What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-07-27 compared with 2023-04-27 · 313 added, 166 removed, 833 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Net sales $ 2,490,280 $ 2,372,582 $ 5,477,894 $ 5,038,803

4 unchanged sentences

571,804 543,468 1,153,391 1,067,684

Business realignment costs 811 274

Business realignment (benefits) costs ( 370 ) — 441 274

Operating profit

19 unchanged sentences

(in thousands)

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

For the Three Months Ended For the Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

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 $ 406,983 $ 315,556 $ 994,168 $ 849,034

1 unchanged sentence

Foreign currency translation adjustments:

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

Foreign currency translation gains (losses) during period $ 12,395 $ — 12,395 $ ( 16,758 ) $ — ( 16,758 ) $ 21,336 $ — 21,336 $ ( 2,340 ) $ — ( 2,340 )

Pension and post-retirement benefit plans:

Net actuarial (loss) gain and service cost 19 2 21 ( 6,474 ) ( 568 ) ( 7,042 )

Net actuarial gain (loss) and service cost 905 ( 180 ) 725 ( 32,337 ) 7,758 ( 24,579 ) 924 ( 178 ) 746 ( 38,811 ) 7,191 ( 31,620 )

Reclassification to earnings 7,661 ( 1,839 ) 5,822 9,481 ( 2,275 ) 7,206 10,888 ( 2,613 ) 8,275 13,441 ( 3,226 ) 10,215

Cash flow hedges:

Gains (losses) on cash flow hedging derivatives 1,448 541 1,989 ( 5,924 ) 874 ( 5,050 )

(Losses) gains on cash flow hedging derivatives ( 4,930 ) ( 2,271 ) ( 7,201 ) 5,278 ( 1,511 ) 3,767 ( 3,483 ) ( 1,731 ) ( 5,214 ) ( 646 ) ( 637 ) ( 1,283 )

Reclassification to earnings 7,246 ( 2,021 ) 5,225 4,289 ( 296 ) 3,993 9,253 ( 3,104 ) 6,149 6,885 ( 1,023 ) 5,862

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

Total other comprehensive income (loss), net of tax $ 23,277 $ ( 6,311 ) 16,966 $ ( 30,047 ) $ 3,676 ( 26,371 ) $ 38,918 $ ( 7,626 ) 31,292 $ ( 21,471 ) $ 2,305 ( 19,166 )

Comprehensive income $ 423,949 $ 289,185 $ 1,025,460 $ 829,868

4 unchanged sentences

(in thousands, except share data)

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Current assets:

27 unchanged sentences

Common stock, shares issued:

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

166,938,439 at July 2, 2023 and 163,439,248 at December 31, 2022

166,939 163,439

Class B common stock, shares issued:

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

54,613,777 at July 2, 2023 and 58,113,777 at December 31, 2022

54,614 58,114

2 unchanged sentences

Treasury—common stock shares, at cost:

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

17,103,981 at July 2, 2023 and 16,588,308 at December 31, 2022

( 1,777,984 ) ( 1,556,029 )

7 unchanged sentences

(in thousands)

Three Months Ended

April 2, 2023 April 3, 2022

Six Months Ended

July 2, 2023 July 3, 2022

Operating Activities

6 unchanged sentences

Other 54,697 66,235

Changes in assets and liabilities:

Changes in assets and liabilities, net of business acquisition:

Accounts receivable—trade, net ( 43,503 ) 19,216

9 unchanged sentences

Equity investments in tax credit qualifying partnerships ( 19,077 ) ( 116,191 )

Business acquisitions, net of cash and cash equivalents acquired ( 165,818 ) —

Other investing activities ( 629 ) 6,166

1 unchanged sentence

Financing Activities

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

Net increase (decrease) in short-term debt 165,984 ( 24,507 )

Long-term borrowings, net of debt issuance costs 744,092 —

Repayment of long-term debt and finance leases ( 752,367 ) ( 2,473 )

14 unchanged sentences

The Hershey Company | Q2 2023 Form 10-Q | Page 5

HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

(in thousands)

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

Stockholders’

Balance, April 2, 2023

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

Net income 406,983 406,983

Other comprehensive income 16,966 16,966

Dividends (including dividend equivalents):

Common Stock, $ 1.036 per share

( 152,734 ) ( 152,734 )

Class B Common Stock, $ 0.942 per share

( 53,801 ) ( 53,801 )

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

Stock-based compensation 16,812 16,812

Exercise of stock options and incentive-based transactions ( 977 ) 3,140 2,163

Balance, July 2, 2023

$ — $ 166,939 $ 54,614 $ 1,301,247 $ 4,171,010 $ ( 1,777,984 ) $ ( 221,041 ) $ 3,694,785

Stock Class B

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive

Stockholders’

Balance, April 3, 2022

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

Net income 315,556 315,556

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

Dividends (including dividend equivalents):

Common Stock, $ 0.901 per share

( 129,551 ) ( 129,551 )

Class B Common Stock, $ 0.819 per share

( 48,823 ) ( 48,823 )

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

Stock-based compensation 17,146 17,146

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

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

Balance, July 3, 2022

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

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q2 2023 Form 10-Q | Page 6

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

For the Six Months Ended July 2, 2023 and July 3, 2022

(in thousands)

20 unchanged sentences

Repurchase of common stock (including excise tax) ( 242,108 ) ( 242,108 )

Balance, April 2, 2023

Balance, July 2, 2023

$ — $ 166,939 $ 54,614 $ 1,301,247 $ 4,171,010 $ ( 1,777,984 ) $ ( 221,041 ) $ 3,694,785

10 unchanged sentences

Net income 849,034 849,034

Other comprehensive income 7,206 7,206

Other comprehensive loss ( 19,166 ) ( 19,166 )

Dividends (including dividend equivalents):

7 unchanged sentences

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

Balance, April 3, 2022

Balance, July 3, 2022

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

14 unchanged sentences

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

Operating results for the quarter ended April 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.

Operating results for the quarter ended July 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.

1 unchanged sentence

Recently Adopted Accounting Pronouncements

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

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

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

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

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

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

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

In September 2022, the FASB issued ASU No.

10 unchanged sentences

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

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.

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

This new standard was not applicable to the May 2023 acquisition (as discussed in Note 2 );

however, will be applied in relevant future acquisitions.

The Hershey Company | Q2 2023 Form 10-Q | Page 8

2 unchanged sentences

(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

9 unchanged sentences

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.

On May 31, 2023, we completed the acquisition of certain assets that provide additional manufacturing capacity from Weaver Popcorn Manufacturing, Inc.

(“Weaver”), a leader in the production and co-packing of microwave popcorn and ready-to-eat popcorn, and former co-manufacturer of the Company’s SkinnyPop brand.

The initial cash consideration paid for Weaver totaled $ 165,818 and consisted of cash on hand and short-term borrowings.

Acquisition-related costs for the Weaver acquisition were immaterial.

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

The preliminary purchase consideration was allocated to assets acquired and liabilities assumed based on their respective fair values and consisted of $ 85,231 to goodwill, $ 79,136 to property, plant and equipment, net and $ 1,451 to other net assets acquired.

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

The final fair value determination is not expected to result in material adjustments to our preliminary purchase price allocation, including goodwill.

We expect to finalize the purchase price allocation by the end of 2023.

Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired.

The goodwill derived from this acquisition is deductible for tax purposes and reflects the value of leveraging our supply chain capabilities to accelerate growth and access to our portfolio of salty snacks products.

Pretzels Inc.

52 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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

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

North America Confectionery North America Salty Snacks International Total

1 unchanged sentence

$ 2,018,430 $ 571,771 $ 16,755 $ 2,606,956

Acquired during the period (see Note 2 )

— 85,231 — 85,231

Foreign currency translation 2,397 — 1,413 3,810

Balance at April 2, 2023

Balance at July 2, 2023

$ 2,020,827 $ 657,002 $ 18,168 $ 2,695,997

The Hershey Company | Q2 2023 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 following table provides the gross carrying amount and accumulated amortization for each major class of intangible asset:

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

8 unchanged sentences

$ 1,928,184 $ 1,966,269

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.

Total amortization expense for the three months ended July 2, 2023 and July 3, 2022 was $ 20,562 and $ 20,060 , respectively.

Total amortization expense for the six months ended July 2, 2023 and July 3, 2022 was $ 39,739 and $ 39,918 , 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.

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.

On April 26, 2023, we terminated the $ 1.5 billion unsecured revolving credit facility, which was set to expire in July and entered into a new unsecured revolving credit facility (the “new credit facility”).

As of July 2, 2023, 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 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.

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

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

As of July 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:

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Short-term foreign bank borrowings against lines of credit $ 137,481 $ 135,555

10 unchanged sentences

Maturity Date

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

2.625 % Notes (1)

13 unchanged sentences

4.250 % Notes (2)

May 4, 2028 350,000 —

2.450 % Notes

November 15, 2029 300,000 300,000

2 unchanged sentences

4.500 % Notes (2)

May 4, 2033 400,000 —

3.375 % Notes

August 15, 2046 300,000 300,000

9 unchanged sentences

Long-term portion $ 4,086,195 $ 3,343,977

(1) In May 2023 we repaid $ 250,000 of 2.625 % Notes and $ 500,000 of 3.375 % Notes due upon their maturity.

(2) During the second quarter of 2023, we issued $ 350,000 of 4.250 % Notes due in May 2028 and $ 400,000 of 4.500 % Notes due in May 2033 (the “2023 Notes”).

Proceeds from the issuance of the 2023 Notes, net of discounts and issuance costs, totaled $ 744,092 .

The 2023 Notes were issued under a shelf registration on Form S-3 filed in May 2021 that registered an indeterminate amount of debt securities.

Interest Expense

Net interest expense consists of the following:

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Interest expense $ 43,893 $ 35,635 $ 86,399 $ 71,006

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 $ 172,299 as of April 2, 2023 and $ 243,009 as of December 31, 2022.

Our open commodity derivative contracts had a notional value of $ 185,348 as of July 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 $ 30,781 at April 2, 2023 and $ 59,448 at December 31, 2022.

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 86,628 at July 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 $ 19,172 at April 2, 2023 and $ 1,843 at December 31, 2022.

The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 19,172 at July 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.

2 unchanged sentences

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,

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 July 2, 2023 and December 31, 2022 was $ 21,740 and $ 18,803 , respectively.

The Hershey Company | Q2 2023 Form 10-Q | Page 14

2 unchanged sentences

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

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

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

July 2, 2023 December 31, 2022

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

1 unchanged sentence

Foreign exchange contracts $ 436 $ 5,561 $ 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 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.

(2) As of July 2, 2023, amounts reflected on a net basis in liabilities were assets of $ 30,450 and liabilities of $ 30,003 , 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 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.

At July 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 April 2, 2023 and April 3, 2022 was as follows:

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

Non-designated Hedges Cash Flow Hedges

9 unchanged sentences

$ ( 4,258 ) $ ( 13,112 ) $ ( 4,930 ) $ 5,278 $ ( 7,246 ) $ ( 4,289 )

(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 | Q2 2023 Form 10-Q | Page 15

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 six months ended July 2, 2023 and July 3, 2022 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)

2023 2022 2023 2022 2023 2022

Commodities futures and options

$ ( 17,051 ) $ 42,071 $ — $ — $ — $ —

Foreign exchange contracts 942 ( 134 ) ( 6,656 ) ( 646 ) 1,728 ( 1,377 )

Interest rate swap agreements

— — 3,173 — ( 10,981 ) ( 5,508 )

Deferred compensation derivatives

2,879 ( 5,044 ) — — — —

$ ( 13,230 ) $ 36,893 $ ( 3,483 ) $ ( 646 ) $ ( 9,253 ) $ ( 6,885 )

(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 $ 10,305 as of April 2, 2023.

This amount is primarily associated with interest rate swap agreements.

5 unchanged sentences

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

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

The Hershey Company | Q2 2023 Form 10-Q | Page 16

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

Assets (Liabilities)

Level 1 Level 2 Level 3 Total

April 2, 2023:

July 2, 2023:

Derivative Instruments:

Foreign exchange contracts (1) $ — $ 1,390 $ — $ 1,390

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

Deferred compensation derivatives (2) $ — $ 1,606 $ — $ 1,606

1 unchanged sentence

Foreign exchange contracts (1) $ — $ 5,561 $ — $ 5,561

Commodities futures and options (3) $ 239 $ — $ — $ 239

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)

(2) 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 April 2, 2023 and December 31, 2022 because of the relatively short maturity of these instruments.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of July 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

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

July 2, 2023 December 31, 2022 July 2, 2023 December 31, 2022

Current portion of long-term debt $ 8,010 $ 749,345 $ 8,010 $ 753,578

3 unchanged sentences

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

In connection with the 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.

The Hershey Company | Q2 2023 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)

In connection with the acquisition of Weaver in May 2023, as discussed in Note 2 , we used valuation techniques to determine fair value, with the primary technique being the cost approach to value personal property, which uses significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

Additionally, 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.

16 unchanged sentences

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

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

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

Three Months Ended

Lease expense Classification April 2, 2023 April 3, 2022

Lease expense Classification July 2, 2023 July 3, 2022

Operating lease cost Cost of sales or SM&A (1) $ 12,320 $ 12,710

3 unchanged sentences

Net lease cost (2) $ 15,246 $ 15,514

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

Six Months Ended

Lease expense Classification July 2, 2023 July 3, 2022

Operating lease cost Cost of sales or SM&A (1) $ 24,363 $ 25,497

Finance lease cost:

Amortization of ROU assets Depreciation and amortization (1) 3,696 3,450

Interest on lease liabilities Interest expense, net 2,192 2,053

Net lease cost (2) $ 30,251 $ 31,000

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

1 unchanged sentence

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

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance leases 6.2 % 6.1 %

The Hershey Company | Q2 2023 Form 10-Q | Page 19

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Supplemental balance sheet information related to leases were as follows:

Leases Classification April 2, 2023 December 31, 2022

Leases Classification July 2, 2023 December 31, 2022

Operating lease ROU assets Other non-current assets $ 322,697 $ 326,472

8 unchanged sentences

Total lease liabilities $ 397,753 $ 400,115

The Hershey Company | Q1 2023 Form 10-Q | Page 17

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

The maturity of our lease liabilities as of July 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:

Three Months Ended

April 2, 2023 April 3, 2022

Six Months Ended

July 2, 2023 July 3, 2022

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

5 unchanged sentences

Finance leases 292 4,192

The Hershey Company | Q2 2023 Form 10-Q | Page 20

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

8 unchanged sentences

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

Total investments in unconsolidated affiliates were $ 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

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Total investments in unconsolidated affiliates were $ 126,114 and $ 133,029 as of July 2, 2023 and December 31, 2022, respectively.

BUSINESS REALIGNMENT ACTIVITIES

1 unchanged sentence

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

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Cost of sales $ ( 17 ) $ ( 23 ) $ 1,033 $ 4

Selling, marketing and administrative expense 1,904 722 2,392 1,702

Business realignment costs 811 274

Business realignment (benefits) costs ( 370 ) — 441 274

Costs associated with business realignment activities $ 1,517 $ 699 $ 3,866 $ 1,980

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

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

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

International Optimization Program:

2 unchanged sentences

Total $ 1,517 $ 699 $ 3,866 $ 1,980

Amounts classified as liabilities qualifying as exit and disposal costs primarily represent employee-related and certain third-party service provider charges, however, such amounts at April 2, 2023 are not significant.

2020 International Optimization Program

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

The International Optimization Program is expected to be completed by 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.

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

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

For the three 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.

Since inception, we have incurred pre-tax charges to execute the program totaling $ 52,708 .

The International Optimization Program was originally expected to total pre-tax costs of $ 50,000 to $ 75,000 , with cash costs in the range of $ 40,000 to $ 65,000 , primarily related to workforce reductions of approximately 350 positions outside of the United States, costs to consolidate and relocate production, and third-party costs incurred to execute these activities.

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

The Hershey Company | Q2 2023 Form 10-Q | Page 21

2 unchanged sentences

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

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

This program was completed as of the second quarter of 2023.

For the six months ended July 2, 2023 and July 3, 2022, we recognized total costs associated with the International Optimization Program of $ 3,866 and $ 1,980 , respectively.

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

Since inception, we have incurred pre-tax charges to execute the program totaling $ 54,225 .

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

The effective tax rates for the three months ended April 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 effective tax rates for the six months ended July 2, 2023 and July 3, 2022 were 17.1 % and 21.4 %, respectively.

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

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

9 unchanged sentences

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

The Hershey Company | Q2 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)

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Net Periodic Benefit Cost

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

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

Pension Benefits Other Benefits

Three Months Ended Three Months Ended

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

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Service cost $ 3,769 $ 4,758 $ 55 $ 80

5 unchanged sentences

Total net periodic benefit cost $ 9,666 $ 8,324 $ 1,819 $ 1,263

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.

We made contributions of $ 3,029 and $ 5,212 to the pension plans and other benefits plans, respectively, during the second quarter of 2023.

In the second quarter of 2022, we made contributions of $ 289 and $ 5,584 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 components of net periodic benefit cost for the six months ended July 2, 2023 and July 3, 2022 were as follows:

Pension Benefits Other Benefits

Six Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Service cost $ 7,522 $ 9,611 $ 109 $ 158

Interest cost 20,560 11,628 4,190 2,313

Expected return on plan assets ( 24,766 ) ( 24,815 ) — —

Amortization of prior service credit ( 2,829 ) ( 2,825 ) — —

Amortization of net loss 9,987 5,839 ( 659 ) 51

Settlement loss 4,389 10,376 — —

Total net periodic benefit cost $ 14,863 $ 9,814 $ 3,640 $ 2,522

We made contributions of $ 3,862 and $ 10,911 to the pension plans and other benefits plans, respectively, during the first six months of 2023.

In the first six months of 2022, we made contributions of $ 3,756 and $ 10,575 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 ).

During the first six months of 2023, we recognized pension settlement charges in our hourly retirement plan due to lump sum withdrawals by employees retiring or leaving the Company.

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

In connection with the second quarter 2023 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 8 basis points lower than the rate as of December 31, 2022 and an expected rate of return on plan assets of 6.3 %, which was consistent with the rate as of December 31, 2022.

The Hershey Company | Q2 2023 Form 10-Q | Page 23

19 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

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Pre-tax compensation expense

2 unchanged sentences

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.

As of July 2, 2023, total stock-based compensation expense related to non-vested awards not yet recognized was $ 115,592 and the weighted-average period over which this amount is expected to be recognized was approximately 2.0 years.

Stock Options

7 unchanged sentences

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

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

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

Stock Options Shares Weighted-Average

1 unchanged sentence

Contractual Term Aggregate Intrinsic Value

Outstanding at beginning of the period 976,634 $ 104.36 3.8 years

Outstanding at beginning of year 976,634 $ 104.36 3.8 years

Granted 5,215 $ 240.90

Exercised ( 216,977 ) $ 102.93

Outstanding as of April 2, 2023

Outstanding as of July 2, 2023

764,872 $ 105.69 3.7 years $ 110,146

Options exercisable as of April 2, 2023

Options exercisable as of July 2, 2023

738,817 $ 103.28 3.6 years $ 108,179

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 weighted-average fair value of options granted was $ 57.65 and $ 37.28 per share for the periods ended July 2, 2023 and July 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:

Three Months Ended

April 2, 2023 April 3, 2022

Six Months Ended

July 2, 2023 July 3, 2022

Dividend yields

2 unchanged sentences

Expected term in years 6.3 6.3

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.

The total intrinsic value of options exercised was $ 31,581 and $ 24,870 for the periods ended July 2, 2023 and July 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 three months ended April 2, 2023 and April 3, 2022 can range from 0 % to 250 % of the targeted amounts.

The performance scores of PSU grants during the six months ended July 2, 2023 and July 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 three months ended April 2, 2023 and April 3, 2022, we awarded RSUs to certain executive officers and other key employees under the EICP.

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

We also awarded RSUs to non-employee directors.

6 unchanged sentences

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

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

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

Performance Stock Units and Restricted Stock Units

7 unchanged sentences

( 15,070 ) $ 203.38

Outstanding as of April 2, 2023

Outstanding as of July 2, 2023

1,085,040 $ 213.43

2 unchanged sentences

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

Three Months Ended

April 2, 2023 April 3, 2022

Six Months Ended

July 2, 2023 July 3, 2022

Units granted

6 unchanged sentences

Expected volatility 19.2 % 25.3 %

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.

The fair value of shares vested totaled $ 100,915 and $ 100,292 for the periods ended July 2, 2023 and July 3, 2022, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 275,043 units as of July 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

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

North America Confectionery $ 1,993,079 $ 1,909,101 $ 4,445,244 $ 4,126,145

10 unchanged sentences

Costs associated with business realignment activities (see Note 9 )

1,517 699 3,866 1,980

Operating profit 560,665 456,531 1,360,589 1,177,521

2 unchanged sentences

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

84,484 19,658 87,467 30,065

Income before income taxes $ 439,520 $ 403,460 $ 1,198,776 $ 1,080,864

1 unchanged sentence

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

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in income $ 6,437 $ 8,754 $ 17,051 $ ( 42,071 )

Net (losses) gains on commodity derivative positions reclassified from unallocated to segment income ( 13,217 ) 32,084 ( 13,587 ) 55,530

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

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 .

Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ ( 6,780 ) $ 40,838 $ 3,464 $ 13,459

As of July 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 $ 5,267 .

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 $ 14,465 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

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

North America Confectionery $ 59,961 $ 57,439 $ 116,683 $ 113,347

4 unchanged sentences

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

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

United States $ 2,158,439 $ 2,060,047 $ 4,776,362 $ 4,400,693

3 unchanged sentences

A summary of our treasury stock activity is as follows:

Three Months Ended

April 2, 2023

Six Months Ended July 2, 2023

Shares Dollars

6 unchanged sentences

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 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

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(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.

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 July 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.

1 unchanged sentence

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.

The Hershey Company | Q2 2023 Form 10-Q | Page 29

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

CONTINGENCIES

8 unchanged sentences

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

In May 2023, 2,500,000 shares of Class B Common Stock were converted to Common Stock by Hershey Trust Company, as trustee for the School Trust.

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

Three Months Ended

April 2, 2023 April 3, 2022

July 2, 2023 July 3, 2022

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

19 unchanged sentences

Earnings Per Share—diluted $ 1.98 $ 1.88 $ 1.53 $ 1.44

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 earnings per share calculations for the three months ended July 2, 2023 and July 3, 2022 excluded 12 and 4 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q2 2023 Form 10-Q | Page 31

2 unchanged sentences

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

Six Months Ended

July 2, 2023 July 3, 2022

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

Basic earnings per share:

Allocation of distributed earnings (cash dividends paid) $ 305,944 $ 107,602 $ 263,337 $ 97,647

Allocation of undistributed earnings 432,943 147,679 356,240 131,810

Total earnings—basic $ 738,887 $ 255,281 $ 619,577 $ 229,457

Denominator (shares in thousands):

Total weighted-average shares—basic 148,914 55,864 146,248 59,530

Earnings Per Share—basic $ 4.96 $ 4.57 $ 4.24 $ 3.85

Diluted earnings per share:

Allocation of total earnings used in basic computation $ 738,887 $ 255,281 $ 619,577 $ 229,457

Reallocation of total earnings as a result of conversion of Class B common stock to Common stock 255,281 — 229,457 —

Reallocation of undistributed earnings — ( 669 ) — ( 722 )

Total earnings—diluted $ 994,168 $ 254,612 $ 849,034 $ 228,735

Denominator (shares in thousands):

Number of shares used in basic computation 148,914 55,864 146,248 59,530

Weighted-average effect of dilutive securities:

Conversion of Class B common stock to Common shares outstanding 55,864 — 59,530 —

Employee stock options 486 — 592 —

Performance and restricted stock units 423 — 491 —

Total weighted-average shares—diluted 205,687 55,864 206,861 59,530

Earnings Per Share—diluted $ 4.83 $ 4.56 $ 4.10 $ 3.84

The earnings per share calculations for the six months ended July 2, 2023 and July 3, 2022 excluded 12 and 4 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q2 2023 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)

OTHER (INCOME) EXPENSE, NET

1 unchanged sentence

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

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

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

$ 77,360 $ 14,848 $ 77,360 $ 27,440

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 $ 84,484 $ 19,658 $ 87,467 $ 30,065

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 for the School Trust, maintains voting control over The Hershey Company.

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

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

A summary of material related party transactions with Hershey Trust Company and/or its affiliates for the six months ended July 2, 2023 and July 3, 2022 is as follows:

Stock Purchase Agreement

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 ).

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.

The Hershey Company | Q2 2023 Form 10-Q | Page 33

4 unchanged sentences

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

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Raw materials $ 461,428 $ 372,612

28 unchanged sentences

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

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Accounts payable:

22 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements