What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-04-27 compared with 2022-11-04 · 202 added, 378 removed, 797 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Net sales $ 2,987,614 $ 2,666,221

11 unchanged sentences

Provision for income taxes 172,071 143,926

Net income including noncontrolling interest 399,487 444,927 1,248,521 1,143,028

Net gain attributable to noncontrolling interest — — — 1,072

Net income attributable to The Hershey Company

$ 587,185 $ 533,478

13 unchanged sentences

(in thousands)

For the Three Months Ended For the Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

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

Net income including noncontrolling interest $ 399,487 $ 444,927 $ 1,248,521 $ 1,143,028

For the Three Months Ended

April 2, 2023 April 3, 2022

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

Net income $ 587,185 $ 533,478

Other comprehensive income, net of tax:

1 unchanged sentence

Foreign currency translation (losses) gains during period $ 8,940 $ — 8,940 $ 14,419 $ — 14,419

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

Pension and post-retirement benefit plans:

5 unchanged sentences

Total other comprehensive income, net of tax $ 15,641 $ ( 1,315 ) 14,326 $ 8,577 $ ( 1,371 ) 7,206

Total comprehensive income including noncontrolling interest $ 371,818 $ 442,658 $ 1,201,686 $ 1,187,959

Comprehensive (loss) income attributable to noncontrolling interest — ( 5 ) — 6,321

Comprehensive income attributable to The Hershey Company $ 371,818 $ 442,663 $ 1,201,686 $ 1,181,638

Comprehensive income $ 601,511 $ 540,684

See Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

(in thousands, except share data)

October 2, 2022 December 31, 2021

April 2, 2023 December 31, 2022

Current assets:

27 unchanged sentences

Common stock, shares issued:

163,439,248 at October 2, 2022 and 160,939,248 at December 31, 2021

164,439,248 at April 2, 2023 and 163,439,248 at December 31, 2022

164,439 163,439

Class B common stock, shares issued:

58,113,777 at October 2, 2022 and 60,613,777 at December 31, 2021

57,113,777 at April 2, 2023 and 58,113,777 at December 31, 2022

57,114 58,114

2 unchanged sentences

Treasury—common stock shares, at cost:

16,484,611 at October 2, 2022 and 15,444,011 at December 31, 2021

17,179,435 at April 2, 2023 and 16,588,308 at December 31, 2022

( 1,781,155 ) ( 1,556,029 )

7 unchanged sentences

(in thousands)

Nine Months Ended

October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Operating Activities

Net income including noncontrolling interest $ 1,248,521 $ 1,143,028

Net income $ 587,185 $ 533,478

Adjustments to reconcile net income to net cash provided by operating activities:

4 unchanged sentences

Other 22,347 24,043

Changes in assets and liabilities, net of business acquisitions and divestitures:

Changes in assets and liabilities:

Accounts receivable—trade, net ( 140,962 ) ( 189,621 )

9 unchanged sentences

Equity investments in tax credit qualifying partnerships ( 12,309 ) ( 22,503 )

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

Other investing activities 85 ( 400 )

1 unchanged sentence

Financing Activities

Net (decrease) increase in short-term debt ( 145,552 ) 339,981

Net decrease in short-term debt ( 90,700 ) ( 65,640 )

Repayment of long-term debt and finance leases ( 1,187 ) ( 1,050 )

6 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 18,375 ) ( 20,258 )

Decrease in cash and cash equivalents, including cash classified as held for sale ( 1,525 ) ( 479,905 )

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

Net decrease in cash and cash equivalents ( 1,525 ) ( 468,471 )

Net (decrease) increase in cash and cash equivalents ( 3,543 ) 8,789

Cash and cash equivalents, beginning of period 463,889 329,266

7 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended October 2, 2022 and October 3, 2021

(in thousands)

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

Stockholders’

Balance, July 3, 2022

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

Net income 399,487 399,487

Other comprehensive loss ( 27,669 ) ( 27,669 )

Dividends (including dividend equivalents):

Common Stock, $ 1.036 per share

( 152,144 ) ( 152,144 )

Class B Common Stock, $ 0.942 per share

( 54,743 ) ( 54,743 )

Stock-based compensation 18,132 18,132

Exercise of stock options and incentive-based transactions 4,239 4,038 8,277

Balance, October 2, 2022

$ — $ 163,439 $ 58,114 $ 1,280,462 $ 3,401,198 $ ( 1,524,083 ) $ ( 296,050 ) $ 3,083,080

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

Loss Noncontrolling

Subsidiaries Total

Stockholders’

Balance, July 4, 2021

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

Net income 444,927 — 444,927

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

Dividends (including dividend equivalents):

Common Stock, $ 0.901 per share

( 131,551 ) ( 131,551 )

Class B Common Stock, $ 0.819 per share

( 49,643 ) ( 49,643 )

Stock-based compensation 18,903 18,903

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

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

Balance, October 3, 2021

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

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q3 2022 Form 10-Q | Page 6

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended October 2, 2022 and October 3, 2021

For the Three Months Ended April 2, 2023 and April 3, 2022

(in thousands)

19 unchanged sentences

Exercise of stock options and incentive-based transactions ( 30,108 ) 17,013 ( 13,095 )

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

Balance, October 2, 2022

Repurchase of common stock (including excise tax) ( 242,139 ) ( 242,139 )

Balance, April 2, 2023

$ — $ 164,439 $ 57,114 $ 1,285,412 $ 3,970,562 $ ( 1,781,155 ) $ ( 238,007 ) $ 3,458,365

5 unchanged sentences

Comprehensive

Loss Noncontrolling

Subsidiaries Total

(Loss) Income Total

Stockholders’

8 unchanged sentences

( 48,824 ) ( 48,824 )

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

Stock-based compensation 15,314 15,314

1 unchanged sentence

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

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

Balance, October 3, 2021

Balance, April 3, 2022

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

14 unchanged sentences

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

Operating results for the quarter ended October 2, 2022 may not be indicative of the results that may be expected for the year ending December 31, 2022 because of seasonal effects on our business.

Operating results for the quarter ended April 2, 2023 may not be indicative of the results that may be expected for the year ending December 31, 2023 because of seasonal effects on our business.

These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Annual Report on Form 10-K”), which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.

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

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

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

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

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

Recent Accounting Pronouncements

3 unchanged sentences

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

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

The Hershey Company | Q3 2022 Form 10-Q | Page 8

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

1 unchanged sentence

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.

2021-08, Business Combinations (Topic 805):

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

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

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

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

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

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

In September 2022, the FASB issued ASU No.

5 unchanged sentences

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.

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

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.

As a result of the adoption of this new standard, we made the required disclosures in the consolidated financial statements.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

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

This ASU requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from

The Hershey Company | Q1 2023 Form 10-Q | Page 7

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Contracts with Customers (Topic 606) rather than adjust them to fair value at the acquisition date.

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

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

As a result, we adopted the provisions of this ASU in the first quarter of 2023.

This new standard will be applied in relevant future acquisitions.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2023, the FASB issued ASU No.

2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in tax credit structures using the proportional amortization method.

This ASU allows entities to elect the proportional amortization method for all tax equity investments, regardless of how the tax credits are received as long as certain criteria are met.

This ASU may be applied in a modified retrospective or retrospective basis and an entity must evaluate the investments in which it still expects to receive tax credits or other income tax benefits as of the beginning of the earliest period presented.

ASU 2023-02 is effective for annual periods beginning after December 15, 2023 and interim periods within those annual periods.

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

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 DIVESTITURE

2021 Activity

BUSINESS ACQUISITIONS

Manufacturing Capacity

On April 14, 2023, we entered into a definitive agreement to acquire certain assets that provide additional manufacturing capacity from Weaver Popcorn Manufacturing, Inc., a leader in the production and co-packing of microwave popcorn and ready-to-eat popcorn, and a co-manufacturer of the Company’s SkinnyPop brand.

Through the transaction, the Company will mainly acquire property, plant and equipment, as well as leased manufacturing facilities in Indiana and Pennsylvania.

The purchase consideration totaled approximately $ 164,000 and will be financed with cash on hand and short-term borrowings.

The acquisition is subject to customary regulatory approvals and is expected to close during the second quarter of 2023.

Pretzels Inc.

6 unchanged sentences

Acquisition-related costs for the Pretzels acquisition were immaterial.

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

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

The Hershey Company | Q1 2023 Form 10-Q | Page 8

2 unchanged sentences

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

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

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

Initial Allocation (1) Adjustments Final Allocation

Goodwill $ 166,191

4 unchanged sentences

Deferred income taxes 773

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

Current liabilities acquired ( 22,713 )

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

Net assets acquired $ 304,334

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

The purchase price allocation presented above has been finalized as of the third quarter of 2022.

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

7 unchanged sentences

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

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

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

The Hershey Company | Q1 2023 Form 10-Q | Page 9

2 unchanged sentences

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

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

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

Initial Allocation (1) Adjustments Final Allocation

Goodwill $ 284,427

5 unchanged sentences

Net assets acquired $ 891,169

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

The purchase price allocation presented above has been finalized as of the third quarter of 2022.

