What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-02-17 · 173 added, 160 removed, 498 unchanged (40% of the section changed)

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We are becoming more disciplined in our focus on platform innovation, which should enable sustainable growth over time and significant extensions to our core.

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

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

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

Our expansion into snacking was fueled by the acquisitions of Dot’s and Pretzels in December 2021 and the acquisition of Weaver in 2023, which are included in our North America Salty Snacks segment.

• Deliver Profitable International Growth .

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

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

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

We utilize continuous listening surveys that are distributed throughout the year to all employees globally to hear their thoughts on the Company’s direction and their place in it.

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

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

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

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

While we focus on sustainability and social impact across our value chain, we continue to improve and focus on the lives of cocoa farmers and cocoa communities, the environmental priorities of climate change and the role of packaging in our business, responsibly and sustainably sourcing the inputs to our products and increasing investments in human rights and diversity initiatives and growing diverse representation across the organization.

In 2023, we maintained fair and equitable pay achievements, including 1:1 aggregate people of color pay equity (2021) and 1:1 aggregate gender pay (2020) for salaried employees in the United States.

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

Through our focus on sustainability and social impact across our value chain, we continue to improve and focus on the lives of cocoa farmers and cocoa communities, the environmental priorities of climate change and the role of packaging in our business, responsibly and sustainably sourcing the inputs to our products and increasing investments in human rights and diversity initiatives and growing diverse representation across the organization.

Hershey is a global confectionery leader known for making more moments of goodness through chocolate, sweets, mints and other great tasting snacks.

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Business Acquisitions and Divestitures

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.

In December 2021, we completed the acquisition of Pretzels Inc.

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

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

Additionally, we completed the acquisition of Dot’s Pretzels, LLC (“Dot’s”), previously a privately held company that produces and sells pretzels and other snack food products to retailers and distributors in the United States, with Dot’s Homestyle Pretzels snacks as its primary product.

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

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

The Hershey Company | 2023 Form 10-K | Page 23

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

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Total proceeds from the divestiture and the impact on our consolidated financial statements were immaterial.

During the second quarter of 2020, we completed the divestitures of KRAVE Pure Foods, Inc.

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

TRENDS AFFECTING OUR BUSINESS

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

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

and globally.

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

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

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

Throughout 2023, the rate of inflation has slowed;

however, negative macroeconomic conditions and future outlook, including fears of a pending recession, have negatively impacted consumer behaviors.

Net sales and net income increased during the year ended December 31, 2023;

however, this was primarily driven by price increases on certain products across our portfolio.

Additionally, we continued to experience corresponding incremental costs and gross margin pressures during the year ended December 31, 2023 (see Consol idated R esults of Operations included in this MD&A).

Despite specific actions taken to mitigate these gross margin pressures, higher prices for direct materials used to manufacture our products were, and continue to be, the primary incremental cost to our business.

We utilize many exchange traded commodities for our business that are subject to price volatility, specifically cocoa products, which experienced an average increase in market prices of approximately 32% during 2023.

We continue to monitor and use our risk management strategy where possible to hedge commodity prices in order to mitigate corresponding increases in our raw materials and energy costs.

Furthermore, certain geopolitical events, specifically the conflict between Russia and Ukraine, have increased global economic and political uncertainty.

For the year ended December 31, 2023, this conflict did not have a material impact on our commodity prices or supply availability.

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

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

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

As of December 31, 2023, we believe we have sufficient liquidity to satisfy our key strategic initiatives and other material cash requirements in both the short-term and in the long-term;

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

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

Based on the length and severity of fluctuating levels of inflation, including price volatility for our commodities, the likelihood of a potential recession, changes in consumer shopping and consumption behavior, and changes in geopolitical events, including the ongoing conflict between Russia and Ukraine, we may experience increasing supply chain costs, higher inflation and other impacts to our business.

