impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.

Based on the length and severity of broad-based supply chain disruptions, fluctuating levels of inflation, changes in consumer shopping and consumption behavior, and the conflict between Russia and Ukraine, we may experience increasing supply chain costs and higher inflation.

We will continue to evaluate the nature and extent of these potential and evolving impacts on our business, consolidated results of operations, segment results, liquidity and capital resources.

The Hershey Company | 2022 Form 10-K | Page 22

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SM&A expense as a percent of net sales 21.5 % 22.3% 23.2%

Long-lived and intangible asset impairment charges — 9.1 112.5 NM (91.9) %

Long-lived asset impairment charges — — 9.1 NM NM

Business realignment costs 2.0 3.5 18.5 (43.6) % (80.9) %

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Net income including noncontrolling interest 1,644.8 1,482.8 1,275.4 10.9 % 16.3 %

Net gain (loss) attributable to noncontrolling interest 5.3 (3.3) (2.9) NM 12.1 %

Net gain (loss) attributable to noncontrolling interest — 5.3 (3.3) NM NM

Net income attributable to The Hershey Company $ 1,644.8 $ 1,477.5 $ 1,278.7 11.3 % 15.5 %

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2022 compared with 2021

Net sales increased 16.1% in 2022 compared with 2021, reflecting a favorable price realization of 8.0% due to higher prices on certain products, a 4.3% benefit from net acquisitions and divestitures driven by the 2021 acquisitions of Lily’s, Dot’s and Pretzels and a volume increase of 4.0% due to an increase in consumer demand primarily in everyday core U.S.

confection brands and salty snack brands.

These increases were slightly offset by an unfavorable impact from foreign currency exchange rates of 0.2%.

2021 compared with 2020

Net sales increased 10.1% in 2021 compared with 2020, reflecting a volume increase of 5.6% due to an increase in everyday core U.S.

confection brands and salty snack brands, a favorable price realization of 3.1% due to higher prices on certain products, a 1.0% benefit from net acquisitions and divestitures driven by the 2021 acquisitions of Lily’s, Dot's and Pretzels and a favorable impact from foreign currency exchange rates of 0.4%.

2020 compared with 2019

Net sales increased 2.0% in 2020 compared with 2019, reflecting a favorable price realization of 2.3% due to higher prices on certain products and a 0.5% benefit from net acquisitions and divestitures (predominantly driven by the 2019 acquisition of ONE Brands, partially offset by the 2020 divestitures of Krave and the Scharffen Berger and Dagoba brands).

These increases were partially offset by an unfavorable impact from foreign currency exchange rates of 0.5% and a volume decrease of 0.3% due to the impact of COVID-19 on sales in our international markets, as well as declines in owned retail and world travel retail and elasticity-driven impacts due to price increases on certain products.

Marketplace Metrics

For the full year 2022, our total U.S.

retail takeaway increased 8.9% in the expanded multi-outlet combined plus convenience store channels (IRI MULO + C-Stores), which includes candy, mint, gum, salty snacks, meat snacks and grocery items.

retail takeaway increased 11.4% in the expanded multi-outlet combined plus convenience store channels (IRI MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items.

candy, mint and gum (“CMG”) consumer takeaway increased 10.7%, resulting in a CMG market share decline of approximately 54 basis points.

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Cost of sales increased 20.3% in 2022 compared with 2021.

The increase was driven by higher sales volume, higher supply chain inflation costs, including higher logistics and labor costs and an incremental $40.8 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases.

Additionally, the increase was partially offset by favorable price realization and supply chain productivity.

Gross margin decreased by 200 basis points in 2022 compared with 2021.

The decrease was driven by unfavorable year-over-year mark-to-market impact from commodity derivative instruments, higher supply chain inflation costs, including higher logistics and labor costs, and unfavorable product mix.

These declines were offset by favorable price realization and volume increases.

2021 compared with 2020

Cost of sales increased 10.7% in 2021 compared with 2020.

The increase was driven by higher sales volume, higher freight and logistics costs and additional plant costs.

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These factors were partially offset by favorable price realization, supply chain productivity and the favorable year-over-year mark-to-market impact from commodity derivative instruments.

2020 compared with 2019

Cost of sales increased 1.9% in 2020 compared with 2019.

The increase in cost of sales was attributed to higher freight and logistics costs and additional plant costs, specifically, PPE costs, increased sanitation and wage incentives associated with COVID-19.

Additionally, the increase was driven by an incremental $28.9 million of unfavorable mark-to-market activity on our commodity derivative instruments.

These derivative instruments are intended to economically hedge future years’ commodity purchases;

however, they were significantly impacted by financial market volatility during 2020.

These drivers were partially offset by favorable price realization and favorable supply chain productivity.

Gross margin remained the same in 2020 compared with 2019.

Increases were driven by the higher freight and logistics costs, additional plant costs, and unfavorable year-over-year mark-to-market impact from commodity derivative instruments.

These factors were offset by favorable price realization and supply chain productivity.

Selling, Marketing and Administrative

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Selling, marketing and administrative (“SM&A”) expenses increased $234.7 million, or 11.7%, in 2022 driven by increased corporate expenses.

Total advertising and related consumer marketing expenses increased 2.7% driven by advertising increases in our confectionery brands and increased investment in our salty snacks portfolio, which were partially offset by cost efficiencies related to new media partners.

SM&A expenses, excluding advertising and related consumer marketing, increased approximately 16.3% in 2022 driven by an increase in acquisition and integration related costs, as well as higher compensation costs, investments in capabilities and technology and broad-based marketplace inflation.

2021 compared with 2020

SM&A expenses increased $110.4 million, or 5.8%, in 2021 driven by increased corporate expenses.

Total advertising and related consumer marketing expenses decreased 0.2% driven by lower advertising in our North America Confectionery segment.

SM&A expenses, excluding advertising and related consumer marketing, increased approximately 9.2% in 2021 driven by higher compensation costs and investments in capabilities and technology.

2020 compared with 2019

SM&A expenses decreased $15.0 million or 0.8% in 2020.

Total advertising and related consumer marketing expenses decreased 2.0% driven by media cost efficiencies and select brand investment optimization related to COVID-19 in our International segment.

SM&A expenses, excluding advertising and related consumer marketing, decreased approximately 0.1% in 2020 due to savings in travel and meeting expenses related to COVID-19 travel restrictions and project timing shifts.

The Hershey Company | 2022 Form 10-K | Page 24

Long-Lived and Intangible Asset Impairment Charges

In 2021, we recorded no impairments charges.

In 2020 and 2019, we recorded the following impairment charges:

Long-Lived Asset Impairment Charges

In 2022 and 2021, we recorded no impairments charges.

In 2020, we recorded the following impairment charges:

For the year ended December 31, 2020

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Other asset write-down (2) 2.9

Customer relationship and trademark intangible assets (3) — 100.1

Other long-lived assets not held for sale (4) — 9.7

Long-lived and intangible asset impairment charges $ 9.1 $ 112.5

(1) In connection with our LSFC disposal group, which was previously classified as held for sale during 2020 and 2019, we recorded impairment charges to adjust long-lived asset values.

Long-lived asset impairment charges $ 9.1

(1) In connection with our LSFC disposal group, which was previously classified as held for sale during 2020, 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.

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

(3) During the fourth quarter of 2019, we recorded impairment charges to write down customer relationship and trademark intangible assets associated with Krave.

These charges were determined by comparing the fair value of the asset group to its carrying value.

We used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis and relief-from-royalty valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

(4) During 2019, we recorded impairment charges predominantly comprised of select long-lived assets that had not yet met the held for sale criteria.

The fair value of these assets was supported by potential sales prices with third-party buyers and market analysis.

The assessment of the valuation of goodwill and other long-lived assets is based on management estimates and assumptions, as discussed in our critical accounting policies included in Item 7 of this Annual Report on Form 10-K.

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The 2022, 2021, and 2020 costs related primarily to the International Optimization Program, a program focused on optimizing our China operating model to improve our operational efficiency and provide for a strong, sustainable and simplified base going forward.

The 2019 costs related primarily to the Margin for Growth Program, a 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.

Costs associated with business realignment activities are classified in our Consolidated Statements of Income as described in Note 9 to the Consolidated Financial Statements.

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2022 compared with 2021

Operating profit increased 14.6% in 2021 compared with 2020 due primarily to higher gross profit, lower business realignment costs and lower impairment charges, partially offset by higher SM&A in the 2021 period, as noted above.

Operating profit margin increased to 22.8% in 2021 from 21.9% in 2020 driven by these same factors.

Operating profit increased 10.6% in 2022 compared with 2021 predominantly due to higher gross profit, partially offset by higher SM&A expenses, as noted above.

Operating profit margin decreased to 21.7% in 2022 from 22.8% in 2021 by the same factors noted above that resulted in lower gross margin for the period.

2021 compared with 2020

Operating profit increased 11.7% in 2020 compared with 2019 due primarily to higher gross profit, lower SM&A and lower impairment charges, partially offset by higher business realignment costs in the 2020 period, as noted above.

Operating profit margin increased to 22.8% in 2021 from 21.9% in 2020 driven by these same factors.

The Hershey Company | 2021 Form 10-K | Page 26

Interest Expense, Net

2022 compared with 2021

Net interest expense was $10.1 million higher in 2022 than in 2021.

The increase was primarily due to higher rates on short-term debt balances in 2022 versus 2021, specifically related to outstanding commercial paper borrowings.

The increase was partially offset due to lower average long-term debt balances, specifically resulting from the repayment of $84.7 million of 8.800% Debentures upon their maturity in February 2021 and $350 million of 3.100% Notes upon their maturity in May 2021.

2021 compared with 2020

Net interest expense was $22.0 million lower in 2021 than in 2020.

The decrease was due to lower average long-term debt balances in 2021 versus 2020, specifically resulting from $435 million of long-term debt repayments with varying maturity dates during 2021.

2020 compared with 2019

Net interest expense was $5.2 million higher in 2020 than in 2019.

The increase was due to higher long-term debt balances in 2020 versus 2019, specifically due to $1.0 billion of notes issued in October 2019 and $1.0 billion of notes issued in May 2020.

The Hershey Company | 2022 Form 10-K | Page 25

Other (Income) Expense, Net

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Other (income) expense, net totaled an expense of $206.1 million in 2022 versus an expense of $119.1 million in 2021.

The decrease in the net expense was primarily due to lower write-downs on equity investments qualifying for historic and renewable energy tax credits, in addition to lower non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans during 2021 compared to the 2020 period.

The increase in the net expense was primarily due to higher write-downs on equity investments qualifying for tax credits in 2022 versus 2021 and higher non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

2021 compared with 2020

Other (income) expense, net totaled an expense of $119.1 million in 2021 versus an expense of $138.3 million in 2020.

The increase in the net expense was primarily due to higher write-downs on equity investments qualifying for federal solar tax credits, partially offset by lower non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans during 2020 compared to the 2019 period.

Income Taxes and Effective Tax Rate

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Our effective income tax rate was 14.2% for 2022 compared with 17.5% for 2021.

Relative to the 21% statutory rate, the 2021 effective tax rate benefited from investment tax credits, partially offset by incremental tax reserves incurred as a result of an adverse ruling in connection with a non-U.S.

Relative to the 21% statutory rate, the 2022 effective tax rate benefited from investment tax credits, partially offset by state taxes.

The 2021 effective rate, relative to the 21% statutory rate, benefited from investment tax credits, partially offset 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.

The 2020 effective rate, relative to the 21% statutory rate, benefited from investment tax credits and the benefit of employee share-based payments, partially offset by state taxes.

2021 compared with 2020

Our effective income tax rate was 17.5% for 2021 compared with 14.7% for 2020.

Relative to the 21% statutory rate, the 2020 effective tax rate benefited from investment tax credits and the benefit of employee share-based payments, partially offset by state taxes.

The 2019 effective rate, relative to the 21% statutory rate, was impacted by changes to foreign valuation allowances, a favorable foreign rate differential, investment tax credits and the benefit of employee share-based payments, which were partially offset by the impact of state taxes.

The Hershey Company | 2021 Form 10-K | Page 27

tax litigation matter, as well as state taxes.

The 2020 effective rate, relative to the 21% statutory rate, benefited from investment tax credits and the benefit of employee share-based payments, partially offset by state taxes.

Net Income Attributable to The Hershey Company and Earnings Per Share-diluted

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Net income increased $167.3 million, or 11.3%, while EPS-diluted increased $0.85, or 12.0%, in 2022 compared with 2021.

The increase in both net income and EPS-diluted was driven primarily by higher gross profit, partially offset by higher SM&A and higher income taxes in 2021.

The increase in both net income and EPS-diluted was driven primarily by higher gross profit and lower income taxes, partially offset by higher SM&A expenses and higher other income and expenses.

Our 2022 EPS-diluted also benefited from lower weighted-average shares outstanding as a result of share repurchases pursuant to our Board-approved repurchase programs.

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Net income increased $198.8 million, or 15.5%, while EPS-diluted increased $1.00, or 16.4%, in 2021 compared with 2020.

The increase in both net income and EPS-diluted was driven primarily by higher gross profit, lower SM&A, lower impairment charges, and lower income taxes in 2020, partially offset by higher other income and expenses, higher business realignment costs, and higher interest expense.

The increase in both net income and EPS-diluted was driven primarily by higher gross profit, partially offset by higher SM&A and higher income taxes in 2021.

Our 2021 EPS-diluted also benefited from lower weighted-average shares outstanding as a result of share repurchases pursuant to our Board-approved repurchase programs.

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SEGMENT RESULTS

Since December 31, 2014, the Company has reported its operations through two segments:

(i) North America and (ii) International and Other.

After the completion of the Company’s acquisitions of Dot’s and Pretzels in December 2021, as described in Note 2 to the Consolidated Financial Statements, management of the Company has elected to begin reporting its operations through three reportable segments.

Therefore, effective in the fourth quarter of 2021, the Company realigned its former two reportable segments into three reportable segments:

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

We have retroactively reflected these changes in all historical periods presented.

The summary that follows provides a discussion of the results of operations of our three reportable segments:

The summary that follows provides a discussion of the results of operations of our three segments:

North America Confectionery, North America Salty Snacks and International.

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Segment income excludes unallocated general corporate administrative expenses, unallocated mark-to-market gains and losses on commodity derivatives, business realignment and impairment charges, acquisition-related costs and other unusual gains or losses that are not part of our measurement of segment performance.

These items of our operating income are largely managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM and used for resource allocation and internal management reporting and performance evaluation.

These items of our operating income are largely managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the Chief Operating Decision Maker and used for resource allocation and internal management reporting and performance evaluation.

Segment income and segment income margin, which are presented in the segment discussion that follows, are non-GAAP measures and do not purport to be alternatives to operating income as a measure of operating performance.

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Unallocated corporate expense (1) 735.5 614.9 520.7

Unallocated mark-to-market (gains) losses on commodity derivatives (2) (24.4) 6.4 (28.6)

Long-lived and intangible asset impairment charges — 9.1 112.5

Unallocated mark-to-market losses (gains) on commodity derivatives (2) 78.2 (24.4) 6.4

Long-lived asset impairment charges — — 9.1

Costs associated with business realignment activities 4.4 16.6 31.5

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2022 compared with 2021

Net sales of our North America Confectionery segment increased $854.1 million, or 11.1%, in 2022 compared to 2021, reflecting a favorable price realization of 8.1% due to higher prices on certain products, a volume increase of 2.8% due to an increase in everyday core U.S.

confection brands, and a 0.4% benefit from the 2021 acquisition of Lily’s.

These increases were partially offset by an unfavorable impact from foreign currency exchange rates of 0.2%.

Our North America Confectionery segment also includes licensing and owned retail.

This includes our Hershey’s Chocolate World stores in the United States (3 locations), Niagara Falls (Ontario) and Singapore.

Our net sales for licensing and owned retail increased approximately 12.7% during 2022 compared to 2021.

Our North America Confectionery segment income increased $335.2 million, or 13.5%, in 2022 compared to 2021, primarily due to favorable price realization and volume increases, partially offset by higher supply chain inflation costs, including higher logistics and labor costs, as well as, unfavorable product mix.

2021 compared with 2020

Net sales of our North America Confectionery segment increased $597.5 million, or 8.4%, in 2021 compared to 2020, reflecting a volume increase of 5.1% due to an increase in everyday core U.S.

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Our North America Confectionery segment income increased $201.3 million, or 8.8%, in 2021 compared to 2020, primarily due to favorable price realization and volume increases, partially offset by higher supply chain-related costs, higher freight and logistics costs, as well as unfavorable product mix.

2020 compared with 2019

Net sales of our North America Confectionery segment increased $269.8 million, or 4.0%, in 2020 compared to 2019, reflecting favorable price realization of 2.8% attributed to higher prices on certain products, a 0.9% benefit from net acquisitions and divestitures (predominantly driven by the 2019 acquisition of ONE Brands, partially offset by the 2020 divestitures of the Scharffen Berger and Dagoba brands), and a volume increase of 0.3% due to an increase in everyday core U.S.

confection brands.

Our North America Confectionery segment also includes licensing and owned retail.

At the onset of the pandemic, all Hershey’s Chocolate World stores were temporarily closed and subsequently re-opened in July 2020 with increased safety measures.

This included the United States (3 locations), Niagara Falls (Ontario) and Singapore.

As a result, our net sales decreased approximately 25.8% during 2020 compared to 2019.

Our North America Confectionery segment income increased $154.4 million, or 7.3%, in 2020 compared to 2019, primarily due to favorable price realization and volume increases, partially offset by higher supply chain-related costs, specifically, PPE costs, increased sanitation and wage incentives associated with COVID-19.

The Hershey Company | 2022 Form 10-K | Page 28

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2022 compared with 2021

Net sales for our North America Salty Snacks segment increased $474 million, or 85.3%, in 2022 compared to 2021, reflecting a 64.0% benefit from the 2021 acquisitions of Dot’s and Pretzels, a favorable price realization of 12.0% due to higher prices on certain products and a volume increase of 9.3% primarily related to SkinnyPop and Pirates Booty snacks.

Our North America Salty Snacks segment income increased $59.2 million, or 58.8%, in 2022 compared to 2021, primarily due to favorable price realization and volume increases, partially offset by higher supply chain inflation costs, including higher logistics and labor costs, as well as, unfavorable product mix.

2021 compared with 2020

Net sales for our North America Salty Snacks segment increased $117.2 million, or 26.7%, in 2021 compared to 2020, reflecting a volume increase of 16.9%, primarily related to SkinnyPop and Pirates Booty snacks, a favorable price realization of 5.7% due to higher prices on certain products and a 4.1% benefit from net acquisitions and divestitures driven by the 2021 acquisitions of Dot’s and Pretzels.

Our North America Salty Snacks segment income increased $24.9 million, or 32.8%, in 2021 compared to 2020, primarily due to favorable price realization and volume increases, partially offset by higher supply chain-related costs, higher freight and logistics costs, as well as unfavorable product mix.

2020 compared with 2019

Net sales for our North America Salty Snacks segment increased $28.2 million, or 6.9%, in 2020 compared to 2019, reflecting a volume increase of 10.6%, primarily related to SkinnyPop and Pirates Booty snacks, partially offset by a 3.7% negative impact from the 2020 Krave divestiture.

Our North America Salty Snacks segment income increased $25 million, or 49.2%, in 2020 compared to 2019, as a result of favorable volume increases.

The Hershey Company | 2022 Form 10-K | Page 29

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The International segment includes all other countries where we currently manufacture, import, market, sell or distribute chocolate and non-chocolate confectionery and other products.

Currently, this includes our operations in Asia markets, Latin America, Europe, Africa and the Middle East, along with exports to these regions.

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

International accounted for 8.2%, 8.2% and 7.7% of our net sales in 2022, 2021 and 2020, respectively.

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Net sales $ 853.4 $ 733.5 $ 626.6 16.3 % 17.1 %

Segment income 74.2 — 50.6 NM NM

Segment income 107.9 74.2 — 45.4 % NM

Segment margin 12.6 % 10.1 % — %

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2022 compared with 2021

Net sales of our International segment increased $119.9 million, or 16.3%, in 2022 compared to 2021, reflecting a volume increase of 11.9%, a favorable price realization of 4.1%, and a favorable impact from foreign currency exchange rates of 0.3%.

The volume increase was primarily attributed to solid marketplace growth in Brazil, Mexico and India, where net sales increased by 21.6%, 20.6% and 13.7%, respectively.

Our International segment also includes world travel retail, where net sales increased approximately 28.6%.

Our International segment income increased $33.7 million in 2022 compared to 2021 primarily resulting from volume increases, favorable price realization, and the execution of our International Optimization Program in China, as we streamline and optimize our China operating model.

2021 compared with 2020

Net sales of our International segment increased $106.9 million, or 17.1%, in 2021 compared to 2020, reflecting a favorable price realization of 12.1%, a volume increase of 4.2% and a favorable impact from foreign currency exchange rates of 0.8%.

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Our International segment income increased $74.2 million in 2021 compared to 2020 with the improvement primarily resulting from execution of our International Optimization Program in China, as we streamline and optimize our China operating model, as well as volume increases and favorable price realization.

2020 compared with 2019

Net sales of our International segment decreased $134.6 million, or 17.7%, in 2020 compared to 2019, reflecting a volume decline of 11.0%, an unfavorable impact from foreign currency exchange rates of 4.9% and an unfavorable price realization of 1.8%.

The volume declines were attributed to significant sales declines in Mexico, China and world travel retail, where net sales decreased by 24.6%, 46.0% and 43.3%, respectively due to the implementation of quarantine protocols by local governments to mitigate the spread of COVID-19.

Furthermore, net sales declines in China were also attributable to the commencement of the International Optimization Program.

Our International segment income decreased $50.6 million in 2020 compared to 2019.

This decrease was driven by the lower level of net sales associated with the COVID-19 disruption.

The Hershey Company | 2022 Form 10-K | Page 30

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Unallocated corporate expense totaled $735.5 million in 2022 as compared to $614.9 million in 2021.

The increase was primarily driven by higher incentive compensation, higher group insurance costs from COVID-19-related delays in preventive care and incremental investments in capabilities and technology.

Unallocated corporate expense totaled $520.7 million in 2020 as compared to $532.6 million in 2019 primarily driven by savings in travel and meeting expenses related to COVID-19 travel restrictions and project timing shifts.

The increase was primarily driven by an increase in acquisition and integration related costs, as well as higher compensation costs, investments in capabilities and technology and broad-based marketplace inflation.

Unallocated corporate expense totaled $614.9 million in 2021 as compared to $520.7 million in 2020 primarily driven by higher incentive compensation, higher group insurance costs from COVID-19-related delays in preventive care and incremental investments in capabilities and technology.

LIQUIDITY AND CAPITAL RESOURCES

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Cash classified as assets held for sale — 11.4 (11.4)

(Decrease) increase in cash and cash equivalents $ (814.7) $ 650.7 $ (94.7)

Increase (decrease) in cash and cash equivalents $ 134.6 $ (814.7) $ 650.7

Operating activities

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This increase in net cash provided by operating activities was mainly driven by the following factors:

• Net working capital (comprised of trade accounts receivable, inventory, accounts payable and accrued liabilities) generated cash of $47 million in 2021 and consumed cash of $166 million in 2020.

• In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, consumed cash of $9 million in 2022 and generated cash of $47 million in 2021.

This $56 million fluctuation was mainly driven by a higher year-over-year build up of U.S.

inventories to satisfy product requirements and maintain sufficient levels to accommodate customer requirements, partially offset by the timing of vendor and supplier payments.

• Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, write-down of equity investments and other charges) resulted in $348 million of higher cash flow in 2022 relative to 2021.

The Hershey Company | 2022 Form 10-K | Page 31

We generated cash of $2.1 billion from operating activities in 2021, an increase of $383.3 million compared to $1.7 billion in 2020.

This increase in net cash provided by operating activities was mainly driven by the following factors:

• In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, generated cash of $47 million in 2021 and consumed cash of $166 million in 2020.

This $213 million fluctuation was mainly driven by strong demand of U.S.

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confection brands and salty snack brands.

• Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, long-lived and intangible asset charges, write-down of equity investments and other charges) resulted in $185 million of higher cash flow in 2021 relative to 2020.

The Hershey Company | 2021 Form 10-K | Page 33

Cash provided by operating activities in 2020 decreased $64.3 million relative to 2019.

This increase was driven by the following factors:

• Net working capital (comprised of trade accounts receivable, inventory, accounts payable and accrued liabilities) consumed cash of $166 million in 2020 and generated cash of $60 million in 2019.

This $226 million fluctuation was mainly driven by a higher year-over-year build up of U.S.

inventories to satisfy product requirements and maintain sufficient levels to accommodate customer requirements, as well as an increase in cash used by accounts receivable due to an increase in sales of U.S.

seasonal products.

• The decrease in cash provided by operating activities was partially offset by the following net cash inflows:

◦ Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, long-lived and intangible asset charges, write-down of equity investments and other charges) resulted in $207 million of higher cash flow in 2020 relative to 2019.

• Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, long-lived asset charges, write-down of equity investments and other charges) resulted in $185 million of higher cash flow in 2021 relative to 2020.

Pension and Post-Retirement Activity.

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Our principal uses of cash for investment purposes relate to purchases of property, plant and equipment and capitalized software, as well as acquisitions of businesses, partially offset by proceeds from sales of property, plant and equipment.

We used cash of $2.2 billion for investing activities in 2021 compared to $531.3 million in 2020, with the increase in cash spend driven by higher levels of acquisition activity.

We used cash of $780.5 million for investing activities in 2019, and the decrease in 2020 in cash spend was driven by no acquisition activity.

We used cash of $787.4 million for investing activities in 2022 compared to $2.2 billion in 2021, with the decrease in cash spend driven by lower levels of acquisition activity, partially offset by higher capital spend and investment tax credits.

We used cash of $531.3 million for investing activities in 2020, with the increase in 2021 in cash spend driven by higher levels acquisition activity.

Primary investing activities include the following:

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Capital expenditures, including capitalized software, primarily to support our ERP system implementation, capacity expansion, innovation and cost savings, were $519.5 million in 2022, $495.9 million in 2021 and $441.6 million in 2020.

Our 2021 expenditures increased compared to 2020 due to progress on capacity expansion projects and our ERP system implementation.

Our 2020 expenditures were substantially higher than 2019 expenditures due to progress on our key strategic initiatives.

For each of the years presented, our expenditures increased due to progress on capacity expansion projects and our ERP system implementation.

We expect 2023 capital expenditures, including capitalized software, to approximate $800 million to $900 million.

The increase in our 2022 capital expenditures is largely driven by our key strategic initiatives, including expanding the agility and capacity of the Company’s supply chain and building digital infrastructure across the enterprise.

The increase in our 2023 capital expenditures is largely driven by our key strategic initiatives, including core confection capacity expansion and continued investments in a digital infrastructure including the build and upgrade of a new ERP system across the enterprise.

We intend to use our existing cash and internally generated funds to meet our 2023 capital requirements.

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• Business acquisitions .

In 2022 and 2020, we had no acquisition activity.

In 2021, we spent an aggregate $1.6 billion to acquire Lily's (June 2021), as well as Dot’s and Pretzels (December 2021).

In 2020, we had no acquisition activity.

In 2019, we spent $402.2 million to acquire ONE Brands.

The Hershey Company | 2021 Form 10-K | Page 34

Further details regarding our business acquisition activity is provided in Note 2 to the Consolidated Financial Statements.

• Other investing activities .

In 2022, 2021, and 2020, our other investing activities were minimal.

In 2019, we generated $20.1 million of proceeds from the sale of property, plant and equipment and other long-lived assets.

This included the sale of select Pennsylvania facilities and land for sales proceeds of approximately $27.6 million, resulting in a gain on the sale of $11.3 million.

The Hershey Company | 2022 Form 10-K | Page 32

Financing activities

Our cash flow from financing activities generally relates to the use of cash for purchases of our Common Stock and payment of dividends, offset by net borrowing activity and proceeds from the exercise of stock options.

Financing activities in 2021 used cash of $681.1 million, compared to cash used of $499.2 million in 2020.

We used cash of $1.1 billion for financing activities in 2019, primarily to fund acquisition activity.

Financing activities in 2022 used cash of $1.4 billion, compared to cash used of $681.1 million in 2021.

We used cash of $499.2 million for financing activities in 2020.

The majority of our financing activity was attributed to the following:

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In addition to utilizing cash on hand, we use short-term borrowings (commercial paper and bank borrowings) to fund seasonal working capital requirements and ongoing business needs.

In 2022, used cash of $245.6 million to reduce a portion of our short-term commercial paper borrowings originally used to fund our 2021 acquisitions of Dot’s and Pretzels, partially offset by an increase in short-term foreign bank borrowings.

In 2021, we generated cash flow of $869.0 million predominantly through the issuance of short-term commercial paper.

In 2020, we generated cash flow of $41.8 million due to an increase in short-term foreign bank borrowings.

In 2019, we used $1.2 billion to reduce short-term commercial paper borrowings and short-term foreign bank borrowings.

We utilized the proceeds from the issuance of long-term debt in October 2019 to repay outstanding commercial paper used to fund the ONE Brands acquisition.

• Long-term debt borrowings and repayments .

In 2022, long-term debt activity was minimal.

In February 2021 and May 2021, we repaid $84.7 million of 8.800% Debentures and $350 million of 3.100% Notes due upon their maturities, respectively.

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Additionally, in May 2020 and December 2020, we repaid $350 million of 2.900% Notes and $350 million of 4.125% Notes due upon their maturities, respectively.

In October 2019, we issued $300 million of 2.05% Notes due in 2024, $300 million of 2.45% Notes due in 2029 and $400 million of 3.125% Notes due in 2049 (the “2019 Notes”).

Proceeds from the issuance of the 2019 Notes, net of discounts and issuance costs, totaled $989.6 million.

In 2023, we expect our long-term debt repayments to approximate $750 million upon the maturity of $250 million of 2.625% Notes and $500 million of 3.375% Notes, both due in May 2023.

• Dividend payments .

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Total cash dividends paid $ 181.1 $ 179.9 $ 207.0 $ 207.0

Declaration date February 2, 2021 April 27, 2021 July 23, 2021 October 27, 2021

Declaration date February 2, 2022 April 27, 2022 July 27, 2022 November 2, 2022

Record date February 18, 2022 May 20, 2022 August 19, 2022 November 18, 2022

Payment date March 15, 2022 June 15, 2022 September 15, 2022 December 15, 2022

The Hershey Company | 2022 Form 10-K | Page 33

• Share repurchases .

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Details regarding our share repurchases are as follows:

The Hershey Company | 2021 Form 10-K | Page 35

In millions 2022 2021 2020

Milton Hershey School Trust repurchase (1) $ 203.4 $ — $ —

Shares repurchased in the open market under pre-approved share repurchase programs (2) — 150.0 150.0

Shares repurchased to replace Treasury Stock issued for stock options and incentive compensation 308.0 61.2 377.2

Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation $ 185.6 $ 308.0 $ 61.2

Cash used for total share repurchases 389.0 458.0 211.2

Total shares repurchased under pre-approved share repurchase programs — 0.9 1.0

(1) 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 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 $203.4 million.

(2) In July 2018, our Board of Directors approved a $500 million share repurchase authorization.

As of December 31, 2022, approximately $110 million remained available for repurchases of our Common Stock under this program.

The share repurchase program does not have an expiration date.

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

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

These share repurchase programs do not have an expiration date.

We expect 2023 share repurchases to be in line with our traditional buyback strategy.

Additionally, in February 2023, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for 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 $239.91 per share, for a total purchase price of $239.9 million.

As a result of this repurchase, our July 2018 share repurchase authorization program was completed in February 2023, and approximately $370 million remains available for repurchases under our May 2021 share repurchase authorization.

• Proceeds from the exercise of stock options, including tax benefits.

We received $33.2 million from employee exercises of stock options, net of employee taxes withheld from share-based awards in 2021.

We received $25.5 million and $240.8 million in 2020 and 2019, respectively.

In 2022 we received $34.2 million from employee exercises of stock options and paid $35.5 million of employee taxes withheld from share-based awards.

We received $33.2 million and $25.5 million from employee exercises of stock options, net of employee taxes withheld from share-based awards in 2021 and 2020, respectively.

Variances are driven primarily by the number of shares exercised and the share price at the date of grant.

The Hershey Company | 2022 Form 10-K | Page 34

Financial Condition

At December 31, 2022, our cash and cash equivalents totaled $463.9 million.

At December 31, 2020, our cash and cash equivalents totaled $1.1 billion.

Our cash and cash equivalents at the end of 2021 decreased $814.7 million compared to the 2020 year-end balance as a result of the uses of net cash outlined in the previous discussion.

At December 31, 2021, our cash and cash equivalents totaled $329.3 million.

Our cash and cash equivalents at the end of 2022 increased $134.6 million compared to the 2021 year-end balance as a result of the net sources of cash outlined in the previous discussion.

Approximately 90% of the balance of our cash and cash equivalents at December 31, 2022 was held by subsidiaries domiciled outside of the United States.

During 2021, previously undistributed earnings of certain international subsidiaries were no longer considered indefinitely reinvested;

however, the Company had previously recognized a one-time U.S.

repatriation tax due under U.S.

tax reform, and as a result, only an immaterial amount of withholding tax was recognized.

For the remainder of the Company’s cash held by international subsidiaries, we intend to continue to reinvest the undistributed earnings indefinitely.

We believe we have sufficient liquidity to satisfy our cash needs for at least the next 12 months, including our cash needs in the United States.

A majority of this balance is distributable to the United States without material tax implications, such as withholding tax.

We intend to continue to reinvest the remainder of the earnings outside of the United States for which there would be a material tax implication to distributing for the foreseeable future and, therefore, have not recognized additional tax expense on these earnings.

We believe that our existing sources of liquidity are adequate to meet anticipated funding needs at comparable risk-based interest rates for the foreseeable future.

Acquisition spending and/or share repurchases could potentially increase our debt.

Operating cash flow and access to capital markets are expected to satisfy our various short- and long-term cash flow requirements, including acquisitions and capital expenditures.

We maintain debt levels we consider prudent based on our cash flow, interest coverage ratio and percentage of debt to capital.

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Our total short- and long-term debt was $4.8 billion at December 31, 2022 and $5.0 billion at December 31, 2021.

Our total debt increased in 2021 mainly due to the issuance of short-term commercial paper used to fund our 2021 acquisitions of Lily’s, Dot’s and Pretzels, partially offset by the repayment of $84.7 million Debentures that matured in February 2021 and $350 million Notes that matured in May 2021.

Our total debt decreased in 2022 mainly due the repayment of short-term commercial paper borrowings originally used to fund our 2021 acquisitions of Dot’s and Pretzels.

As a source of short-term financing, we maintain a $1.5 billion unsecured revolving credit facility with the option to increase borrowings by an additional $500 million with the consent of the lenders.

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Furthermore, we have a current shelf registration statement filed with the SEC that allows for the issuance of an indeterminate amount of debt securities.

Proceeds from the debt issuances and any other offerings under the current registration statement may be used for general corporate requirements, including reducing existing borrowings,

The Hershey Company | 2021 Form 10-K | Page 36

financing capital additions and funding contributions to our pension plans, future business acquisitions and working capital requirements.

Proceeds from the debt issuances and any other offerings under the current registration statement may be used for general corporate requirements, including reducing existing borrowings, financing capital additions and funding contributions to our pension plans, future business acquisitions and working capital requirements.

Our ability to obtain debt financing at comparable risk-based interest rates is partly a function of our existing cash-flow-to-debt and debt-to-capitalization levels as well as our current credit rating.

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Operating cash flow and access to capital markets are expected to satisfy our various short- and long-term cash flow requirements, including acquisitions and capital expenditures.

The Hershey Company | 2022 Form 10-K | Page 35

Equity Structure

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(3) Includes the minimum rental commitments (including imputed interest) under non-cancelable finance leases primarily for offices and warehouse facilities, as well as vehicles.

The Hershey Company | 2021 Form 10-K | Page 37

(4) Purchase obligations consist primarily of fixed commitments for the purchase of raw materials to be utilized in the normal course of business.

Amounts presented included fixed price forward contracts and unpriced contracts that were valued using market prices as of December 31, 2021.

Amounts presented include fixed price forward contracts and unpriced contracts that were valued using market prices as of December 31, 2022.

The amounts presented in the table do not include items already recorded in accounts payable or accrued liabilities at year-end 2022, nor does the table reflect cash flows we are likely to incur based on our plans, but are not obligated to incur.

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We do not believe such purchase obligations will adversely affect our liquidity position.

The Hershey Company | 2022 Form 10-K | Page 36

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

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As of December 31, 2022, our primary plans had cumulative unrecognized investment and actuarial losses of approximately $213 million.

We amortize the unrecognized net actuarial gains and losses in excess of the corridor amount, which is the greater of 10% of a respective plan’s projected benefit obligation or the fair market value of plan assets.

W e amortize the unrecognized net actuarial gains and losses in excess of the corridor amount, which is the greater of 10% of a respective plan’s projected benefit obligation or the fair market value of plan assets.

These unrecognized net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the expected long-term rate of investment returns, (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations or (iii) other actuarial gains when actual plan experience is favorable as compared to the assumed experience.

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A 100 basis point decrease (increase) in the weighted-average pension discount rate would increase (decrease) annual net periodic pension benefit expense by approximately $5 million and the December 31, 2022 pension liability would increase by approximately $57 million or decrease by approximately $50 million, respectively.

Pension income for defined benefit pension plans is expected to be approximately $2 million in 2021.

Pension expense for defined benefit pension plans is expected to be approximately $21 million in 2023.

Pension expense beyond 2023 will depend on future investment performance, our contributions to the pension trusts, changes in discount rates and various other factors related to the covered employees in the plans.

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• Discount rate .

The determination of the discount rate used to calculate the benefit obligations of the OPEB plans is discussed in the pension plans section above.

The determination of the discount rate used to calculate the benefit obligati ons of the OPEB plans is discussed in the pension plans section above.

A 100 basis point decrease (increase) in the discount rate assumption for these plans would not be material to the OPEB plans’ consolidated expense and the December 31, 2022 benefit liability would increase by approximately $13 million or decrease by approximately $12 million, respectively.

Business Acquisitions, Valuation and Impairment of Goodwill and Other Intangible Assets

Business Acquisitions, Valuation and Imp airment of Goodwill and Other Intangible Assets

We use the acquisition method of accounting for business acquisitions.

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Results of Impairment Tests

At December 31, 2021, the net book value of our goodwill totaled $2,633.2 million.

At December 31, 2022, the net book value of our goodwill totaled $2.6 billion.

As it relates to our 2022 annual testing performed at the beginning of the fourth quarter, we tested all of our reporting units using a qualitative assessment and determined that no quantitative testing was deemed necessary.

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We had no goodwill impairment charges in 2022, 2021 or 2020.

In 2019, sales and operating performance associated with our Krave business were below expectations.

In the fourth quarter of 2019, as part of a strategic review initiated by our leadership team, we updated our strategic forecast which projected underperformance related to the Krave business primarily due to mainstream brands driving category volume and an increase in the overall competitive landscape.

We deemed this to be a triggering event requiring us to test our Krave long-lived asset group for impairment.

Based on our assessment, we determined that the carrying value was not recoverable and calculated an impairment loss as the excess of the asset group’s carrying value over its fair value.

Therefore, as a result of this testing, during the fourth quarter of 2019, we recorded an impairment charge totaling $100.1 million to write down the long-lived asset group, which predominantly consisted of customer relationship and trademark intangible assets.

The Hershey Company | 2021 Form 10-K | Page 41

We base our deferred income taxes, accrued income taxes and provision for income taxes upon income, statutory tax rates, the legal structure of our Company, interpretation of tax laws and tax planning opportunities available to us in the various jurisdictions in which we operate.

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Accrued interest and penalties related to unrecognized tax benefits are included in income tax expense.

We adjust these unrecognized tax benefits, as well as the related interest, in light of changing facts and circumstances, such as receiving audit assessments or clearing of an item for which a reserve has been established.

We adjust these unrecognized tax benefits, as well as the related interest, in light of

The Hershey Company | 2022 Form 10-K | Page 40

changing facts and circumstances, such as receiving audit assessments or clearing of an item for which a reserve has been established.

Settlement of any particular position could require the use of cash.

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capital loss carryforwards and various foreign jurisdictions’ net operating loss carryforwards and other deferred tax assets for which we do not expect to realize a benefit.

The Hershey Company | 2021 Form 10-K | Page 42

Refer to Note 10 to the Consolidated Financial Statements for further discussion of our deferred tax assets and liabilities.

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-K

Item 7. Management’s Discussion and Analysis