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.

The measurement period adjustments to the initial allocation were immaterial and 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).

2 unchanged sentences

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

Lily's Sweets, LLC

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

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

The cash consideration paid for Lily’s totaled $ 422,210 and the Company may be required to pay additional cash consideration if certain defined targets related to net sales and gross margin were exceeded during the period from the closing date through December 31, 2021.

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

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

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

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

The Hershey Company | Q3 2022 Form 10-Q | Page 11

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

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

Goodwill $ 175,826

Other intangible assets 235,800

Other assets acquired, primarily current assets 33,092

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

Deferred income taxes ( 7,888 )

Net assets acquired $ 427,210

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

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

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

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

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

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

Lotte Shanghai Foods Co., Ltd.

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd., which was previously included within the International segment results in our consolidated financial statements.

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

GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill by reportable segment for the nine months ended October 2, 2022 are as follows:

The changes in the carrying value of goodwill by reportable segment for the three months ended April 2, 2023 are as follows:

North America Confectionery North America Salty Snacks International Total

1 unchanged sentence

$ 2,018,430 $ 571,770 $ 16,756 $ 2,606,956

Measurement period adjustments (see Note 2 )

— ( 18,028 ) — ( 18,028 )

Foreign currency translation 43 — 834 877

Balance at October 2, 2022

Balance at April 2, 2023

$ 2,018,473 $ 571,770 $ 17,590 $ 2,607,833

The Hershey Company | Q3 2022 Form 10-Q | Page 12

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

October 2, 2022 December 31, 2021

April 2, 2023 December 31, 2022

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

8 unchanged sentences

$ 1,947,584 $ 1,966,269

Total amortization expense for the three months ended October 2, 2022 and October 3, 2021 was $ 19,909 and $ 13,936 , respectively.

Total amortization expense for the nine months ended October 2, 2022 and October 3, 2021 was $ 59,827 and $ 37,192 , respectively.

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

The Hershey Company | Q1 2023 Form 10-Q | Page 10

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Total amortization expense for the three months ended April 2, 2023 and April 3, 2022 was $ 19,177 and $ 19,859 , respectively.

SHORT AND LONG-TERM DEBT

1 unchanged sentence

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

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

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

As of April 2, 2023, we maintained a $ 1.5 billion unsecured revolving credit facility (the “prior credit facility”).

On April 26, 2023, we terminated the prior credit facility, which was scheduled to expire in July 2024, and entered into a new unsecured revolving credit facility (the “new credit facility”).

The new credit facility allows the Company to borrow up to $ 1.35 billion with the option to increase borrowings by an additional $ 500 million with the consent of the lenders.

The new credit facility is scheduled to expire on April 26, 2028;

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

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

As of October 2, 2022, we were in compliance with all covenants pertaining to the credit agreement, and we had no significant compensating balance agreements that legally restricted these funds.

The credit agreements governing the prior credit facility and the new credit facility contains certain financial and other covenants, customary representations, warranties and events of default.

As of April 2, 2023, we were in compliance with all covenants pertaining to the prior credit facility, and we had no significant compensating balance agreements that legally restricted these funds.

For more information, refer to the Consolidated Financial Statements included in our 2022 Annual Report on Form 10-K.

2 unchanged sentences

Short-term debt consisted of the following:

October 2, 2022 December 31, 2021

April 2, 2023 December 31, 2022

Short-term foreign bank borrowings against lines of credit $ 143,081 $ 135,555

10 unchanged sentences

Maturity Date

October 2, 2022 December 31, 2021

April 2, 2023 December 31, 2022

2.625 % Notes

30 unchanged sentences

Net interest expense consists of the following:

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Interest expense $ 42,506 $ 35,371

19 unchanged sentences

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

Our open commodity derivative contracts had a notional value of $ 679,205 as of October 2, 2022 and $ 313,200 as of December 31, 2021.

Our open commodity derivative contracts had a notional value of $ 172,299 as of April 2, 2023 and $ 243,009 as of December 31, 2022.

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

7 unchanged sentences

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

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 33,002 at October 2, 2022 and $ 94,623 at December 31, 2021.

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 30,781 at April 2, 2023 and $ 59,448 at December 31, 2022.

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

The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 537 at October 2, 2022 and $ 2,993 at December 31, 2021.

The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 19,172 at April 2, 2023 and $ 1,843 at December 31, 2022.

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.

Interest Rate Risk

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.

These swaps, which were settled upon issuance of the related debt, were designated as cash flow hedges and the gains and losses that were deferred in other comprehensive income are being recognized as an adjustment to interest expense over the same period that the hedged interest payments affect earnings.

In order to manage interest rate exposure, from time to time, we enter into interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions.

These swaps, which are settled upon issuance of the related debt, are designated as cash flow hedges and the gains and losses that are deferred in other comprehensive income are being recognized as an adjustment to interest expense over the same period that the hedged interest payments affect earnings.

We had interest rate swap agreements in a cash flow hedging relationship with a notional amount of $ 750,000 at April 2, 2023 and none at December 31, 2022.

Equity Price Risk

2 unchanged sentences

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 notional amount of the contracts outstanding at October 2, 2022 and December 31, 2021 was $ 19,768 and $ 24,975 , respectively.

The change in fair value of these derivatives is recorded in selling,

The Hershey Company | Q1 2023 Form 10-Q | Page 13

2 unchanged sentences

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

The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of October 2, 2022 and December 31, 2021:

October 2, 2022 December 31, 2021

marketing and administrative expense, together with the change in the related liabilities.

The notional amount of the contracts outstanding at April 2, 2023 and December 31, 2022 was $ 20,224 and $ 18,803 , respectively.

The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of April 2, 2023 and December 31, 2022:

April 2, 2023 December 31, 2022

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

1 unchanged sentence

Foreign exchange contracts $ 2,101 $ 1,330 $ 3,921 $ 261

Interest rate swap agreements 3,173 — — —

5,274 1,330 3,921 261

Derivatives not designated as hedging instruments:

6 unchanged sentences

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

(2) As of October 2, 2022, amounts reflected on a net basis in liabilities were assets of $ 44,502 and liabilities of $ 39,740 , which are associated with cash transfers receivable or payable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.

(2) As of April 2, 2023, amounts reflected on a net basis in liabilities were assets of $ 23,357 and liabilities of $ 21,415 , 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, 2022 were assets of $ 25,308 and liabilities of $ 25,296 .

At October 2, 2022 and December 31, 2021, the remaining amount reflected in assets and liabilities related to the fair value of other non-exchange traded derivative instruments, respectively.

At April 2, 2023 and December 31, 2022, the remaining amount reflected in assets and liabilities related to the fair value of other non-exchange traded derivative instruments, respectively.

Income Statement Impact of Derivative Instruments

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended October 2, 2022 and October 3, 2021 was as follows:

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended April 2, 2023 and April 3, 2022 was as follows:

Non-designated Hedges Cash Flow Hedges

9 unchanged sentences

$ ( 8,972 ) $ 50,005 $ 1,448 $ ( 5,924 ) $ ( 2,007 ) $ ( 2,596 )

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

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

The Hershey Company | Q1 2023 Form 10-Q | Page 14

2 unchanged sentences

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

The effect of derivative instruments on the Consolidated Statements of Income for the nine months ended October 2, 2022 and October 3, 2021 was as follows:

Non-designated Hedges Cash Flow Hedges

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

2022 2021 2022 2021 2022 2021

Commodities futures and options

$ 28,027 $ 64,199 $ — $ — $ — $ —

Foreign exchange contracts ( 173 ) 574 245 ( 2,200 ) ( 956 ) ( 5,174 )

Interest rate swap agreements

— — — — ( 8,187 ) ( 8,353 )

Deferred compensation derivatives

( 6,142 ) 3,592 — — — —

$ 21,712 $ 68,365 $ 245 $ ( 2,200 ) $ ( 9,143 ) $ ( 13,527 )

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

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

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

The amount of pre-tax net losses on derivative instruments, including interest rate swap agreements and foreign currency forward exchange contracts expected to be reclassified into earnings in the next 12 months was approximately $ 7,479 as of October 2, 2022.

This amount is primarily associated with interest rate swap agreements.

5 unchanged sentences

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

The Hershey Company | Q3 2022 Form 10-Q | Page 17

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of October 2, 2022 and December 31, 2021:

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of April 2, 2023 and December 31, 2022:

Assets (Liabilities)

Level 1 Level 2 Level 3 Total

October 2, 2022:

April 2, 2023:

Derivative Instruments:

Foreign exchange contracts (1) $ — $ 2,483 $ — $ 2,483

Commodities futures and options (3) 5,797 — — 5,797

Foreign exchange contracts (1) — 5,093 — 5,093

Interest rate swap agreements (2) — 3,173 — 3,173

Deferred compensation derivatives (3) $ — $ 1,273 $ — $ 1,273

Commodities futures and options (4) $ 2,261 $ — $ — $ 2,261

Foreign exchange contracts (1) $ — $ 1,330 $ — $ 1,330

December 31, 2022:

6 unchanged sentences

We estimate the fair value of foreign currency forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences.