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

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Gross margin 44.8 % 43.2 % 45.1 %

SM&A expense 2,236.0 2,001.4 1,890.9 11.7 % 5.8 %

Selling, Marketing & Administrative (“SM&A”) expense 2,436.5 2,236.0 2,001.4 9.0 % 11.7 %

SM&A expense as a percent of net sales 21.8 % 21.5% 22.3%

Long-lived asset impairment charges — — 9.1 NM NM

Business realignment costs 0.4 2.0 3.5 (77.8) % (43.6) %

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2023 compared with 2022

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

Net sales were $11,165.0 million in 2023 compared to $10,419.3 million in 2022, an increase of $745.7 million, or 7.2%.

The net sales increase reflects a favorable price realization of 8.3% due to higher list prices across all segments and by a favorable impact from foreign currency exchange rates of 0.2%.

These increases were slightly offset by a volume decrease of 1.3% due to a decrease in consumer demand primarily in everyday core U.S.

confection brands.

2022 compared with 2021

Net sales were $10,419.3 million in 2022 compared to $8,971.3 million in 2021, an increase of $1,448.0 million, or 16.1%.

The net sales increase reflects a volume increase of 8.0% due to higher prices on certain products, a 4.3% benefit from net acquisitions and divestitures driven by the 2021 acquisitions of Lily’s, Dot’s and Pretzels and a volume increase of 4.0% due to an increase in consumer demand primarily in everyday core U.S.

confection brands and salty snack brands.

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

2021 compared with 2020

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

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

Marketplace Metrics

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retail takeaway increased 6.0% in the expanded multi-outlet combined plus convenience store channels (IRI MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items.

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

candy, mint and gum (“CMG”) consumer takeaway increased 6.0% and experienced a CMG market share decline of 83 basis points.

Our Salty consumer takeaway increased 5.6% and experienced a Salty market share decline of 9 basis points.

The Hershey Company | 2023 Form 10-K | Page 25

The CMG consumer takeaway and market share information reflect measured channels of distribution accounting for approximately 90% of our U.S.

The CMG consumer takeaway and market share information reflect measured channels of distribution accounting for approximate ly 90% of our U.S.

confectionery retail business.

These channels of distribution primarily include food, drug, mass merchandisers and convenience store channels, plus Wal-Mart Stores, Inc., partial dollar, club and military channels.

These metrics are based on measured market scanned purchases as reported by Information Resources, Incorporated (“IRI”), the Company’s market insights and analytics provider, and provide a means to assess our retail takeaway and market position relative to the overall category.

These channels of distribution primarily include food, drug, mass merchandisers and co nvenience store channels, plus Wal-Mart Stores, Inc., partial dollar, club and military channels.

These metrics are based on measured market scanned purchases as reported by Circana , the Company’s market insights and analytics provider, and provide a means to assess our retail takeaway and market position relative to the overall category.

Cost of Sales and Gross Margin

2023 compared with 2022

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

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

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

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

Cost of sales were $6,167.2 million in 2023 compared to $5,920.5 million in 2022, an increase of $246.7 million, or 4.2%.

The increase included $356.2 million of unfavorable costs driven by higher supply chain costs, including higher labor costs partially offset by lower logistics costs, and unfavorable mix.

The increase was further driven by an incremental $97.7 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases (See Item 7A - Quantitative and Qualitative Disclosures About Market Risk for more information).

These increases were partially offset by $207.2 million of favorable supply chain productivity and price realization.

Gross margin was 44.8% in 2023 compared with 43.2% in 2022, an increase of 160 basis points.

The increase was driven by favorable price realization and increased supply chain productivity.

The increase was partially offset by unfavorable activity on our mark-to-market impact from commodity derivative instruments, higher supply chain costs, including higher labor costs and increased waste.

The increase was further driven by unfavorable mix and foreign exchange rates.

2022 compared with 2021

Cost of sales were $5,920.5 million in 2022 compared with $4,922.7 million in 2021, an increase of $997.8 million, or 20.3%.

The increase included $767.7 million of unfavorable costs driven by higher sales volume and higher supply chain inflation costs, including higher logistics and labor costs.

The increase was further driven by an incremental $40.8 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases.

Additionally, we incurred incremental costs of $263.3 million associated with our 2021 acquisitions of Dot’s and Pretzels.

These increases were offset by $74.0 million of favorable price realization and supply chain productivity.

Gross margin was 43.2% in 2022 compared with 45.1% 2021, a decrease of 190 basis points.

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

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

2021 compared with 2020

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

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

These drivers were partially offset by the incremental $78.8 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases;

however, our mark-to-market activity was significantly impacted by financial market volatility during March 2020 amid the COVID-19 outbreak.

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

Gross margin decreased by 30 basis points in 2021 compared with 2020.

The decrease was driven by higher freight and logistics costs and additional plant costs.

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

Selling, Marketing and Administrative

2023 compared with 2022

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

Selling, marketing and administrative (“SM&A”) expenses were $2,436.5 million in 2023 compared to $2,236.0 million in 2022, an increase of $200.5 million, or 9.0%.

The increase was driven by increased corporate expenses.

Total advertising and related consumer marketing expenses increased 12.2% driven by North America Confectionery and North America Salty Snacks.

SM&A expenses, excluding advertising and related consumer marketing, increased approximately 7.5% in 2023 driven by higher compensation costs and investments in capabilities and technology across segments.

2022 compared with 2021

SM&A expenses were $2,236.0 million in 2022 compared to $2,001.4 million in 2021, an increase of $234.6 million, or 11.7%, driven by increased corporate expenses.

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

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

2021 compared with 2020

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

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

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

The Hershey Company | 2023 Form 10-K | Page 26

Long-Lived Asset Impairment Charges

In 2022 and 2021, we recorded no impairments charges.

In 2020, we recorded the following impairment charges:

For the year ended December 31, 2020

In millions of dollars

Adjustment to disposal group (1) $ 6.2

Other asset write-down (2) 2.9

Long-lived asset impairment charges $ 9.1

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

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

The sale of the LSFC joint venture was completed in January 2021.

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

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

These estimates and assumptions are subject to change due to changing economic and competitive conditions.

Business Realignment Activities

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The 2023, 2022, and 2021 costs related primarily to the International Optimization Program, a program focused on optimizing our China operating model to improve our operational efficiency and provide for a strong, sustainable and simplified base going forward.

Additionally, in February 2024, the Board of Directors approved the Advancing Agility & Automation Initiative, which is a multi-year productivity program to improve supply chain and manufacturing-related spend, optimize selling, general and administrative expenses, leverage new technology and business models to further simplify and automate processes, and generate long-term savings.

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

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2023 compared with 2022

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

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

Operating profit was $2,560.9 million in 2023 compared to $2,260.8 million in 2022, an increase of $300.1 million, or 13.3%.

The increase was predominantly due to higher gross profit, partially offset by higher SM&A expenses, as noted above.

Operating profit margin increased to 22.9% in 2023 from 21.7% in 2022 by the same factors noted above in gross margin.

2022 compared with 2021

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

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

Operating profit was $2,260.8 million in 2022 compared to $2,043.7 million in 2021, an increase of $217.1 million, or 10.6%.

The increase was predominantly due to higher gross profit, partially offset by higher SM&A expenses, as noted above.

Operating profit margin decreased to 21.7% in 2022 from 22.8% in 2021 driven by these same factors.

Interest Expense, Net

2023 compared with 2022

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

Net interest expense was $151.8 million in 2023 compared to $137.6 million in 2022, an increase of $14.2 million, or 10.3%.

The increase was primarily due to higher rates on short-term debt balances in 2023 versus 2022, specifically related to outstanding commercial paper borrowings, and higher rates on long-term debt balances, specifically related to the $350 million 4.25% Notes and $400 million 4.50% Notes issued in May 2023.

The increase in the expense was partially offset by an increase in interest income.

2022 compared with 2021

Net interest expense was $137.6 million in 2022 compared to $127.4 million in 2021, an increase of $10.2 million, or 8.0%.

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

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

2021 compared with 2020

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

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

The Hershey Company | 2023 Form 10-K | Page 27

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2023 compared with 2022

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

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

Other (income) expense, net totaled an expense of $237.2 million in 2023 versus an expense of $206.1 million in 2022, an increase of $31.1 million, or 15.1%.

The increase in the net expense was primarily driven by an increase of $22.2 million of higher write-downs on equity investments qualifying for tax credits in 2023 versus 2022 and an increase of $9.5 million of higher non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

2022 compared with 2021

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

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

Other (income) expense, net totaled an expense of $206.1 million in 2022 versus an expense of $119.1 million in 2021, an increase of $87.0 million, or 73.1%.

The increase in the net expense was primarily driven by an increase of $75.4 million of higher write-downs on equity investments qualifying for tax credits in 2022 versus 2021 and an increase of $13.3 million of non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

Income Taxes and Effective Tax Rate

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Relative to the 21% statutory rate, the 2023 effective tax rate benefited from investment tax credits, partially offset by state taxes.

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

tax litigation matter, as well as state taxes.

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

2022 compared with 2021

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

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

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

tax litigation matter, as well as state taxes.

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

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

2023 compared with 2022

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

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

Net income was $1,861.8 million in 2023 compared to $1,644.8 million in 2022, an increase of $217.0 million, or 13.2%.

EPS-diluted was $9.06 in 2023 compared to $7.96 in 2022, an increase of $1.1, or 13.8%.

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

Our 2023 EPS-diluted also benefited from lower weighted-average shares outstanding as a result of share repurchases pursuant to our Board-approved repurchase programs..

2022 compared with 2021

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

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

Net income was $1,644.8 million in 2022 compared to $1,477.5 million in 2021, an increase of $167.3 million, or 11.3%.

EPS-diluted was $7.96 in 2022 compared to $7.11 in 2021, an increase of $0.85, or 12.0%.

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

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

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Unallocated mark-to-market losses (gains) on commodity derivatives (2) 58.9 78.2 (24.4)

Long-lived asset impairment charges — — 9.1

Costs associated with business realignment activities 3.4 4.4 16.6

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2023 compared with 2022

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

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

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

Net sales of our North America Confectionery segment were $9,123.1 million in 2023 compared to $8,536.5 million in 2022, a increase of $586.6 million, or 6.9%.

The increase reflected a favorable price realization of 9.0% due to price increases on certain products across our portfolio.

The increases were partially offset by a volume decrease of 1.9% driven by a decrease in everyday core U.S.

confection brands, and an unfavorable impact from foreign currency exchange rates of 0.2%.

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

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Our net sales for licensing and owned retail increased approximately 12.1% during 2023 compared to 2022.

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

Our North America Confectionery segment income was $3,117.0 million in 2023 compared to $2,811.1 million in 2022, a increase of $305.9 million, or 10.9%.

The increase was primarily due to favorable price realization and supply chain productivity, partially offset by higher supply chain costs, including higher labor costs, as well as unfavorable product mix.

2022 compared with 2021

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

confection brands, a favorable price realization of 2.1% due to higher prices on certain products, a 0.9% benefit from the 2021 acquisition of Lily’s and a favorable impact from foreign currency exchange rates of 0.3%.

Net sales of our North America Confectionery segment were $8,536.5 million in 2022 compared to $7,682.4 million 2021, an increase of $854.1 million, or 11.1%.

The increase reflected a favorable price realization of 8.1% due to higher prices on certain products, a volume increase of 2.8% due to an increase in everyday core U.S.

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

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

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

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

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

As a result, our net sales increased approximately 37.4% during 2021 compared to 2020.

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

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

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

Our North America Confectionery segment income was $2,811.1 million in 2022 compared to $2,475.9 million in 2021, an increase of $335.2 million, or 13.5%.

The increase was primarily due to favorable price realization and volume increases, partially offset by higher supply chain inflation costs, including higher logistics and labor costs, as well as, unfavorable product mix.

The Hershey Company | 2023 Form 10-K | Page 30

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2023 compared with 2022

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

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

Net sales for our North America Salty Snacks segment were $1,092.7 million in 2023 compared to $1,029.4 million in 2022, an increase of $63.3 million, or 6.1%.

The increase reflected a favorable price realization of 5.4% due to price increases on products across our portfolio, primarily SkinnyPop and Dot’s Homestyle Pretzels snacks, and a volume increase of 0.7%, primarily related to Dot’s Homestyle Pretzels snacks.

Our North America Salty Snacks segment income was $158.3 million in 2023 compared to $159.9 million in 2022 a decrease of $1.6 million, or 1.0%.

The decrease is primarily due to increased advertising and related consumer marketing costs and costs related to the voluntary removal of certain Paqui branded items in 2023.

The decrease was partially offset by favorable price realization and favorable product mix.

2022 compared with 2021

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

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

Net sales for our North America Salty Snacks segment was $1,029.4 million in 2022 compared to $555.4 million in 2021, an increase of $474.0 million, or 85.3%.

The increase reflected a 64.0% benefit from the 2021 acquisitions of Dot’s and Pretzels, a favorable price realization of 12.0% due to higher prices on certain products and a volume increase of 9.3% primarily related to SkinnyPop and Pirates Booty snacks.

Our North America Salty Snacks segment income was $159.9 million in 2022 compared to $100.7 million in 2021, an increase of $59.2 million, or 58.8%.

The increase is primarily due to favorable price realization and volume increases, partially offset by higher supply chain inflation costs, including higher logistics and labor costs, as well as, unfavorable product mix.

The Hershey Company | 2023 Form 10-K | Page 31

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

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

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

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

International results, which accounted for 8.5%, 8.2% and 8.2% of our net sales in 2023, 2022 and 2021, respectively.

International results for the years ended December 31, 2023, 2022 and 2021 were as follows:

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Net sales $ 949.2 $ 853.4 $ 733.5 11.2 % 16.3 %

Segment income 107.9 74.2 — 45.4 % NM

Segment income 148.3 107.9 74.2 37.4 % 45.4 %

Segment margin 15.6 % 12.6 % 10.1 %

NM = not meaningful

2023 compared with 2022

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

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

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

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

Net sales of our International segment were $949.2 million in 2023 compared to $853.4 million in 2022, an increase of $95.8 million, or 11.2%.

The increase reflected a favorable price realization of 4.7%, driven by price increases across the segment, a favorable impact from foreign currency exchange rates of 3.4%, primarily driven by Mexico, and a volume increase of 3.1%.

The net sales increase was primarily attributable to World Travel Retail, Mexico and Brazil & Latin America, where net sales increased 15.6%, 14.3% and 13.0%, respectively.

Our International segment income was $148.3 million in 2023 compared to $107.9 million in 2022, an increase of $40.4 million, or 37.4%, primarily resulting from favorable price realization, favorable foreign currency exchange rates, and minimal volume increases, partially offset by increased supply chain costs.

2022 compared with 2021

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

The volume increase was primarily attributed to solid marketplace growth in Mexico, India, and Brazil, where net sales increased by 39.0%, 23.9% and 21.3%, respectively.

Net sales of our International segment were $853.4 million in 2022 compared to $733.5 million in 2021, an increase of $119.9 million, or 16.3% reflecting a volume increase of 11.9%, a favorable price realization of 4.1%, and a favorable impact from foreign currency exchange rates of 0.3%.

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

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

These increases also benefited from a favorable impact from foreign currency exchange rates of 1.0%.

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

Our International segment income was $107.9 million in 2022 compared to $74.2 million in 2021, an increase of $33.7 million, or 45.4%, primarily resulting from volume increases, favorable price realization, and the execution of our International Optimization Program in China, as we streamline and optimize our China operating model.

The Hershey Company | 2023 Form 10-K | Page 32

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Unallocated corporate expense includes centrally-managed (a) corporate functional costs relating to legal, treasury, finance and human resources, (b) expenses associated with the oversight and administration of our global operations, including warehousing, distribution and manufacturing, information systems and global shared services, (c) non-cash stock-based compensation expense and (d) other gains or losses that are not integral to segment performance.

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

Unallocated corporate expense totaled $800.4 million in 2023 as compared to $735.5 million in 2022, an increase of $64.9 or, or 8.8%.

The increase was primarily driven by incremental investments in capabilities and technology, higher compensation costs, and an increase in acquisition and integration related costs.

Unallocated corporate expense totaled $735.5 million in 2022 as compared to $614.9 million in 2021, an increase of $120.6 million, or 19.6%.

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

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

LIQUIDITY AND CAPITAL RESOURCES

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Cash classified as assets held for sale — — 11.4

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

(Decrease) increase in cash and cash equivalents $ (62.0) $ 134.6 $ (814.7)

Operating activities

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We meet these needs primarily with cash on hand, bank borrowings or the issuance of commercial paper.

We generated cash of $2.32 billion from operating activities in 2023, a decrease of $4.6 million compared to $2.33 billion in 2022.

The decrease in net cash provided by operating activities was mainly driven by the following factors:

• In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, consumed cash of $209.0 million in 2023, compared to $8.6 million in 2022.

This $200.4 million fluctuation was mainly driven by mainly driven by an increase in cash used by accounts receivable due to an increase in sales of U.S.

seasonal products and the timing of vendor and supplier payments.

• Timing of income tax payments contributed to a decrease in operating cash of $32.5 million in 2023, compared to an increase of $5.0 million in 2022.

This $37.5 million fluctuation was primarily due to the variance in actual tax

The Hershey Company | 2023 Form 10-K | Page 33

expense for 2023 relative to the timing of quarterly estimated tax payments.

We paid cash of $303.9 million for income taxes during 2023 compared to $221.3 million in the same period of 2022.

• Other assets and liabilities consumed cash of $100.4 million in 2023, compared to $25.7 million in 2022.

This $74.7 million fluctuation was primarily due to our purchase of an irrevocable group annuity contract to settle a portion of our post retirement benefit obligation.

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

◦ Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, write-down of equity investments and other charges) resulted in $256.7 million of higher cash flow in 2023 relative to 2022.

We generated cash of $2.3 billion from operating activities in 2022, an increase of $244.9 million compared to $2.1 billion in 2021.

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

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

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

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

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

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

inventories, specifically our everyday core U.S.

confection brands and salty snack brands.

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

Pension and Post-Retirement Activity.

We recorded net periodic benefit costs of $43.2 million, $36.3 million and $28.4 million in 2023, 2022 and 2021, respectively, relating to our benefit plans (including our defined benefit and other post retirement plans).

The main drivers of fluctuations in expense from year to year are assumptions in formulating our long-term estimates, including discount rates used to value plan obligations, expected returns on plan assets, the service and interest costs and the amortization of actuarial gains and losses.

The main drivers of fluctuations in expense from year to year are assumptions in formulating our long-term estimates, including discount rates used to value the service and interest costs and the amortization of actuarial gains and losses.

The funded status of our qualified defined benefit pension plans is dependent upon many factors, including returns on invested assets, the level of market interest rates and the level of funding.

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

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

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

We used cash of $1.2 billion for investing activities in 2023 compared to $0.8 billion in 2022, with the increase in cash spend driven by an increase of investments in capabilities and technology as well as a higher level of acquisition activity.

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

Primary investing activities include the following:

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We expect 2024 capital expenditures, including capitalized software, to approximate $600 million to $650 million.

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

The decrease in our 2024 capital expenditures is largely driven by the wind down of our key strategic initiatives, including completion of the upgrade of a new ERP system across the enterprise in 2024.

We intend to use our existing cash and internally generated funds to meet our 2024 capital requirements.

The Hershey Company | 2023 Form 10-K | Page 34

• Investments in partnerships qualifying for tax credits .

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• Business acquisitions .

In 2022 and 2020, we had no acquisition activity.

In 2023, we spent $165.8 million to acquire Weaver (May 2023).

In 2022, we had no acquisition activity.

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

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In 2023, 2022, and 2021, our other investing activities were minimal.

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

Financing activities

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

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

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

Financing activities in 2023 used cash of $1.1 billion, compared to cash used of $1.4 billion in 2022.

We used cash of $0.7 billion for financing activities in 2021.

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

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

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

In 2023, our short-term borrowings increased $26.0 million predominately through the issuance of short-term commercial paper, as well as an increase in short-term foreign bank borrowings.

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

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

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

• Long-term debt borrowings and repayments .

In May 2023, we repaid $250 million of 2.625% Notes and $500 million of 3.375% Notes due upon their maturities.

In May 2023, we issued $350 million of 4.250% Notes due in May 2028 and $400 million 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 $744.1 million.

In 2022, long-term debt activity was minimal.

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

In May 2020, we issued $300 million of 0.900% Notes due in 2025, $350 million of 1.700% Notes due in 2030 and $350 million of 2.650% Notes due in 2050 (the “2020 Notes”).

Proceeds from the issuance of the 2020 Notes, net of discounts and issuance costs, totaled $989.9 million.

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

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

In 2024, we expect our long-term debt repayments to approximate $300 million upon the maturity of $300 million of 2.050% Notes due in November 2024.

• Dividend payments .

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Total cash dividends paid $ 207.4 $ 206.1 $ 237.8 $ 237.8

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

Declaration date January 31, 2023 April 25, 2023 July 27, 2023 October 25, 2023

Record date February 17, 2023 May 19, 2023 August 18, 2023 November 17, 2023

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Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation $ 27.4 $ 185.6 $ 308.0

Cash used for total share repurchases 389.0 458.0 211.2

Cash used for total share repurchases (excluding excise tax) $ 267.3 $ 389.0 $ 458.0

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

(1) In February 2022, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the School Trust at a price equal to $203.35 per share, for a total purchase price of $203.4 million.

(1) In February 2023 and 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 in 2023 and 2022 of the Company’s Common Stock from the School Trust at a price equal to $239.91 per share, for a total purchase price of $239.9 million in 2023.

In 2022 the Company purchased the common stock at a price equal to $203.35 per share, for a total purchase price of $203.4 million.

As a result of the 2023 share repurchase, our July 2018 share repurchase authorization program was completed, and approximately $370.1 million remains available for repurchases under our May 2021 share repurchase authorization.

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

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

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 December 31, 2023, approximately $370.1 million remained available for repurchases under our May 2021 share repurchase authorization.

In December 2023, our Board of Directors approved an additional $500 million share repurchase authorization.

This program is to commence after the existing 2021 authorization is completed and is to be utilized at management’s discretion.

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We expect 2024 share repurchases to be in line with our traditional buyback strategy.

Additionally, in February 2023, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the School Trust at a price equal to $239.91 per share, for a total purchase price of $239.9 million.

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

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

In 2023 we received $26.0 million from employee exercises of stock options and paid $35.0 million of employee taxes withheld from share-based awards.

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

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

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

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

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

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

Our cash and cash equivalents at the end of 2023 decreased $62.0 million compared to the 2022 year-end balance as a result of the net uses of cash outlined in the previous discussion.

Approximately 80% of the balance of our cash and cash equivalents at December 31, 2023 was held by subsidiaries domiciled outside of the United States.

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We use debt financing to lower our overall cost of capital which increases our return on stockholders’ equity.

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

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

Our total short- and long-term debt was $4.8 billion at December 31, 2023 and December 31, 2022.

Our total debt remained consistent in 2023 primarily due to the repayment of $250 million of 2.625% Notes and $500 million of 3.375% Notes due upon their maturity in May 2023 offset by the issuance of $350 million of 4.250% Notes due in May 2028 and $400 million of 4.500% Notes due in May 2033.

As a source of short-term financing, 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.

As of December 31, 2022, the termination date of this agreement is July 2, 2024, however, we may extend the termination date for up to two additional one-year periods upon notice to the administrative agent under the facility.

As of December 31, 2023, the termination date of this agreement is 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.

We may use these funds for general corporate purposes, including commercial paper backstop and business acquisitions.

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(2) Includes the minimum rental commitments (including imputed interest) under non-cancelable operating leases primarily for offices, retail stores, warehouses and distribution facilities.

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

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

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

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We sponsor various defined benefit pension plans.

The primary plans are The Hershey Company Retirement Plan and The Hershey Company Retirement Plan for Hourly Employees, which are cash balance plans that provide pension benefits for most U.S.

The primary plans were The Hershey Company Retirement Plan (“Retirement Plan”) and the Hershey Company Retirement Plan for Hourly Employees (“Hourly Plan”).

These are cash balance plans that provide pension benefits for most U.S.

employees hired prior to January 1, 2007.

Effective December 31, 2023, the Hourly Plan merged into the Retirement Plan and the name was changed to The Hershey Retirement Plan for Salaried and Hourly Employees.

We also sponsor two primary other post-employment benefit (“OPEB”) plans, consisting of a health care plan and life insurance plan for retirees.

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We consider a number of factors when setting assumptions with respect to the long-term rate of return, including current and expected asset allocation and historical and expected returns on the plan asset categories.

Actual asset allocations are regularly reviewed and periodically rebalanced to the targeted allocations when considered appropriate.

Investment gains or losses represent the difference between the expected return estimated using the

The Hershey Company | 2023 Form 10-K | Page 40

long-term rate of return and the actual return realized.

allocations are regularly reviewed and periodically rebalanced to the targeted allocations when considered appropriate.

Investment gains or losses represent the difference between the expected return estimated using the long-term rate of return and the actual return realized.

For 2023, we increased the expected return on plan assets assumption to 6.7% from the 6.3% assumption used during 2022.

The historical average return (compounded annually) over the 20 years prior to December 31, 2023 was approximately 6.7%.

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

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

As of December 31, 2023, our plans had cumulative unrecognized investment and actuarial losses of approximately $181 million.

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

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

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Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

The Hershey Company | 2023 Form 10-K | Page 41

Goodwill and indefinite-lived intangible assets are not amortized, but instead, are evaluated for impairment annually or more often if indicators of a potential impairment are present.

Our annual impairment tests are conducted at the beginning of the fourth quarter.

The Hershey Company | 2022 Form 10-K | Page 39

We test goodwill for impairment by performing either a qualitative or quantitative assessment.

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At December 31, 2023, the net book value of our goodwill totaled $2.7 billion.

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

Based on our testing, all of our reporting units had an excess fair value well over the their respective carrying values.

As it relates to our 2023 annual testing performed at the beginning of the fourth quarter, we tested all of our reporting units using a quantitative assessment.

Based on our testing, all of our reporting units had an excess fair value well over their respective carrying values.

There were no other events or circumstances that would indicate that impairment may exist.

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We apply a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions.

Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately realized upon settlement.

Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately

The Hershey Company | 2023 Form 10-K | Page 42

realized upon settlement.

Future changes in judgments and estimates related to the expected ultimate resolution of uncertain tax positions will affect income in the quarter of such change.

1 unchanged sentence

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

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

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

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

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis