What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-10-26 compared with 2023-07-27 · 153 added, 148 removed, 998 unchanged (23% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Net sales $ 3,029,987 $ 2,728,153 $ 8,507,881 $ 7,766,956

4 unchanged sentences

624,304 551,880 1,777,695 1,619,564

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

Business realignment costs — — 441 274

Operating profit

19 unchanged sentences

(in thousands)

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 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

7 unchanged sentences

Cash flow hedges:

(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 )

Gains (losses) on cash flow hedging derivatives 2,945 ( 1,365 ) 1,580 891 ( 706 ) 185 ( 538 ) ( 3,096 ) ( 3,634 ) 245 ( 1,343 ) ( 1,098 )

Reclassification to earnings 4,198 ( 163 ) 4,035 2,258 ( 643 ) 1,615 13,451 ( 3,267 ) 10,184 9,143 ( 1,666 ) 7,477

6 unchanged sentences

(in thousands, except share data)

July 2, 2023 December 31, 2022

October 1, 2023 December 31, 2022

Current assets:

27 unchanged sentences

Common stock, shares issued:

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

166,938,702 at October 1, 2023 and 163,439,248 at December 31, 2022

166,939 163,439

Class B common stock, shares issued:

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

54,613,514 at October 1, 2023 and 58,113,777 at December 31, 2022

54,614 58,114

2 unchanged sentences

Treasury—common stock shares, at cost:

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

17,063,009 at October 1, 2023 and 16,588,308 at December 31, 2022

( 1,776,262 ) ( 1,556,029 )

7 unchanged sentences

(in thousands)

Six Months Ended

July 2, 2023 July 3, 2022

Nine Months Ended

October 1, 2023 October 2, 2022

Operating Activities

32 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 38,270 ) 24,288

Net (decrease) increase in cash and cash equivalents ( 17,728 ) 10,456

Net increase (decrease) in cash and cash equivalents 7,363 ( 1,525 )

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

7 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

For the Three Months Ended October 1, 2023 and October 2, 2022

(in thousands)

6 unchanged sentences

Stockholders’

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

Net income 518,577 518,577

Other comprehensive income 16,966 16,966

Other comprehensive loss ( 29,606 ) ( 29,606 )

Dividends (including dividend equivalents):

6 unchanged sentences

Exercise of stock options and incentive-based transactions ( 598 ) 1,705 1,107

Balance, July 2, 2023

Repurchase of common stock (including excise tax) 17 17

Balance, October 1, 2023

$ — $ 166,939 $ 54,614 $ 1,321,533 $ 4,451,463 $ ( 1,776,262 ) $ ( 250,647 ) $ 3,967,640

6 unchanged sentences

Stockholders’

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

6 unchanged sentences

( 54,743 ) ( 54,743 )

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

Stock-based compensation 18,132 18,132

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

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

Balance, July 3, 2022

Balance, October 2, 2022

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

3 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

For the Nine Months Ended October 1, 2023 and October 2, 2022

(in thousands)

20 unchanged sentences

Repurchase of common stock (including excise tax) ( 242,091 ) ( 242,091 )

Balance, July 2, 2023

Balance, October 1, 2023

$ — $ 166,939 $ 54,614 $ 1,321,533 $ 4,451,463 $ ( 1,776,262 ) $ ( 250,647 ) $ 3,967,640

20 unchanged sentences

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

Balance, July 3, 2022

Balance, October 2, 2022

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

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 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.

Operating results for the quarter ended October 1, 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.

99 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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

The changes in the carrying value of goodwill by reportable segment for the nine months ended October 1, 2023 are as follows:

North America Confectionery North America Salty Snacks International Total

4 unchanged sentences

Foreign currency translation ( 154 ) — 1,149 995

Balance at July 2, 2023

Balance at October 1, 2023

$ 2,018,276 $ 657,002 $ 17,904 $ 2,693,182

4 unchanged sentences

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

July 2, 2023 December 31, 2022

October 1, 2023 December 31, 2022

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

8 unchanged sentences

$ 1,907,371 $ 1,966,269

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.

Total amortization expense for the three months ended October 1, 2023 and October 2, 2022 was $ 19,882 and $ 19,909 , respectively.

Total amortization expense for the nine months ended October 1, 2023 and October 2, 2022 was $ 59,620 and $ 59,827 , 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.

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;

We maintain a $ 1.35 billion unsecured revolving credit facility with the option to increase borrowings by an additional $ 500 million with the consent of the lenders.

The 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.

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.

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

As of October 1, 2023, we were in compliance with all covenants pertaining to the credit facility, and we had no significant compensating balance agreements that legally restricted access to 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:

July 2, 2023 December 31, 2022

October 1, 2023 December 31, 2022

Short-term foreign bank borrowings against lines of credit $ 181,988 $ 135,555

10 unchanged sentences

Maturity Date

July 2, 2023 December 31, 2022

October 1, 2023 December 31, 2022

2.625 % Notes (1)

38 unchanged sentences

Net interest expense consists of the following:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Interest expense $ 45,776 $ 38,520 $ 132,175 $ 109,526

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 $ 185,348 as of July 2, 2023 and $ 243,009 as of December 31, 2022.

Our open commodity derivative contracts had a notional value of $ 155,320 as of October 1, 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 $ 86,628 at July 2, 2023 and $ 59,448 at December 31, 2022.

The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 76,824 at October 1, 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 July 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 October 1, 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.

7 unchanged sentences

The change in fair value of these derivatives is recorded in selling, marketing and administrative expense, together with the change in the related liabilities.

The notional amount of the contracts outstanding at July 2, 2023 and December 31, 2022 was $ 21,740 and $ 18,803 , respectively.

The notional amount of the contracts outstanding at October 1, 2023 and December 31, 2022 was $ 23,641 and $ 18,803 , respectively.

The Hershey Company | Q3 2023 Form 10-Q | Page 14

2 unchanged sentences

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

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

July 2, 2023 December 31, 2022

The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of October 1, 2023 and December 31, 2022:

October 1, 2023 December 31, 2022

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

9 unchanged sentences

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

(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.

(2) As of October 1, 2023, amounts reflected on a net basis in liabilities were assets of $ 36,052 and liabilities of $ 36,023 , 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 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.

At October 1, 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 July 2, 2023 and July 3, 2022 was as follows:

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended October 1, 2023 and October 2, 2022 was as follows:

Non-designated Hedges Cash Flow Hedges

13 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:

The effect of derivative instruments on the Consolidated Statements of Income for the nine months ended October 1, 2023 and October 2, 2022 was as follows:

Non-designated Hedges Cash Flow Hedges

13 unchanged sentences

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 $ 27,088 as of July 2, 2023.

This amount is primarily associated with interest rate swap agreements.

9 unchanged sentences

(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:

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 1, 2023 and December 31, 2022:

Assets / Liabilities

Level 1 Level 2 Level 3 Total

July 2, 2023:

October 1, 2023:

Derivative Instruments:

15 unchanged sentences

Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of July 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 October 1, 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

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

October 1, 2023 December 31, 2022 October 1, 2023 December 31, 2022

Current portion of long-term debt $ 7,791 $ 749,345 $ 7,791 $ 753,578

27 unchanged sentences

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

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

The components of lease expense for the three months ended October 1, 2023 and October 2, 2022 were as follows:

Three Months Ended

Lease expense Classification July 2, 2023 July 3, 2022

Lease expense Classification October 1, 2023 October 2, 2022

Operating lease cost Cost of sales or SM&A (1) $ 12,101 $ 11,812

3 unchanged sentences

Net lease cost (2) $ 15,045 $ 14,381

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

The components of lease expense for the nine months ended October 1, 2023 and October 2, 2022 were as follows:

Nine Months Ended

Lease expense Classification October 1, 2023 October 2, 2022

Operating lease cost Cost of sales or SM&A (1) $ 36,464 $ 37,309

6 unchanged sentences

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

July 2, 2023 December 31, 2022

October 1, 2023 December 31, 2022

Weighted-average remaining lease term (years)

9 unchanged sentences

Supplemental balance sheet information related to leases were as follows:

Leases Classification July 2, 2023 December 31, 2022

Leases Classification October 1, 2023 December 31, 2022

Operating lease ROU assets Other non-current assets $ 315,524 $ 326,472

8 unchanged sentences

Total lease liabilities $ 390,983 $ 400,115

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

The maturity of our lease liabilities as of October 1, 2023 were as follows:

Operating leases Finance leases Total

9 unchanged sentences

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

Six Months Ended

July 2, 2023 July 3, 2022

Nine Months Ended

October 1, 2023 October 2, 2022

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

19 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 $ 126,114 and $ 133,029 as of July 2, 2023 and December 31, 2022, respectively.

Total investments in unconsolidated affiliates were $ 126,325 and $ 133,029 as of October 1, 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 Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Cost of sales $ ( 506 ) $ ( 1 ) $ 527 $ 3

Selling, marketing and administrative expense 80 394 2,472 2,096

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 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

Business realignment costs — — 441 274

(Benefits) costs associated with business realignment activities $ ( 426 ) $ 393 $ 3,440 $ 2,373

Costs recorded by program during the three and nine months ended October 1, 2023 and October 2, 2022 related to these activities were as follows:

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

International Optimization Program:

2 unchanged sentences

Total $ ( 426 ) $ 393 $ 3,440 $ 2,373

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 July 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 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 | Q3 2023 Form 10-Q | Page 21

2 unchanged sentences

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

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.

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.

This program was completed in 2023.

For the nine months ended October 1, 2023 and October 2, 2022, we recognized total costs associated with the International Optimization Program of $ 3,440 and $ 2,373 , respectively.

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

1 unchanged sentence

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

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

The effective tax rates for the nine months ended October 1, 2023 and October 2, 2022 were 18.3 % and 19.7 %, 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.

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 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.

5 unchanged sentences

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

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

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

For the nine months ended October 1, 2023, the tax-related provisions of the IRA did not have a material impact on our consolidated financial statements, including our annual effective tax rate, or on our liquidity.

The Hershey Company | Q3 2023 Form 10-Q | Page 22

4 unchanged sentences

Net Periodic Benefit Cost

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

The components of net periodic benefit cost for the three months ended October 1, 2023 and October 2, 2022 were as follows:

Pension Benefits Other Benefits

Three Months Ended Three Months Ended

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

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Service cost $ 3,747 $ 4,028 $ 57 $ 80

2 unchanged sentences

Amortization of prior service credit ( 1,414 ) ( 1,413 ) ( 13 ) —

Amortization of net loss 5,020 3,108 ( 333 ) 25

Amortization of net loss (gain) 4,974 4,563 ( 242 ) 26

Settlement loss 943 3,728 926 —

Total net periodic benefit cost $ 6,234 $ 7,743 $ 2,522 $ 1,260

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.

We made contributions of $ 987 and $ 5,314 to the pension plans and other benefits plans, respectively, during the third quarter of 2023.

In the third quarter of 2022, we made contributions of $ 824 and $ 1,484 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:

The components of net periodic benefit cost for the nine months ended October 1, 2023 and October 2, 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

Nine Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Service cost $ 11,269 $ 13,639 $ 166 $ 238

5 unchanged sentences

Total net periodic benefit cost $ 21,097 $ 17,557 $ 6,162 $ 3,782

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.

We made contributions of $ 4,849 and $ 16,224 to the pension plans and other benefits plans, respectively, during the first nine months of 2023.

In the first nine months of 2022, we made contributions of $ 4,580 and $ 12,059 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 | Q3 2023 Form 10-Q | Page 23

2 unchanged sentences

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

During the first nine 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.

In connection with the third quarter 2023 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 53 basis points higher 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.

Annuitization of Other Post Employment Benefits

On August 21, 2023, the Hershey Employee Benefits Committee approved the purchase of an irrevocable group annuity contract with an insurance company for eligible retirees of The Hershey Company Retiree Medical and Life Insurance Plan to cover their medical benefits.

On August 31, 2023, we paid $ 88,689 for the irrevocable group annuity contract.

As a result of this transaction, we remeasured the projected benefit obligation and recognized a $ 926 non-cash pre-tax settlement charge during the quarter ended October 1, 2023.

STOCK COMPENSATION PLANS

14 unchanged sentences

In addition, historical data is used to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.

The Hershey Company | Q3 2023 Form 10-Q | Page 24

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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 Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Pre-tax compensation expense

2 unchanged sentences

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

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.

As of October 1, 2023, total stock-based compensation expense related to non-vested awards not yet recognized was $ 94,733 and the weighted-average period over which this amount is expected to be recognized was approximately 1.9 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.

The Hershey Company | Q2 2023 Form 10-Q | Page 24

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 July 2, 2023 is as follows:

A summary of activity relating to grants of stock options for the period ended October 1, 2023 is as follows:

Stock Options Shares Weighted-Average

4 unchanged sentences

Exercised ( 238,117 ) $ 103.17

Outstanding as of July 2, 2023

Outstanding as of October 1, 2023

743,732 $ 105.70 3.5 years $ 70,417

Options exercisable as of July 2, 2023

Options exercisable as of October 1, 2023

717,677 $ 103.21 3.3 years $ 69,525

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 weighted-average fair value of options granted was $ 57.65 and $ 37.28 per share for the periods ended October 1, 2023 and October 2, 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:

Six Months Ended

July 2, 2023 July 3, 2022

Nine Months Ended

October 1, 2023 October 2, 2022

Dividend yields

2 unchanged sentences

Expected term in years 6.3 6.3

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.

The total intrinsic value of options exercised was $ 34,060 and $ 36,362 for the periods ended October 1, 2023 and October 2, 2022, respectively.

The Hershey Company | Q3 2023 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)

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 six months ended July 2, 2023 and July 3, 2022 can range from 0 % to 250 % of the targeted amounts.

The performance scores of PSU grants during the nine months ended October 1, 2023 and October 2, 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 six months ended July 2, 2023 and July 3, 2022, we awarded RSUs to certain executive officers and other key employees under the EICP.

During the nine months ended October 1, 2023 and October 2, 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-

The Hershey Company | Q2 2023 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)

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

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 July 2, 2023 is as follows:

A summary of activity relating to grants of PSUs and RSUs for the period ended October 1, 2023 is as follows:

Performance Stock Units and Restricted Stock Units

7 unchanged sentences

( 21,345 ) $ 204.92

Outstanding as of July 2, 2023

Outstanding as of October 1, 2023

1,027,737 $ 206.49

(1) Reflects the net number of PSUs above and below target levels based on the performance metrics.

The Hershey Company | Q3 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)

The following table sets forth information about the fair value of the PSUs and RSUs granted for potential future distribution to employees and non-employee directors.

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.

Six Months Ended

July 2, 2023 July 3, 2022

Nine Months Ended

October 1, 2023 October 2, 2022

Units granted

6 unchanged sentences

Expected volatility 19.2 % 25.3 %

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.

The fair value of shares vested totaled $ 103,600 and $ 103,081 for the periods ended October 1, 2023 and October 2, 2022, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 261,654 units as of October 1, 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 Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

North America Confectionery $ 2,457,647 $ 2,235,550 $ 6,902,891 $ 6,361,695

8 unchanged sentences

Unallocated corporate expense (1) 199,270 179,632 562,974 518,834

Unallocated mark-to-market losses (gains) on commodity derivatives ( 6,780 ) 40,838 3,464 13,459

Costs associated with business realignment activities (see Note 9 )

Unallocated mark-to-market losses on commodity derivatives 1,753 50,065 5,217 63,524

(Benefits) costs associated with business realignment activities (see Note 9 )

( 426 ) 393 3,440 2,373

7 unchanged sentences

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

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 (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 .

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in income $ ( 17,103 ) $ 14,044 $ ( 52 ) $ ( 28,027 )

Net gains on commodity derivative positions reclassified from unallocated to segment income 18,856 36,021 5,269 91,551

Net losses on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ 1,753 $ 50,065 $ 5,217 $ 63,524

As of October 1, 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 $ 3,515 .

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 $ 1,502 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 Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

North America Confectionery $ 59,921 $ 56,678 $ 176,604 $ 170,025

4 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

United States $ 2,683,348 $ 2,392,590 $ 7,459,710 $ 6,793,283

3 unchanged sentences

A summary of our treasury stock activity is as follows:

Six Months Ended July 2, 2023

Nine Months Ended October 1, 2023

Shares Dollars

8 unchanged sentences

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 July 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 October 1, 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.

18 unchanged sentences

Three Months Ended

July 2, 2023 July 3, 2022

October 1, 2023 October 2, 2022

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

19 unchanged sentences

Earnings Per Share—diluted $ 2.52 $ 2.36 $ 1.94 $ 1.81

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 earnings per share calculations for the three months ended October 1, 2023 and October 2, 2022 excluded 8 and 4 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q3 2023 Form 10-Q | Page 32

2 unchanged sentences

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

Six Months Ended

July 2, 2023 July 3, 2022

Nine Months Ended

October 1, 2023 October 2, 2022

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

19 unchanged sentences

Earnings Per Share—diluted $ 7.36 $ 6.91 $ 6.04 $ 5.65

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 earnings per share calculations for the nine months ended October 1, 2023 and October 2, 2022 excluded 12 and 4 stock options (in thousands), respectively, that would have been antidilutive.

The Hershey Company | Q3 2023 Form 10-Q | Page 33

5 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

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

10 unchanged sentences

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:

A summary of material related party transactions with Hershey Trust Company and/or its affiliates for the nine months ended October 1, 2023 and October 2, 2022 is as follows:

Stock Purchase Agreement

13 unchanged sentences

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

July 2, 2023 December 31, 2022

October 1, 2023 December 31, 2022

Raw materials $ 469,455 $ 372,612

28 unchanged sentences

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

July 2, 2023 December 31, 2022

October 1, 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