(2) The fair value of interest rate swap agreements represents the difference in the present value of cash flows calculated at the contracted interest rates and at current market interest rates at the end of the period.

We calculate the fair value of interest rate swap agreements quarterly based on the quoted market price for the same or similar financial instruments.

The Hershey Company | Q1 2023 Form 10-Q | Page 15

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

(3) The fair value of deferred compensation derivatives is based on quoted prices for market interest rates and a broad market equity index.

1 unchanged sentence

Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of October 2, 2022 and December 31, 2021 because of the relatively short maturity of these instruments.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of April 2, 2023 and December 31, 2022 because of the relatively short maturity of these instruments.

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

1 unchanged sentence

Fair Value Carrying Value

October 2, 2022 December 31, 2021 October 2, 2022 December 31, 2021

April 2, 2023 December 31, 2022 April 2, 2023 December 31, 2022

Current portion of long-term debt $ 756,114 $ 749,345 $ 758,086 $ 753,578

1 unchanged sentence

Total $ 3,693,409 $ 3,603,510 $ 4,099,461 $ 4,097,555

The Hershey Company | Q3 2022 Form 10-Q | Page 18

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Other Fair Value Measurements

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

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

During the nine months ended October 2, 2022 and October 3, 2021, we recorded no impairment charges.

In connection with the acquisitions of Pretzels and Dot’s in December 2021 and subsequent measurement period adjustments through the third quarter of 2022, as discussed in Note 2 , we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis and the relief-from-royalty, a form of the multi-period excess earnings, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

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

12 unchanged sentences

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

The components of lease expense for the three months ended October 2, 2022 and October 3, 2021 were as follows:

Three Months Ended

Lease expense Classification October 2, 2022 October 3, 2021

Operating lease cost Cost of sales or SM&A (1) $ 11,812 $ 10,764

Finance lease cost:

Amortization of ROU assets Depreciation and amortization (1) 1,539 1,971

Interest on lease liabilities Interest expense, net 1,030 1,100

Net lease cost (2) $ 14,381 $ 13,835

The Hershey Company | Q1 2023 Form 10-Q | Page 16

2 unchanged sentences

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

The components of lease expense for the nine months ended October 2, 2022 and October 3, 2021 were as follows:

Nine Months Ended

Lease expense Classification October 2, 2022 October 3, 2021

The components of lease expense for the three months ended April 2, 2023 and April 3, 2022 were as follows:

Three Months Ended

Lease expense Classification April 2, 2023 April 3, 2022

Operating lease cost Cost of sales or SM&A (1) $ 12,043 $ 12,787

6 unchanged sentences

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

October 2, 2022 December 31, 2021

April 2, 2023 December 31, 2022

Weighted-average remaining lease term (years)

5 unchanged sentences

Supplemental balance sheet information related to leases were as follows:

Leases Classification October 2, 2022 December 31, 2021

Leases Classification April 2, 2023 December 31, 2022

Operating lease ROU assets Other non-current assets $ 321,284 $ 326,472

12 unchanged sentences

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

The maturity of our lease liabilities as of October 2, 2022 were as follows:

The maturity of our lease liabilities as of April 2, 2023 were as follows:

Operating leases Finance leases Total

9 unchanged sentences

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

Nine Months Ended

October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

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

15 unchanged sentences

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

Total investments in unconsolidated affiliates were $ 132,226 and $ 93,089 as of October 2, 2022 and December 31, 2021, respectively.

Total investments in unconsolidated affiliates were $ 145,338 and $ 133,029 as of April 2, 2023 and December 31, 2022, respectively.

The Hershey Company | Q1 2023 Form 10-Q | Page 18

5 unchanged sentences

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

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Cost of sales $ 1,050 $ 27

2 unchanged sentences

Costs associated with business realignment activities $ 2,349 $ 1,281

Costs recorded by program during the three and nine months ended October 2, 2022 and October 3, 2021 related to these activities were as follows:

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Costs recorded by program during the three months ended April 2, 2023 and April 3, 2022 related to these activities were as follows:

Three Months Ended

April 2, 2023 April 3, 2022

International Optimization Program:

2 unchanged sentences

Total $ 2,349 $ 1,281

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 October 2, 2022 are not significant.

2020 International Optimization Program

4 unchanged sentences

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

For the nine months ended October 2, 2022 and October 3, 2021, we recognized total costs associated with the International Optimization Program of $ 2,373 and $ 13,793 , respectively.

For the three months ended April 2, 2023 and April 3, 2022, we recognized total costs associated with the International Optimization Program of $ 2,349 and $ 1,281 , respectively.

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

5 unchanged sentences

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

The effective tax rates for the nine months ended October 2, 2022 and October 3, 2021 were 19.7 % and 21.4 %, respectively.

Relative to the statutory rate, the 2022 effective tax rate was impacted by investment tax credits, partially offset by state taxes.

The effective tax rates for the three months ended April 2, 2023 and April 3, 2022 were 22.7 % and 21.2 %, respectively.

Relative to the statutory rate, the 2023 effective tax rate was primarily impacted by state taxes, partially offset by employee share-based payments.

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

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

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

7 unchanged sentences

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 (“CARES”) Act and other COVID-19 relief measures, and establishes new federal programs, including provisions on taxes, healthcare and unemployment benefits.

The ARPA did not have a material impact on our consolidated financial statements for the nine months ended October 3, 2021.

Coronavirus Aid, Relief, and Economic Security Act

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

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

The CARES Act did not have a material impact on our consolidated financial statements for the nine months ended October 3, 2021.

The Hershey Company | Q3 2022 Form 10-Q | Page 23

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Net Periodic Benefit Cost

The components of net periodic benefit cost for the three months ended October 2, 2022 and October 3, 2021 were as follows:

The components of net periodic benefit cost for the three months ended April 2, 2023 and April 3, 2022 were as follows:

Pension Benefits Other Benefits

Three Months Ended Three Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Service cost $ 4,028 $ 5,256 $ 80 $ 45

Interest cost 8,810 4,785 1,154 964

Expected return on plan assets ( 11,973 ) ( 12,249 ) — —

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

Amortization of net loss 4,563 4,585 26 —

Settlement loss 3,728 5,408 — —

Total net periodic benefit cost $ 7,743 $ 6,249 $ 1,260 $ 1,009

We made contributions of $ 824 and $ 1,484 to the pension plans and other benefits plans, respectively, during the third quarter of 2022.

In the third quarter of 2021, we made contributions of $ 25,711 and $ 3,527 to our pension plans and other benefit plans, respectively.

The contributions in 2022 and 2021 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans.

The components of net periodic benefit cost for the nine months ended October 2, 2022 and October 3, 2021 were as follows:

Pension Benefits Other Benefits

Nine Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

April 2, 2023 April 3, 2022 April 2, 2023 April 3, 2022

Service cost $ 3,753 $ 4,853 $ 54 $ 78

5 unchanged sentences

Total net periodic benefit cost $ 5,197 $ 1,490 $ 1,821 $ 1,259

We made contributions of $ 4,580 and $ 12,059 to the pension plans and other benefits plans, respectively, during the first nine months of 2022.

In the first nine months of 2021, we made contributions of $ 26,894 and $ 11,682 to our pension plans and other benefit plans, respectively.

We made contributions of $ 833 and $ 5,699 to the pension plans and other benefits plans, respectively, during the first three months of 2023.

In the first three months of 2022, we made contributions of $ 3,467 and $ 4,991 to our pension plans and other benefit plans, respectively.

The contributions in 2023 and 2022 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans.

The non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 17 ).

The Hershey Company | Q1 2023 Form 10-Q | Page 20

2 unchanged sentences

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

During the first nine months of 2022, we recognized pension settlement charges in our hourly retirement plan and salaried retirement plan due to lump sum withdrawals by employees retiring or leaving the Company.

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

In connection with the third quarter 2022 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 288 basis points higher than the rate as of December 31, 2021 and an expected rate of return on plan assets of 5.8 %.

STOCK COMPENSATION PLANS

15 unchanged sentences

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

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Pre-tax compensation expense

1 unchanged sentence

Related income tax benefit 4,330 3,251

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

As of October 2, 2022, total stock-based compensation expense related to non-vested awards not yet recognized was $ 93,265 and the weighted-average period over which this amount is expected to be recognized was approximately 1.8 years.

The Hershey Company | Q3 2022 Form 10-Q | Page 25

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Compensation expenses for stock compensation plans are primarily included in SM&A expense.

As of April 2, 2023, total stock-based compensation expense related to non-vested awards not yet recognized was $ 130,091 and the weighted-average period over which this amount is expected to be recognized was approximately 2.2 years.

Stock Options

3 unchanged sentences

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

A summary of activity relating to grants of stock options for the period ended October 2, 2022 is as follows:

The Hershey Company | Q1 2023 Form 10-Q | Page 21

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

A summary of activity relating to grants of stock options for the period ended April 2, 2023 is as follows:

Stock Options Shares Weighted-Average

4 unchanged sentences

Exercised ( 149,320 ) $ 102.78

Forfeited ( 3,858 ) $ 102.97

Expired ( 1,873 ) $ 103.07

Outstanding as of October 2, 2022

Outstanding as of April 2, 2023

832,529 $ 105.50 3.9 years $ 123,975

Options exercisable as of October 2, 2022

Options exercisable as of April 2, 2023

806,474 $ 103.28 3.7 years $ 121,886

The weighted-average fair value of options granted was $ 37.28 and $ 24.12 per share for the periods ended October 2, 2022 and October 3, 2021, respectively.

The weighted-average fair value of options granted was $ 57.65 and $ 37.28 per share for the periods ended April 2, 2023 and April 3, 2022, respectively.

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

Nine Months Ended

October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Dividend yields

2 unchanged sentences

Expected term in years 6.3 6.3

The total intrinsic value of options exercised was $ 36,362 and $ 28,416 for the periods ended October 2, 2022 and October 3, 2021, respectively.

The total intrinsic value of options exercised was $ 20,566 and $ 18,814 for the periods ended April 2, 2023 and April 3, 2022, respectively.

Performance Stock Units and Restricted Stock Units

7 unchanged sentences

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

The performance scores of PSU grants during the nine months ended October 2, 2022 and October 3, 2021 can range from 0 % to 250 % of the targeted amounts.

The Hershey Company | Q3 2022 Form 10-Q | Page 26

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The performance scores of PSU grants during the three months ended April 2, 2023 and April 3, 2022 can range from 0 % to 250 % of the targeted amounts.

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

1 unchanged sentence

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

During the nine months ended October 2, 2022 and October 3, 2021, we awarded RSUs to certain executive officers and other key employees under the EICP.

During the three months ended April 2, 2023 and April 3, 2022, we awarded RSUs to certain executive officers and other key employees under the EICP.

We also awarded RSUs to non-employee directors.

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

We recognize expense for employee RSUs based on the straight- line method.

We recognize expense for employee RSUs based on the straight-

The Hershey Company | Q1 2023 Form 10-Q | Page 22

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

A summary of activity relating to grants of PSUs and RSUs for the period ended October 2, 2022 is as follows:

A summary of activity relating to grants of PSUs and RSUs for the period ended April 2, 2023 is as follows:

Performance Stock Units and Restricted Stock Units

7 unchanged sentences

( 6,004 ) $ 192.57

Outstanding as of October 2, 2022

Outstanding as of April 2, 2023

1,085,967 $ 210.94

2 unchanged sentences

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

Nine Months Ended

October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Units granted

6 unchanged sentences

Expected volatility 19.2 % 25.3 %

The fair value of shares vested totaled $ 103,081 and $ 50,361 for the periods ended October 2, 2022 and October 3, 2021, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 265,359 units as of October 2, 2022.

The fair value of shares vested totaled $ 97,304 and $ 97,803 for the periods ended April 2, 2023 and April 3, 2022, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 270,694 units as of April 2, 2023.

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

31 unchanged sentences

Our segment net sales and earnings were as follows:

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

North America Confectionery $ 2,452,165 $ 2,217,044

10 unchanged sentences

Costs associated with business realignment activities (see Note 9 )

393 3,397 2,373 13,793

Operating profit 799,924 720,990

2 unchanged sentences

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

48,157 23,004 78,222 32,612

Income before income taxes $ 759,256 $ 677,404

1 unchanged sentence

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

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in income $ 10,614 $ ( 50,825 )

Net gains on commodity derivative positions reclassified from unallocated to segment income 36,021 15,175 91,551 40,062

Net (losses) gains on commodity derivative positions reclassified from unallocated to segment income ( 370 ) 23,446

Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ 10,244 $ ( 27,379 )

As of October 2, 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 $ 23,389 .

As of April 2, 2023, 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 $ 1,511 .

Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pre-tax gains on commodity derivatives of $ 14,874 to segment operating results in the next twelve months.

4 unchanged sentences

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

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

North America Confectionery $ 56,722 $ 55,908

4 unchanged sentences

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

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

United States $ 2,617,923 $ 2,340,646

3 unchanged sentences

A summary of our treasury stock activity is as follows:

Nine Months Ended October 2, 2022

Three Months Ended

April 2, 2023

Shares Dollars

Milton Hershey School Trust repurchase 1,000,000 $ 239,910

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

Total share repurchases 1,679,000 355,271

Shares issued for stock options and incentive compensation ( 408,873 ) ( 17,013 )

Total net share repurchases 591,127 222,897

Excise tax associated with net share repurchases (1) — 2,229

Net change 591,127 $ 225,126

(1) A corresponding liability for excise tax associated with net share repurchases is classified on our Consolidated Balance Sheets within accrued liabilities.

In February 2023, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the Milton Hershey School Trust (the “School Trust”), pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the School Trust at a price equal to $ 239.91 per share, for a total purchase price of $ 239,910 .

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

As of October 2, 2022, $ 109,983 remained available for repurchases of our Common Stock under this program.

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

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

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

The program has no expiration date and acquired shares of Common Stock will be held as treasury shares.

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.

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 | Q1 2023 Form 10-Q | Page 26

2 unchanged sentences

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

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

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

As a result of the February 2023 Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, the July 2018 share repurchase authorization was completed and as of April 2, 2023, approximately $ 370 million remains available for repurchases under our May 2021 share repurchase authorization.

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

The program has no expiration date and acquired shares of Common Stock will be held as treasury shares.

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.

CONTINGENCIES

8 unchanged sentences

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

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

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

Three Months Ended

October 2, 2022 October 3, 2021

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

Basic earnings per share:

Allocation of distributed earnings (cash dividends paid) $ 152,262 $ 54,743 $ 131,247 $ 49,643

Allocation of undistributed earnings 141,630 50,852 191,575 72,462

Total earnings—basic $ 293,892 $ 105,595 $ 322,822 $ 122,105

Denominator (shares in thousands):

Total weighted-average shares—basic 147,169 58,114 145,665 60,614

Earnings Per Share—basic $ 2.00 $ 1.82 $ 2.22 $ 2.01

Diluted earnings per share:

Allocation of total earnings used in basic computation $ 293,892 $ 105,595 $ 322,822 $ 122,105

Reallocation of total earnings as a result of conversion of Class B common stock to Common stock 105,595 — 122,105 —

Reallocation of undistributed earnings — ( 251 ) — ( 369 )

Total earnings—diluted $ 399,487 $ 105,344 $ 444,927 $ 121,736

Denominator (shares in thousands):

Number of shares used in basic computation 147,169 58,114 145,665 60,614

Weighted-average effect of dilutive securities:

Conversion of Class B common stock to Common shares outstanding 58,114 — 60,614 —

Employee stock options 561 — 625 —

Performance and restricted stock units 430 — 522 —

Total weighted-average shares—diluted 206,274 58,114 207,426 60,614

Earnings Per Share—diluted $ 1.94 $ 1.81 $ 2.14 $ 2.01

The earnings per share calculations for the three months ended October 2, 2022 excluded 4 stock options (in thousands), that would have been antidilutive.

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

The Hershey Company | Q3 2022 Form 10-Q | Page 32

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Nine Months Ended

October 2, 2022 October 3, 2021

April 2, 2023 April 3, 2022

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

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Earnings Per Share—diluted $ 2.85 $ 2.66 $ 2.57 $ 2.41

The earnings per share calculations for the nine months ended October 2, 2022 and October 3, 2021 excluded 4 and 43 stock options (in thousands), respectively, that would have been antidilutive.

The earnings per share calculations for the three months ended April 2, 2023 and April 3, 2022 excluded 8 and 4 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q1 2023 Form 10-Q | Page 28

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

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

Three Months Ended

April 2, 2023 April 3, 2022

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

$ 43,314 $ 20,963 $ 70,754 $ 28,734

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

2 unchanged sentences

Total $ 2,983 $ 10,407

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 nine months ended October 2, 2022 is as follows:

Sale and Donation of Property, Plant and Equipment

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

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

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

The sale and donation transactions closed in June 2022.

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

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

Stock Purchase Agreement

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

The Hershey Company | Q1 2023 Form 10-Q | Page 29

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SUPPLEMENTAL BALANCE SHEET INFORMATION

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

October 2, 2022 December 31, 2021

The components of certain asset accounts included within our Consolidated Balance Sheets are as follows:

April 2, 2023 December 31, 2022

Raw materials $ 417,847 $ 372,612

23 unchanged sentences

Total other non-current assets $ 964,993 $ 944,989

The Hershey Company | Q1 2023 Form 10-Q | Page 30

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The components of certain liability and stockholders’ equity accounts included within our Consolidated Balance Sheets are as follows:

April 2, 2023 December 31, 2022

Accounts payable:

Accounts payable—trade $ 697,433 $ 636,472

Supplier finance program obligations 120,277 105,293

Other 187,197 228,793

Total accounts payable $ 1,004,907 $ 970,558

Accrued liabilities:

17 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements