What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-17 compared with 2022-02-18 · 211 added, 301 removed, 1540 unchanged (25% of the section changed)

22 unchanged sentences

Note 13 - Segment Information

Note 14 - Equity and Noncontrolling Interest

Note 14 - Equity and Treasury Stock Activity

Note 15 - Commitments and Contingencies

1 unchanged sentence

Note 17 - Other (Income) Expense, Net

Note 1 8 - Related Party Transactions

Note 1 9 - Supplemental Balance Sheet Information

18 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The Hershey Company | 2022 Form 10-K | Page 46

12 unchanged sentences

We also performed sensitivity analyses of significant assumptions to evaluate the changes in the estimate that would result from changes in the assumptions.

The Hershey Company | 2021 Form 10-K | Page 49

Valuation of Identifiable Intangible Assets in Business Acquisitions

Description of the Matter As discussed in Note 2 of the consolidated financial statements, the Company completed the acquisitions of Lily’s Sweets, LLC on June 25, 2021 for net consideration of $427.2 million, Dot’s Pretzels, LLC on December 13, 2021 for net consideration of $894.2 million, and Pretzels Inc.

on December 14, 2021 for net consideration of $304.5 million in transactions that were accounted for as business combinations (collectively, “the Business Acquisitions”).

Auditing the Company’s accounting for the Business Acquisitions was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of acquired identifiable intangible assets, which principally consisted of trademarks with an estimated fair value of $493.9 million in aggregate and customer relationships with an estimated fair value of $300.3 million in aggregate.

The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the Business Acquisitions and due to the limited historical data on which those assumptions were based.

The Company used a discounted cash flow model to measure these acquired identifiable intangible assets.

The significant assumptions used to estimate the fair value of the trademarks and customer relationships included discount rates, royalty rates, customer attrition rates, and certain significant assumptions that formed the basis of projected cash flows, including forecasted revenue growth rates and operating margins.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s valuation of the acquired identifiable intangible assets.

For example, we tested controls over the recognition and measurement of these intangible assets, including management’s review of the significant assumptions and methods discussed above.

To test the estimated fair value of the acquired trademarks and customer relationships, we performed audit procedures that included, among others, evaluating the Company’s selection of valuation methods and testing the models and significant assumptions discussed above, including the completeness and accuracy of the underlying data.

For example, we compared the significant assumptions to current industry, market, and economic trends and to the historical results of the Business Acquisitions.

We also performed sensitivity analyses of these significant assumptions to evaluate the changes in the fair value of the acquired identifiable intangible assets that would result from changes in the assumptions.

We involved our valuation specialists to assist in evaluating the significant assumptions and methodologies used by the Company.

/s/ ERNST & YOUNG LLP

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In our opinion, The Hershey Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Lily’s Sweets, LLC, Dot’s Pretzels, LLC, or Pretzels Inc.

(collectively, “the Acquired Companies”) which are included in the 2021 consolidated financial statements of the Company and constituted 17.1% of total assets as of December 31, 2021 and 0.9% of net sales for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the Acquired Companies.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 17, 2023 expressed an unqualified opinion thereon.

8 unchanged sentences

We believe that our audit provides a reasonable basis for our opinion.

The Hershey Company | 2021 Form 10-K | Page 51

Definition and Limitations of Internal Control Over Financial Reporting

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and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

The Hershey Company | 2022 Form 10-K | Page 48

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

12 unchanged sentences

Selling, marketing and administrative expense 2,236,009 2,001,351 1,890,925

Long-lived and intangible asset impairment charges — 9,143 112,485

Long-lived asset impairment charges — — 9,143

Business realignment costs 1,989 3,525 18,503

29 unchanged sentences

Foreign currency translation adjustments:

Foreign currency translation (losses) gains during period $ ( 1,500 ) $ — ( 1,500 ) $ ( 13,767 ) $ — ( 13,767 ) $ 13,141 $ — 13,141

Foreign currency translation losses during period $ ( 10,340 ) $ — ( 10,340 ) $ ( 1,500 ) $ — ( 1,500 ) $ ( 13,767 ) $ — ( 13,767 )

Reclassification to earnings due to the sale of businesses — — — 5,249 — 5,249 — — —

Pension and post-retirement benefit plans:

Net actuarial gain (loss) 67,728 ( 13,929 ) 53,799 ( 39,455 ) 9,351 ( 30,104 ) ( 9,315 ) 2,273 ( 7,042 )

Net actuarial (loss) gain ( 32,970 ) 7,481 ( 25,489 ) 67,728 ( 13,929 ) 53,799 ( 39,455 ) 9,351 ( 30,104 )

Reclassification to earnings 31,009 ( 7,392 ) 23,617 32,092 ( 8,067 ) 24,025 33,326 ( 8,240 ) 25,086

Cash flow hedges:

(Losses) gains on cash flow hedging derivatives ( 1,551 ) ( 2,989 ) ( 4,540 ) ( 780 ) 1,880 1,100 ( 2,515 ) 857 ( 1,658 )

Gains (losses) on cash flow hedging derivatives 2,056 ( 74 ) 1,982 ( 1,551 ) ( 2,989 ) ( 4,540 ) ( 780 ) 1,880 1,100

Reclassification to earnings 10,200 ( 3,088 ) 7,112 18,117 ( 1,034 ) 17,083 7,779 ( 3,156 ) 4,623

38 unchanged sentences

Common stock, shares issued:

160,939,248 in 2021 and 2020

163,439,248 in 2022 and 160,939,248 in 2021

163,439 160,939

Class B common stock, shares issued:

60,613,777 in 2021 and 2020

58,113,777 in 2022 and 60,613,777 in 2021

58,114 60,614

5 unchanged sentences

Accumulated other comprehensive loss ( 252,333 ) ( 249,215 )

Total—The Hershey Company stockholders’ equity 2,757,229 2,234,352

Noncontrolling interest in subsidiary — 3,531

Total stockholders’ equity 3,299,544 2,757,229

12 unchanged sentences

Deferred income taxes 36,889 13,374 26,880

Impairment of long-lived and intangible assets (see Note 6 )

— 9,143 112,485

Impairment of long-lived assets (see Note 6 )

Write-down of equity investments 188,286 113,756 125,579

16 unchanged sentences

Financing Activities

Net increase (decrease) in short-term debt 869,030 41,759 ( 1,168,205 )

Net (decrease) increase in short-term debt ( 245,633 ) 869,030 41,759

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

3 unchanged sentences

Exercise of stock options 34,158 49,821 46,372

Taxes withheld and paid on employee stock awards ( 35,515 ) ( 16,610 ) ( 20,840 )

Net cash used in financing activities ( 1,415,725 ) ( 681,136 ) ( 499,228 )

Effect of exchange rate changes on cash and cash equivalents 9,887 ( 5,075 ) ( 6,990 )

(Decrease) increase in cash and cash equivalents, including cash classified as held for sale ( 826,155 ) 662,159 ( 94,736 )

Increase (decrease) in cash and cash equivalents, including cash classified as held for sale 134,623 ( 826,155 ) 662,159

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

Net (decrease) increase in cash and cash equivalents ( 814,721 ) 650,725 ( 94,736 )

Net increase (decrease) in cash and cash equivalents 134,623 ( 814,721 ) 650,725

Cash and cash equivalents, beginning of period 329,266 1,143,987 493,262

20 unchanged sentences

Net income (loss) 1,278,708 ( 3,295 ) 1,275,413

Other comprehensive income 32,814 167 32,981

Other comprehensive (loss) income ( 14,116 ) 1,054 ( 13,062 )

Dividends (including dividend equivalents):

6 unchanged sentences

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

Retirement of treasury common stock ( 138,348 ) ( 6,284,919 ) 6,423,267 —

Impact of ASU 2016-02 related to leases 3,913 3,913

Balance, December 31, 2020

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

Net income (loss) 1,278,708 ( 3,295 ) 1,275,413

Other comprehensive (loss) income ( 14,116 ) 1,054 ( 13,062 )

Net income 1,477,512 5,307 1,482,819

Other comprehensive income 88,867 5,249 94,116

Dividends (including dividend equivalents):

6 unchanged sentences

Repurchase of common stock ( 457,946 ) ( 457,946 )

Divestiture of noncontrolling interest ( 1,436 ) ( 1,436 )

Distributions to joint venture partner ( 8,750 ) ( 8,750 )

Other ( 3,901 ) ( 3,901 )

Balance, December 31, 2021

1 unchanged sentence

Net income 1,644,817 — 1,644,817

Other comprehensive income 88,867 5,249 94,116

Other comprehensive loss ( 3,118 ) — ( 3,118 )

Dividends (including dividend equivalents):

3 unchanged sentences

( 207,133 ) ( 207,133 )

Conversion of Class B Common Stock into Common Stock 2,500 ( 2,500 ) —

Stock-based compensation 65,909 65,909

1 unchanged sentence

Repurchase of common stock ( 388,964 ) ( 388,964 )

Divestiture of noncontrolling interest ( 1,436 ) ( 1,436 )

Distributions to joint venture partner ( 8,750 ) ( 8,750 )

Other ( 3,901 ) ( 3,901 )

Balance, December 31, 2022

10 unchanged sentences

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

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 Pretzels, LLC (“Dot’s”) and Pretzels Inc.(“Pretzels”) in December 2021, 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:

The Company currently operates through three segments that are aligned with its management structure and the key markets it serves:

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

5 unchanged sentences

We use the equity method of accounting when we have a 20% to 50% interest in other companies and exercise significant influence.

See Note 14 for information on our noncontrolling interest, which was divested in January 2021.

In addition, we use the equity method of accounting for our investments in partnership entities which make equity investments in projects eligible to receive federal historic and energy tax credits.

3 unchanged sentences

For additional information on our investments in unconsolidated affiliates, see Note 8 .

On March 11, 2020, the World Health Organization designated coronavirus disease 2019 (“COVID-19”) as a global pandemic.

We continue to actively monitor COVID-19 and its potential impact on our operations and financial results.

Employee health and safety remains our first priority while we continue our efforts to support community food supplies.

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

However, during 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.

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

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

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

The Hershey Company | 2021 Form 10-K | Page 58

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Use of Estimates

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Our trade promotional programs and consumer incentives are used to promote our products and include, but are not limited to, discounts, coupons, rebates, in-store display incentives, and volume-based incentives.

The estimated costs associated with these programs and incentives are based upon our analysis of the programs offered, expectations regarding customer and consumer participation, historical sales and payment trends, and our experience with payment patterns associated with similar programs offered in the past.

The estimated costs

The Hershey Company | 2022 Form 10-K | Page 55

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

associated with these programs and incentives are based upon our analysis of the programs offered, expectations regarding customer and consumer participation, historical sales and payment trends, and our experience with payment patterns associated with similar programs offered in the past.

The estimated costs of these programs are reasonably likely to change in future periods due to changes in trends with regard to customer and consumer participation, particularly for new programs and for programs related to the introduction of new products.

9 unchanged sentences

In 2022, 2021 and 2020, approximately 28 %, 30 % and 31 %, respectively, of our consolidated net sales were made to McLane Company, Inc., one of the largest wholesale distributors in the United States to convenience stores, drug stores, wholesale clubs and mass merchandisers and the primary distributor of our products to Wal-Mart Stores, Inc.

The Hershey Company | 2021 Form 10-K | Page 59

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Cost of Sales

7 unchanged sentences

Advertising expense is also charged to expense as incurred and totaled $ 517,677 in 2022, $ 511,798 in 2021 and $ 516,936 in 2020.

There was no prepaid advertising expense as of December 31, 2021 and $ 705 as of December 31, 2020.

Prepaid advertising expense was $ 241 as of December 31, 2022.

There was no prepaid advertising expense as of December 31, 2021.

Cash Equivalents

Cash equivalents consist of highly liquid debt instruments, time deposits and money market funds with original maturities of three months or less.

The fair value of cash and cash equivalents approximates the carrying amount.

The fair value of cash equivalents approximates the carrying amount.

Accounts Receivable—Trade

6 unchanged sentences

Accounts receivable-trade in the Consolidated Balance Sheets is presented net of allowances for bad debts and anticipated discounts of $ 26,001 and $ 28,837 at December 31, 2022 and 2021, respectively.

The Hershey Company | 2022 Form 10-K | Page 56

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Inventories are valued at the lower of cost or market value, adjusted for the value of inventory that is estimated to be excess, obsolete or otherwise unsaleable.

1 unchanged sentence

The remainder of our inventories in the U.S.

and inventories for our international businesses were valued at the lower of first-in, first-out (“FIFO”) cost or net realizable value.

and inventories for our international businesses were valued at the lower of first-in, first-out (“FIFO”), average cost or net realizable value.

LIFO cost of inventories valued using the LIFO method was $ 621,614 as of December 31, 2022 and $ 589,850 as of December 31, 2021.

11 unchanged sentences

We measure the recoverability of assets to be held and used by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated.

The Hershey Company | 2021 Form 10-K | Page 60

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

If these assets are considered to be impaired, we measure impairment as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

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If we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying value, a quantitative test is then performed.

Otherwise, no further testing is required.

Otherwise, no further testing is

The Hershey Company | 2022 Form 10-K | Page 57

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

For those reporting units tested using a quantitative approach, we compare the fair value of each reporting unit with the carrying amount of the reporting unit, including goodwill.

11 unchanged sentences

The weighted-average amortization period for our finite-lived intangible assets is approximately 29 years , which is primarily driven by recently acquired trademarks.

If certain events or changes in operating conditions indicate that the carrying value of these assets, or related asset groups, may not be recoverable, we perform an

The Hershey Company | 2021 Form 10-K | Page 61

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

impairment assessment and may adjust the remaining useful lives.

If certain events or changes in operating conditions indicate that the carrying value of these assets, or related asset groups, may not be recoverable, we perform an impairment assessment and may adjust the remaining useful lives.

See Note 3 for additional information regarding the results of impairment tests.

Supplier Finance Program Obligations

During 2020, we entered into an agreement with a third-party financial institution to facilitate a supplier finance program which allows qualifying suppliers to sell their receivables from the Company to the financial institution.

These participating suppliers negotiate their outstanding receivable arrangements directly with the financial institution, and our rights and obligations to our suppliers are not impacted.

We have no economic interest in a supplier’s decision to enter into these agreements.

Once a qualifying supplier elects to participate in the supplier finance program and reaches an agreement with a financial institution, they elect which individual Company invoices they sell to the financial institution.

However, all Company payments to participating suppliers are paid to the financial institution on the invoice due date, regardless of whether the individual invoice is sold by the supplier to the financial institution.

The financial institution pays the supplier on the invoice due date for any invoices that were not previously sold under the supplier finance program.

Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted by our suppliers’ decisions to sell amounts under these arrangements.

The payment of these obligations is included in cash provided by operating activities in the Consolidated Statements of Cash Flows.

Included in Accounts Payable in the Consolidated Balance Sheets at December 31, 2022 and 2021 were $ 105,293 and $ 36,386 of outstanding payment obligations, respectively, that were sold to the financial institution under the Company’s supplier finance program.

Currency Translation

4 unchanged sentences

dollars using the exchange rates in effect at the balance sheet date, while income and expense items are translated using the average exchange rates during the period.

The Hershey Company | 2022 Form 10-K | Page 58

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Derivative Instruments

14 unchanged sentences

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20):

Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans , which modifies the disclosure requirements for defined benefit pension plans and other post-retirement plans.

ASU 2018-14 is effective for annual periods beginning after December 15, 2020, with early adoption permitted.

The amendments in this ASU should be applied on a retrospective basis to all periods presented.

We elected to early adopt the provisions of this ASU in the fourth quarter of 2019.

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

In June 2016, the FASB issued ASU No.

2 unchanged sentences

This ASU modifies the measurement of expected credit losses of certain financial instruments.

ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim

The Hershey Company | 2021 Form 10-K | Page 62

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

periods within those annual periods.

ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods.

The amendments in this ASU should be applied on a modified retrospective basis to all periods presented.

11 unchanged sentences

2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract .

This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The Hershey Company | 2022 Form 10-K | Page 59

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

or obtain internal-use software (and hosting arrangements that include an internal-use software license).

ASU 2018-15 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods, with early adoption permitted.

11 unchanged sentences

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

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No.

3 unchanged sentences

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

We intend to early adopt the provisions of this ASU in the first quarter of 2022.

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

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

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

In September 2022, the FASB issued ASU No.

2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

This ASU requires a buyer in a supplier finance program to disclose qualitative and quantitative information about the program including the program’s nature, activity during the period, changes from period to period and potential magnitude.

ASU 2022-04 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods.

A rollforward of obligations during the annual period, including the amount of obligations confirmed and obligations subsequently paid, is effective for annual periods beginning after December 15, 2023 with early adoption permitted.

This ASU should be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on rollforward information, which should be applied prospectively.

We early adopted provisions of this ASU in the fourth quarter of 2022, with the exception of the amendment on rollforward information, which will be adopted in the fourth quarter of 2023.

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

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU No.

6 unchanged sentences

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

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

The Hershey Company | 2022 Form 10-K | Page 60

2 unchanged sentences

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

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

BUSINESS ACQUISITIONS AND DIVESTITURES

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

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

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

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

The cash consideration paid for Pretzels totaled $ 304,334 and consisted of cash on hand and short-term borrowings.

Acquisition-related costs for the Pretzels acquisition were immaterial.

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

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

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

Initial Allocation

Goodwill $ 166,191

7 unchanged sentences

Net assets acquired $ 304,334

The purchase price allocation presented above is preliminary.

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

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.

The purchase price allocation presented above has been finalized as of the third quarter of 2022 and includes an immaterial amount of measurement period adjustments.

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

A portion of goodwill derived from this acquisition is deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Pretzels’ products.

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

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

The Hershey Company | 2022 Form 10-K | Page 61

2 unchanged sentences

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

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

A portion of goodwill derived from this acquisition is expected to be deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Pretzels’ products.

Other intangible assets include trademarks valued at $ 5,700 and customer relationships valued at $ 26,400 .

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

Dot's Pretzels, LLC

1 unchanged sentence

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

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

The cash consideration paid for Dot’s totaled $ 891,169 and consisted of cash on hand and short-term borrowings.

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

1 unchanged sentence

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

Initial Allocation

Goodwill $ 284,427

5 unchanged sentences

Net assets acquired $ 891,169

The purchase price allocation presented above is preliminary.

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

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

The purchase price allocation presented above has been finalized as of the third quarter of 2022 and includes an immaterial amount of measurement period adjustments.

The measurement period adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed, specifically, the refinement of certain assumptions in the value of customer relationships based on an analysis of historical customer-specific data and post-closing adjustments to the working capital acquired including certain holdbacks.

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

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

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

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

Trademarks were assigned an estimated useful life of 33 years and customer relationships were assigned estimated useful lives ranging from 16 to 18 years.

The Hershey Company | 2021 Form 10-K | Page 65

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

Lily's Sweets, LLC

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

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

The Hershey Company | 2022 Form 10-K | Page 62

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

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

The Hershey Company | 2021 Form 10-K | Page 66

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

2020 Activity

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

2019 Activity

ONE Brands, LLC

On September 23, 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.

The purchase consideration for ONE Brands totaled $ 402,160 and consisted of cash on hand and short-term borrowings.

Acquisition-related costs for the ONE Brands acquisition were immaterial.

The acquisition has been accounted for as a business combination and, accordingly, ONE Brands has been included within the North America Confectionery segment from the date of acquisition.

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

Goodwill $ 180,065

Other intangible assets 206,800

Other assets acquired, primarily current assets 25,435

Other liabilities assumed, primarily current liabilities ( 10,140 )

Net assets acquired $ 402,160

The purchase price allocation presented above has been finalized as of the first quarter of 2020 and includes an immaterial amount of measurement period adjustments.

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

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

Other intangible assets include trademarks valued at $ 144,900 , customer relationships valued at $ 58,800 and covenants not to compete valued at $ 3,100 .

Trademarks were assigned an estimated useful life of 33 years, customer relationships were assigned estimated useful lives ranging from 17 to 19 years and covenants not to compete were assigned an estimated useful life of 4 years.

The Hershey Company | 2022 Form 10-K | Page 63

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GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill by reportable segment for the years ended December 31, 2021 and 2020 are as follows:

The changes in the carrying value of goodwill by segment for the years ended December 31, 2022 and 2021 are as follows:

North America Confectionery North America Salty Snacks International Total

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1,849,293 121,152 17,770 1,988,215

Acquired during the period 174,516 468,646 — 643,162

Measurement period adjustments 1,310 — — 1,310

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

Acquired during the period (see Note 2 )

174,516 468,646 — 643,162

Measurement period adjustments (see Note 2 )

1,310 — — 1,310

Measurement period adjustments — ( 18,028 ) — ( 18,028 )

Foreign currency translation ( 7,576 ) — ( 614 ) ( 8,190 )

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$ 1,966,269 $ 2,037,588

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 under performance 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 $ 100,131 to write down the long-lived asset group, which predominantly consisted of customer relationship and trademark intangible assets.

Total amortization expense for the years ended December 31, 2022, 2021 and 2020 was $ 79,690 , $ 52,124 and $ 46,472 , respectively.

The Hershey Company | 2021 Form 10-K | Page 68

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Amortization expense for the next five years, based on current intangible asset balances, is estimated to be as follows:

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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.

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

This facility is scheduled to expire

The Hershey Company | 2022 Form 10-K | Page 64

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

on July 2, 2024;

however, we may extend the termination date for up to two additional one-year periods upon notice to the administrative agent under the facility.

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Total short-term debt $ 693,790 $ 939,423

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

Weighted average interest rate on outstanding commercial paper 4.3 % 0.1 %

The maximum amount of short-term borrowings outstanding during 2022 and 2021 was $ 937,593 and $ 939,423 , respectively.

The weighted-average interest rate on short-term borrowings outstanding was 4.4 % as of December 31, 2022 and 0.2 % as of December 31, 2021.

The Hershey Company | 2021 Form 10-K | Page 69

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Long-term Debt

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Maturity Date 2022 2021

8.800 % Debentures (1)

February 15, 2021 $ — $ 84,715

2.625 % Notes

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2.050 % Notes

May 15, 2023 500,000 500,000

2.050 % Notes

November 15, 2024 300,000 300,000

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Long-term portion $ 3,343,977 $ 4,086,627

The Hershey Company | 2022 Form 10-K | Page 65

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

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

(2) During the second quarter of 2020, we issued $ 300,000 of 0.900 % Notes due in 2025, $ 350,000 of 1.700 % Notes due in 2030 and $ 350,000 of 2.650 % Notes due in 2050 (the “2020 Notes”).

Proceeds from the issuance of the 2020 Notes, net of discounts and issuance costs, totaled $ 989,876 .

The 2020 Notes were issued under a shelf registration statement on Form S-3 filed in May 2018 that registered an indeterminate amount of debt securities.

Additionally, in May 2020, we repaid $ 350,000 of 2.900 % Notes due upon their maturity, and in December 2020, we repaid $ 350,000 of 4.125 % Notes due upon their maturity.

Aggregate annual maturities of our long-term Notes (excluding finance lease obligations and net impact of interest rate swaps, debt issuance costs and unamortized debt discounts) are as follows for the years ending December 31:

2023 $ 750,000

Thereafter 1,700,000

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None of our debt is convertible into our Common Stock.

The Hershey Company | 2021 Form 10-K | Page 70

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Interest Expense

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This enables us to continue to align the derivative gains and losses with the underlying economic exposure being hedged and thereby eliminate the mark-to-market volatility within our reported segment income.

The Hershey Company | 2022 Form 10-K | Page 66

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Foreign Exchange Price Risk

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

The Hershey Company | 2021 Form 10-K | Page 71

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Interest Rate Risk

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

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

In December 2020, our fixed-to-floating interest rate swap matured in connection with the repayment of certain long-term debt upon its maturity (see Note 4 ).

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

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

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These contracts are not designated as hedges for accounting purposes and are entered into for periods of 3 to 12 months.

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 change in fair value of these derivatives is recorded in SM&A expense, together with the change in the related liabilities.

The notional amount of the contracts outstanding at December 31, 2022 and 2021 was $ 18,803 and $ 24,975 , respectively.

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

(2) As of December 31, 2021, amounts reflected on a net basis in liabilities were assets of $ 31,774 and liabilities of $ 32,701 , which are associated with cash transfers receivable or payable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.

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

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

The Hershey Company | 2022 Form 10-K | Page 67

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

(2) As of December 31, 2022, amounts reflected on a net basis in assets were assets of $ 25,308 and liabilities of $ 25,296 , 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 December 31, 2022 and 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

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This amount is primarily associated with interest rate swap agreements.

Fair Value Hedging Relationships

For the years ended December 31, 2021 and 2020, we had no interest rate swap derivative instruments in a fair value hedging relationship.

For the year ended December 31, 2020, we recognized a net pretax benefit to interest expense of $ 3,186 relating to our fixed-to-floating interest rate swap arrangements.

FAIR VALUE MEASUREMENTS

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The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of December 31, 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 issuuances and is, therefore, classified as Level 2 within the valuation hierarchy.

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

The fair values and carrying values of long-term debt, including the current portion, were as follows:

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

2019 Activity

During 2019, we recorded the following impairment charges, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy:

Customer relationship and trademark intangible assets (1) $ 100,131

Other long-lived assets not held for sale (2) 9,629

Adjustment to disposal group (3) 2,725

Long-lived and intangible asset impairment charges $ 112,485

(1) During the fourth quarter of 2019, as discussed in Note 3 , 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.

(2) 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.

(3) In connection with disposal groups previously classified as held for sale, we recorded impairment charges to adjust long-lived asset values.

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

The Hershey Company | 2021 Form 10-K | Page 75

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

In connection with the acquisition of ONE Brands in the third quarter of 2019, as discussed in Note 2 , we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty, a form of the multi-period excess earnings and the with-and-without valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

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

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

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

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

The Hershey Company | 2022 Form 10-K | Page 70

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The components of lease expense were as follows:

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Finance leases 6.1 % 6.1 %

The Hershey Company | 2021 Form 10-K | Page 76

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Supplemental balance sheet information related to leases were as follows:

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Total lease liabilities $ 400,115 $ 416,337

In 2021, our operating lease ROU assets and corresponding lease liabilities increased due to lease agreements assumed as a result of our 2021 business combination activity (see Note 2 ).

The Hershey Company | 2022 Form 10-K | Page 71

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The maturity of our lease liabilities as of December 31, 2022 were as follows:

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Total lease liabilities $ 326,636 $ 73,479 $ 400,115

The Hershey Company | 2021 Form 10-K | Page 77

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

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Additionally, we acquire ownership interests in emerging snacking businesses and startup companies, which vary in method of accounting based on our percentage of ownership and ability to exercise significant influence over decisions relating to operating and financial affairs.

These investments afford the Company the rights to distribute brands that the Company does not own to third-party customers primarily in the United States.

These investments afford the Company the rights to distribute brands that the Company does not own to third-party customers primarily in North America.

Net sales and expenses of our equity method investees are not consolidated into our financial statements;

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

The Hershey Company | 2022 Form 10-K | Page 72

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

For the years ended December 31, 2022 2021 2020

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Costs associated with business realignment activities $ 4,417 $ 16,599 $ 31,513

The Hershey Company | 2021 Form 10-K | Page 78

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Costs recorded by program in 2022, 2021 and 2020 related to these activities were as follows:

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International Optimization Program:

Severance $ 3,982 $ 18,977 $ —

Severance and employee benefit costs $ 2,001 $ 3,982 $ 18,977

Other program costs 2,416 12,617 10,366

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Total $ 4,417 $ 16,599 $ 31,513

The following table presents the liability activity for costs qualifying as exit and disposal costs for the year ended December 31, 2021:

Liability balance at December 31, 2020 (1)

2021 business realignment charges (2)

Cash payments

Liability balance at December 31, 2021 (1)

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

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

Amounts classified as liabilities qualifying as exit and disposal costs primarily represent employee-related and certain third-party service provider charges, however, such amounts at December 31, 2022 are not significant and are expected to be paid within the next 12 months.

2020 International Optimization Program

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

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

The International Optimization Program is expected to be completed by the end of 2023, with total pre-tax costs anticipated to be $ 50,000 to $ 75,000 .

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

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

For the years ended December 31, 2020 and 2019, we recognized total costs associated with the Margin for Growth Program of $ 2,170 , and $ 9,238 respectively.

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

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

For the year ended December 31, 2020, we recognized total costs associated with the Margin for Growth Program of $ 2,170 .

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

This project was completed in mid-2020.

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

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

The Hershey Company | 2022 Form 10-K | Page 73

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

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

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

The components of income before income taxes were as follows:

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Net deferred tax liabilities $ ( 287,905 ) $ ( 247,131 )

Changes in deferred taxes were primarily due to accelerated tax depreciation on property, plant and equipment and increases in pension and unrealized value of derivatives.

Changes in deferred taxes were primarily due to acquired intangibles and accelerated tax depreciation on property, plant and equipment.

The valuation allowances as of December 31, 2022 and 2021 were primarily related to various foreign jurisdictions' net operating loss carryforwards and other deferred tax assets that we do not expect to realize.

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Stock compensation ( 0.7 ) ( 0.5 ) ( 0.6 )

Valuation allowance release — — ( 1.5 )

Other, net 0.3 ( 1.1 ) ( 0.3 )

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

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

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

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The equity investment write-down is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 17 ).

Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law.

The IRA enacted a 15% corporate minimum tax on certain corporations and an excise tax on share repurchases after December 31, 2022, and created and extended certain energy-related tax credits and incentives, as well as other provisions.

We currently do not expect the tax-related provisions of the IRA to have a material impact on our consolidated financial statements, including our annual effective tax rate, or on our liquidity.

We will continue to monitor and assess the impact the IRA may have on our business and financial results.

American Rescue Plan Act

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

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

The ARPA did not have a material impact on our consolidated financial statements for the year ended December 31, 2021

The ARPA strengthens and extends certain federal programs enacted through the Coronavirus Aid, Relief, and Economic Security Act and other coronavirus disease 2019 (“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 years ended December 31, 2022 and 2021.

Coronavirus Aid, Relief, and Economic Security Act

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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 year ended December 31, 2021.

The CARES Act did not have a material impact on our consolidated financial statements for the years ended December 31, 2022, 2021 and 2020.

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

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Net amounts recognized in AOCI $ ( 137,943 ) $ ( 117,518 ) $ 19,689 $ 1,137

The project benefit obligation during 2021 was impacted by actuarial gain of $ 33,984 which was the result of the discount rate assumption increasing from 2.3 % at December 31, 2020 to 2.7 % at December 31, 2021.

The projected benefit obligation during 2022 was impacted by actuarial gain of $ 184,775 which was mainly the result of the discount rate assumption increasing from 2.7 % at December 31, 2021 to 5.5 % at December 31, 2022.

The accumulated benefit obligation for all defined benefit pension plans was $ 799,635 as of December 31, 2022 and $ 1,031,197 as of December 31, 2021.

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Rate of increase in compensation levels

3.5 % 3.5 % N/A N/A

3.4 % 3.5 % 4.0 % N/A

Interest crediting rate

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For purposes of measuring our post-retirement benefit obligation at December 31, 2021, we assumed a 6.2 % annual rate of increase in the per capita cost of covered health care benefits for 2022, grading down to 5.0 % by 2025.

The valuations and assumptions reflect adoption of the Society of Actuaries updated Pri-2012 mortality tables with MP-2021 and MP-2020 generational projection scales, which we adopted as of December 31, 2021 and 2020, respectively.

The valuations and assumptions reflect adoption of the Society of Actuaries updated Pri-2012 mortality tables with MP-2021 generational projection scales, which we adopted as of December 31, 2021.

The Society of Actuaries did not update the Pri-2012 mortality tables in 2022.

Adoption of the updated scales did not have a significant impact on our current pension obligations or net period benefit cost since our primary plans are cash balance plans and most participants take lump-sum settlements upon retirement.

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— — — 97,412 97,412

Global real estate investment trusts (g) — — — 60,083 60,083

Global infrastructure (h) — — — 70,851 70,851

Real assets fund (f) — — — 168,926 168,926

Total pension plan assets

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(f) This category comprises funds primarily invested in publicly traded real estate securities, publicly listed infrastructure securities and real estate debt.

(g) This category comprises equity funds primarily invested in publicly traded real estate securities.

(h) This category comprises equity funds primarily invested in publicly traded listed infrastructure securities.

The fair value of the Level 1 assets was based on quoted prices in active markets for the identical assets.

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Forfeited ( 6,971 ) $ 123.07

Expired ( 1,873 ) $ 103.07

Outstanding as of December 31, 2022

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SEGMENT INFORMATION

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 , 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:

The Company reports its operations through three segments:

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

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

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

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

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

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

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

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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Accounting policies associated with our operating segments are generally the same as those described in Note 1 .

As discussed in Note 5 , derivatives used to manage commodity price risk are not designated for hedge accounting treatment.

These derivatives are recognized at fair market value with the resulting realized and unrealized (gains) losses recognized in unallocated derivative (gains) losses outside of the reporting segment results until the related inventory is sold, at which time the related gains and losses are reallocated to segment income.

This enables us to align the derivative gains and losses with the underlying economic exposure being hedged and thereby eliminate the mark-to-market volatility within our reported segment income.

Certain manufacturing, warehousing, distribution and other activities supporting our global operations are integrated to maximize efficiency and productivity.

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Unallocated corporate expense (1) 735,542 614,875 520,632

Unallocated mark-to-market (gains) losses on commodity derivatives ( 24,376 ) 6,429 ( 28,651 )

Long-lived and intangible asset impairment charges (see Note 6 )

— 9,143 112,485

Unallocated mark-to-market losses (gains) on commodity derivatives 78,182 ( 24,376 ) 6,429

Long-lived asset impairment charges (see Note 6 )

Costs associated with business realignment activities (see Note 9 )

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Net gains on commodity derivative positions reclassified from unallocated to segment income 122,751 61,026 13,022

Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative losses (gains) $ ( 24,376 ) $ 6,429 $ ( 28,651 )

Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative losses (gains) $ 78,182 $ ( 24,376 ) $ 6,429

As of December 31, 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 $ 8,735 .

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Total $ 2,769,702 $ 2,586,187 $ 2,285,255

EQUITY AND NONCONTROLLING INTEREST

EQUITY AND TREASURY STOCK ACTIVITY

We had 1,055,000,000 authorized shares of capital stock as of December 31, 2022.

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Class B Stock can be converted into Common Stock on a share-for-share basis at any time.

During 2022, 2,500,000 shares of Class B Common Stock were converted to Common Stock by Hershey Trust Company, as trustee for the Milton Hershey School Trust (the “School Trust”).

During 2021 and 2020, no shares of Class B Stock were converted into Common Stock.

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Shares repurchased in the open market under pre-approved share repurchase programs — ( 871,144 ) ( 951,138 )

Shares repurchased to replace Treasury Stock issued for stock options and incentive compensation ( 2,005,500 ) ( 450,000 ) ( 2,674,349 )

Milton Hershey School Trust repurchase ( 1,000,000 ) — —

Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation ( 824,701 ) ( 2,005,500 ) ( 450,000 )

Stock issuances:

Shares issued for stock options and incentive compensation 680,404 758,531 798,832

Retirement of treasury shares — — 138,348,719

Treasury shares at end of year ( 16,588,308 ) ( 15,444,011 ) ( 13,325,898 )

Change in Common Stock due to retirement of treasury shares — — ( 138,348,719 )

Net shares outstanding at end of year 204,964,717 206,109,014 208,227,127

6 unchanged sentences

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

Retirement of Treasury Shares

During 2019, we retired 138,348,719 shares or $ 6,423,267 of the Company’s treasury shares previously repurchased.

Under the applicable state law, these shares resume the status of authorized and unissued shares upon retirement.

In accordance with our accounting policy, we record any excess of repurchase price over par value to retained earnings.

As a result, our retained earnings were reduced by $ 6,284,919 during 2019.

This transaction was approved by the Board on October 11, 2019.

Hershey Trust Company

Hershey Trust Company, as trustee for the Milton Hershey School Trust (the “Trust”) and as direct owner of investment shares, held 95,400 shares of our Common Stock as of December 31, 2021.

As trustee for the Trust, Hershey Trust Company held 60,612,012 shares of the Class B Common Stock as of December 31, 2021, and was entitled to cast approximately 81 % of all of the votes entitled to be cast on matters requiring the vote of both classes of our common stock voting together.

Hershey Trust Company, as trustee for the Trust, or any successor trustee, or Milton Hershey School, as appropriate, must approve any issuance of shares of Common Stock or other action that would result in it not continuing to have voting control of our Company.

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

Hershey Trust Company, as trustee for the School Trust and as direct owner of investment shares, held 39,630 shares of our Common Stock as of December 31, 2022.

As trustee for the School Trust, Hershey Trust Company held 58,112,012 shares of the Class B Common Stock as of December 31, 2022, and was entitled to cast approximately 80 % of all of the votes entitled to be cast on matters requiring the vote of both classes of our common stock voting together.

Hershey Trust Company, as trustee for the School Trust, or any successor trustee, or Milton Hershey School, as appropriate, must approve any issuance of shares of Common Stock or other action that would result in it not continuing to have voting control of our Company.

Stock Purchase Agreements

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 $ 239,910 .

As a result of this repurchase, our July 2018 share repurchase authorization program was completed in February 2023.

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 $ 203,350 .

The Hershey Company | 2022 Form 10-K | Page 89

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

Noncontrolling Interest in Subsidiary

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

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

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

Noncontrolling Interest

Balance, December 31, 2020

Net gain attributable to noncontrolling interest 5,307

Divestiture of noncontrolling interest ( 1,436 )

Distributions to joint venture partner ( 8,750 )

Reclassification to accrued liabilities ( 3,901 )

Other comprehensive income - foreign currency translation adjustments 5,249

Balance, December 31, 2021

During the fourth quarter of 2021, we obtained certain approvals and satisfied other conditions necessary to commence the distribution of sales proceeds attributable to the joint venture partner.

A portion of the distribution was completed in 2021, and we expect the remaining distribution to be completed during 2022.

COMMITMENTS AND CONTINGENCIES

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We expect to maintain the facilities with repairs and maintenance activities that would not involve or require the removal of significant quantities of asbestos.

The Hershey Company | 2021 Form 10-K | Page 96

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Legal contingencies

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

The Company is among several defendants named in the suit.

The Company believes that the suit is without merit and is defending vigorously against the suit.

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.

The Hershey Company | 2022 Form 10-K | Page 90

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Collective Bargaining

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Collective bargaining agreements covered approximately 6,470 employees, or approximately 33 % of the Company’s employees worldwide.

During 2022, agreements will be negotiated for certain employees at four facilities outside of the United States, comprising approximately 62 % of total employees under collective bargaining agreements.

During 2023, agreements will be negotiated for certain employees at five facilities, four of which are outside of the United States, comprising approximately 67 % of total employees under collective bargaining agreements.

We currently expect that we will be able to renegotiate such agreements on satisfactory terms when they expire.

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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.

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$ 206,159 $ 119,081 $ 138,327

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 year ended December 31, 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 a proposed sales price submitted by a third-party buyer received prior to executing the Purchase Agreement.

Stock Purchase Agreements

In February 2023 and February 2022, the Company entered into Stock Purchase Agreements 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 | 2022 Form 10-K | Page 93

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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 8. Financial Statements and Supplementary Data