What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-20 compared with 2023-02-17 · 243 added, 230 removed, 1521 unchanged (24% of the section changed)

57 unchanged sentences

The unsettled portion of the Company’s obligation for trade promotion activities is included in accrued liabilities in the consolidated balance sheet.

Auditing management’s calculation of the unsettled portion of the Company’s obligation for trade promotion activities was highly subjective and required significant judgment as a result of the nature of the required estimates and assumptions.

In particular, the estimates required an analysis of the programs offered, expectations regarding customer and consumer participation, historical sales and payment trends, and experience with payment patterns associated with similar programs offered in the past.

The estimated cost of these programs is sensitive to changes in trends with regard to customer and consumer participation, particularly for new programs and for programs related to the introduction of new products.

Auditing management’s calculation of the unsettled portion of the Company’s obligation for trade promotion activities was subjective and required judgment as a result of the nature of the required estimates and assumptions.

In particular, the estimates required an analysis of the programs offered, expectations regarding customer and consumer participation, and experience with historical payment patterns.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls related to the Company’s calculation of the accrued liabilities for trade promotion activities.

For example, we tested controls over management’s review of the completeness of the promotional activities as well as the significant assumptions and the data inputs utilized in the calculations.

To test the unsettled portion of the Company’s obligation for trade promotion activities, we performed audit procedures that included, among others, assessing (1) the expected value estimation methodology used by management, (2) whether all material trade promotion activities were properly included in management’s estimate, and (3) the significant assumptions discussed above and the underlying data used in its analyses.

Specifically, when evaluating the significant assumptions, we compared them to historical trends, third party data, and assumptions used in prior periods, and inspected management’s retrospective review of actual trade promotion activities compared to previous estimates.

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

To test the unsettled portion of the Company’s obligation for trade promotion activities, we performed audit procedures that included, among others, assessing (1) the expected value estimation methodology used by management, (2) whether all material trade promotion activities were properly included in management’s estimate, and (3) the assumptions discussed above and the underlying data used in its analyses.

Specifically, when evaluating the assumptions, we compared them to historical trends, third party data, and assumptions used in prior periods, and inspected management’s retrospective review of actual trade promotion activities compared to previous estimates.

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

/s/ Ernst & Young LLP

8 unchanged sentences

In our opinion, The Hershey Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the acquisition of certain assets that provide additional manufacturing capacity from Weaver Popcorn Manufacturing, Inc.

(“Weaver”) on May 31, 2023, which is included in the 2023 consolidated financial statements of the Company and constituted 1.4% of total assets as of December 31, 2023.

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 20, 2024 expressed an unqualified opinion thereon.

28 unchanged sentences

Selling, marketing and administrative expense 2,436,508 2,236,009 2,001,351

Long-lived asset impairment charges — — 9,143

Business realignment costs 441 1,989 3,525

6 unchanged sentences

Net income including noncontrolling interest 1,861,787 1,644,817 1,482,819

Net gain (loss) attributable to noncontrolling interest — 5,307 ( 3,295 )

Net gain attributable to noncontrolling interest — — 5,307

Net income attributable to The Hershey Company

20 unchanged sentences

Foreign currency translation adjustments:

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

Foreign currency translation gains (losses) during period $ 22,659 $ — 22,659 $ ( 10,340 ) $ — ( 10,340 ) $ ( 1,500 ) $ — ( 1,500 )

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

3 unchanged sentences

Cash flow hedges:

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

(Losses) gains on cash flow hedging derivatives 954 ( 30 ) 924 2,056 ( 74 ) 1,982 ( 1,551 ) ( 2,989 ) ( 4,540 )

Reclassification to earnings 10,866 ( 3,648 ) 7,218 10,200 ( 3,088 ) 7,112 18,117 ( 1,034 ) 17,083

1 unchanged sentence

Total comprehensive income including noncontrolling interest $ 1,884,042 $ 1,641,699 $ 1,576,935

Comprehensive gain (loss) attributable to noncontrolling interest — 10,556 ( 2,241 )

Comprehensive gain attributable to noncontrolling interest — — 10,556

Comprehensive income attributable to The Hershey Company $ 1,884,042 $ 1,641,699 $ 1,566,379

59 unchanged sentences

Deferred income taxes 16,233 36,889 13,374

Impairment of long-lived assets (see Note 6 )

Write-down of equity investments 210,484 188,286 113,756

16 unchanged sentences

Financing Activities

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

Net increase (decrease) in short-term debt 26,049 ( 245,633 ) 869,030

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

6 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 38,250 ) 9,887 ( 5,075 )

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

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

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

(Decrease) increase in cash and cash equivalents, including cash classified as held for sale ( 61,987 ) 134,623 ( 826,155 )

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

Net (decrease) increase in cash and cash equivalents ( 61,987 ) 134,623 ( 814,721 )

Cash and cash equivalents, beginning of period 463,889 329,266 1,143,987

19 unchanged sentences

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

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

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

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

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

Dividends (including dividend equivalents):

6 unchanged sentences

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

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

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

Other ( 3,901 ) ( 3,901 )

Balance, December 31, 2021

1 unchanged sentence

Net income 1,644,817 — 1,644,817

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

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

Dividends (including dividend equivalents):

3 unchanged sentences

( 207,133 ) ( 207,133 )

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

Stock-based compensation 65,909 65,909

1 unchanged sentence

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

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

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

Other ( 3,901 ) ( 3,901 )

Balance, December 31, 2022

1 unchanged sentence

Net income 1,861,787 — 1,861,787

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

Other comprehensive income 22,255 — 22,255

Dividends (including dividend equivalents):

6 unchanged sentences

Exercise of stock options and incentive-based transactions ( 32,122 ) 23,128 ( 8,994 )

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

Repurchase of common stock (including excise tax) ( 267,331 ) ( 267,331 )

Balance, December 31, 2023

20 unchanged sentences

See Note 10 for additional information on our equity investments in partnership entities qualifying for tax credits.

Other investments that are not controlled, and over which we do not have the ability to exercise significant influence, are accounted for under the cost method.

Both equity and cost method investments are included as Other non-current assets in the Consolidated Balance Sheets.

Other investments that are not controlled, and over which we do not have the ability to exercise significant influence, are accounted for at cost, less impairments.

Both equity method and cost, less impairment investments are included as Other non-current assets in the Consolidated Balance Sheets.

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

37 unchanged sentences

Advertising expense is also charged to expense as incurred and totaled $ 604,853 in 2023, $ 517,677 in 2022 and $ 511,798 in 2021.

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

There was no prepaid advertising expense as of December 31, 2023.

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

Cash Equivalents

13 unchanged sentences

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

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

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

As of December 31, 2023, approximately 55 % of our inventories, representing the majority of our United States (“U.S.”) inventories, were valued under the last-in, first-out (“LIFO”) method.

The remainder of our inventories in the U.S.

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

For the remainder of our inventories in the U.S.

and inventories for our international businesses, cost is determined by either first-in, first-out ("FIFO") or average cost.

LIFO cost of inventories valued using the LIFO method was $ 741,040 as of December 31, 2023 and $ 621,614 as of December 31, 2022.

51 unchanged sentences

Supplier Finance Program Obligations

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

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

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

5 unchanged sentences

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

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

The rollforward of the Company’s outstanding obligations confirmed as valid under its supplier finance program, which are included in Accounts Payable in the Consolidated Balance Sheets, for year ended December 31, 2023 are as follows:

Supplier finance program obligations outstanding at beginning of the year $ 105,293

Invoice amounts added during the year 585,872

Invoice amounts paid during the year ( 541,904 )

Supplier finance program obligations outstanding at end of the year $ 149,261

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THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Currency Translation

4 unchanged sentences

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Derivative Instruments

14 unchanged sentences

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

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

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

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

We adopted the provisions of this ASU in the first quarter of 2020.

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

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement .

This ASU modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures.

ASU 2018-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods, with early adoption permitted.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

We adopted the provisions of this ASU in the first quarter of 2020.

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

In August 2018, the FASB issued ASU No.

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

This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

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

The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

We adopted the provisions of this ASU in the first quarter of 2020 on a prospective basis.

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

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted.

An entity that elects early adoption must adopt all the amendments in the same period.

Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

We adopted the provisions of this ASU in the fourth quarter of 2020.

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

In March 2020, the FASB issued ASU No.

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

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

10 unchanged sentences

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

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

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

This ASU should be applied

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

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

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

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU No.

4 unchanged sentences

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

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

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

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

This new standard was not applicable to our May 2023 acquisition of Weaver Popcorn Manufacturing, Inc.

(“Weaver”) due to no contract assets or liabilities (as discussed in Note 2 );

however, will be applied in relevant future acquisitions.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2023, the FASB issued ASU No.

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

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

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

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

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

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

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This ASU requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), an amount for other segment items with a description of the composition, and disclosure of the title and position of the CODM.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted and the update should be applied retrospectively to each period presented in the financial statements.

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

As a result, we intend to adopt the provisions of this ASU in the fourth quarter of 2024.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

This ASU requires public business entities on an annual basis to disclose specific categories in a tabular rate reconciliation and provide additional information for reconciling items that meet a five percent quantitative threshold.

Additionally, the ASU requires all entities to disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes, as well as individual jurisdictions where income taxes paid are equal to or greater than five percent of total income taxes paid.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted and the updated should be applied on a prospective basis, with a retrospective application permitted in the financial statements.

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

As a result, we intend to adopt the provisions of this ASU in the fourth quarter of 2025.

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

9 unchanged sentences

(i) forecasted sales, growth rates and customer attrition rates, (ii) forecasted operating margins, (iii) royalty rates and discount rates used to present value future cash flows, (iv) the amount of synergies expected from the acquisition, (v) the economic useful life of assets and (vi) the evaluation of historical tax positions.

In certain acquisitions, historical data is limited, therefore, we base our estimates and assumptions on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

In certain acquisitions, historical data is limited;

therefore, we base our estimates and assumptions on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

2023 Activity

Manufacturing Capacity

On May 31, 2023, we completed the acquisition of certain assets that provide additional manufacturing capacity from Weaver, a leader in the production and co-packing of microwave popcorn and ready-to-eat popcorn, and former co-manufacturer of the Company’s SkinnyPop brand.

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

Acquisition-related costs for the Weaver acquisition were immaterial.

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

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

The purchase price allocation has been finalized as of the fourth quarter of 2023 and did not include measurement period adjustments.

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

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

2021 Activity

Pretzels Inc.

6 unchanged sentences

Acquisition-related costs for the Pretzels acquisition were immaterial.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

15 unchanged sentences

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Dot's Pretzels, LLC

On December 13, 2021, 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.

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

10 unchanged sentences

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

historical customer-specific data and post-closing adjustments to the working capital acquired including certain holdbacks.

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

7 unchanged sentences

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

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

12 unchanged sentences

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

Lotte Shanghai Foods Co., Ltd.

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd.

(“LSFC”), which was previously included within the International segment results in our consolidated financial statements.

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

2020 Activity

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.

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

The Hershey Company | 2023 Form 10-K | Page 65

2 unchanged sentences

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

Lotte Shanghai Foods Co., Ltd.

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd.

(“LSFC”), which was previously included within the International segment results in our consolidated financial statements.

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

GOODWILL AND INTANGIBLE ASSETS

5 unchanged sentences

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

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

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

2 unchanged sentences

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

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

Acquired during the period (see Note 2 )

— 85,231 — 85,231

Foreign currency translation 2,401 — 1,462 3,863

19 unchanged sentences

Amortization expense $ 78,276 $ 78,276 $ 78,276 $ 77,136 $ 77,136

SHORT AND LONG-TERM DEBT

Short-term Debt

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

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

This facility is scheduled to expire

The Hershey Company | 2023 Form 10-K | Page 66

2 unchanged sentences

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

on July 2, 2024;

SHORT AND LONG-TERM DEBT

Short-term Debt

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

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

This facility is scheduled to expire on 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.

16 unchanged sentences

The weighted-average interest rate on short-term borrowings outstanding was 5.8 % as of December 31, 2023 and 4.4 % as of December 31, 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Long-term Debt

16 unchanged sentences

4.250 % Notes (2)

May 4, 2028 350,000 —

2.450 % Notes

November 15, 2029 300,000 300,000

2 unchanged sentences

4.500 % Notes (2)

May 4, 2033 400,000 —

3.375 % Notes

August 15, 2046 300,000 300,000

9 unchanged sentences

Long-term portion $ 3,789,132 $ 3,343,977

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

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

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

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

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

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

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

3 unchanged sentences

None of our debt is convertible into our Common Stock.

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THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Interest Expense

24 unchanged sentences

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

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

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Foreign Exchange Price Risk

7 unchanged sentences

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

The Hershey Company | 2023 Form 10-K | Page 69

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Interest Rate Risk

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

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

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

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

Equity Price Risk

17 unchanged sentences

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

(2) As of December 31, 2023, amounts reflected on a net basis in liabilities were assets of $ 29,881 and liabilities of $ 30,493 , which are associated with cash transfers receivable or payable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.

The comparable amounts reflected on a net basis in assets at December 31, 2022 were assets of $ 25,308 and liabilities of $ 25,296 .

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

The Hershey Company | 2023 Form 10-K | Page 70

2 unchanged sentences

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

(2) As of December 31, 2022, amounts reflected on a net basis in assets were assets of $ 25,308 and liabilities of $ 25,296 , which are associated with cash transfers receivable or payable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period.

The comparable amounts reflected on a net basis in liabilities at December 31, 2021 were assets of $ 31,774 and liabilities of $ 32,701 .

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

Income Statement Impact of Derivative Instruments

63 unchanged sentences

2023 Activity

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

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

2021 Activity

During 2020, we recorded the following impairment charges, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy:

Adjustment to disposal group (1) $ 6,200

Other asset write-down (2) 2,943

Long-lived asset impairment charges $ 9,143

(1) In connection with the sale of the LSFC joint venture (disposal group previously classified as held for sale), we recorded impairment charges to adjust long-lived asset values.

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

The 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.

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

12 unchanged sentences

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

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

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The components of lease expense were as follows:

7 unchanged sentences

(2) Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial.

The Hershey Company | 2023 Form 10-K | Page 73

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

48 unchanged sentences

rather, our proportionate share of earnings or losses are recorded on a net basis within other (income) expense, net in the Consolidated Statements of Income.

Both equity and cost method investments are reported within other non-current assets in our Consolidated Balance Sheets.

Both equity method investments and cost, less impairment, investments are reported within other non-current assets in our Consolidated Balance Sheets.

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

Total investments in unconsolidated affiliates was $ 207,177 and $ 133,029 as of December 31, 2023 and December 31, 2022, respectively.

BUSINESS REALIGNMENT ACTIVITIES

We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies.

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

The Hershey Company | 2023 Form 10-K | Page 75

2 unchanged sentences

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

BUSINESS REALIGNMENT ACTIVITIES

We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies.

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

For the years ended December 31, 2023 2022 2021

8 unchanged sentences

Other program costs 2,999 2,416 12,617

Margin for Growth Program:

Severance — — ( 653 )

Other program costs — — 2,823

Total $ 3,440 $ 4,417 $ 16,599

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

Amounts classified as liabilities qualifying as exit and disposal costs primarily represent employee-related and certain third-party service provider charges;

however, such amounts at December 31, 2023 are not significant and are expected to be paid within the next 12 months.

Advancing Agility & Automation Initiative

On February 2, 2024, the Board of Directors of the Company approved a multi-year productivity initiative (“Advancing Agility & Automation” or "AAA") 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.

The Company estimates that the AAA Initiative will result in total pre-tax costs of $ 200,000 to $ 250,000 from inception through 2026.

This estimate primarily includes program office execution and third-party costs supporting the design and implementation of the new organizational structure of $ 100,000 to $ 120,000 , as well as implementation and technology capability costs of $ 55,000 to $ 70,000 .

Additionally, we expect to incur employee severance and related separation benefits of $ 45,000 to $ 60,000 as we facilitate workforce reductions and reallocate resources to further drive the Company’s strategic priorities.

The cash portion of the total cost is estimated to be $ 175,000 to $ 225,000 .

At the conclusion of the program in 2026, ongoing annual savings are expected to be approximately $ 300,000 .

2020 International Optimization Program

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

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

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

The 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 segment.

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

For the year ended December 31, 2022 and 2021, we recognized total costs associated with the International Optimization Program of $ 4,417 and $ 16,599 .

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

Since inception, we have incurred pre-tax charges to execute the program totaling $ 50,359 .

Margin for Growth Program

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

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

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

This project was completed in mid-2020.

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

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

This program was completed in 2023.

The Hershey Company | 2023 Form 10-K | Page 76

2 unchanged sentences

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

For the year ended December 31, 2023 and 2022, we recognized total costs associated with the International Optimization Program of $ 3,440 and $ 4,417 .

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

Since inception, we have incurred pre-tax charges to execute the program totaling $ 53,799 .

The components of income before income taxes were as follows:

46 unchanged sentences

Inventories 13,250 28,573

Derivative instruments — 1,352

Pension 10,001 11,038

40 unchanged sentences

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.

3 unchanged sentences

As of December 31, 2023, we had approximately $ 656,389 of undistributed earnings of our international subsidiaries.

During 2020, previously undistributed earnings of certain international subsidiaries were no longer considered indefinitely reinvested;

however, the Company had previously recognized a one-time U.S.

repatriation tax due under U.S.

tax reform, and as a result, only an immaterial amount of withholding tax was recognized.

We intend to continue to reinvest the remainder of the earnings outside of the United States for which there would be a material tax implication to distributing, such as withholding tax, for the foreseeable future and, therefore, have not recognized additional tax expense on these earnings beyond the one-time U.S.

We continue to reinvest the remainder of the earnings outside of the United States for which there would be a material tax implication to distributing, such as withholding tax, for the foreseeable future and, therefore, have not recognized additional tax expense on these earnings beyond the one-time U.S.

repatriation tax due under the 2017 Tax Cuts and Jobs Act.

11 unchanged sentences

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

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

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

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

American Rescue Plan Act

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

The ARPA strengthens and extends certain federal programs enacted through the Coronavirus Aid, Relief, and Economic Security Act and other coronavirus disease 2019 (“COVID-19”) relief measures, and establishes new federal programs, including provisions on taxes, healthcare and unemployment benefits.

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

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law.

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

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

For the year ended December 31, 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.

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

We sponsor a number of defined benefit pension plans.

The primary plans are The Hershey Company Retirement Plan and The Hershey Company Retirement Plan for Hourly Employees.

These are cash balance plans that provide pension benefits for most domestic employees hired prior to January 1, 2007.

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 post-retirement benefit plans:

15 unchanged sentences

Actuarial (gain) loss 23,187 ( 184,775 ) 38,789 ( 28,145 )

Curtailment — — ( 740 ) —

Settlement ( 66,132 ) ( 82,907 ) ( 88,689 ) —

7 unchanged sentences

Settlement ( 66,132 ) ( 82,907 ) ( 88,689 ) —

Annuity purchase — — 88,689 —

Currency translation and other 1,838 ( 2,746 ) — —

12 unchanged sentences

Net amounts recognized in AOCI $ ( 120,623 ) $ ( 137,943 ) $ ( 7,177 ) $ 19,689

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

The projected benefit obligation during 2023 was impacted by actuarial loss of $ 23,187 which was mainly the result of the discount rate assumption decreasing from 5.5 % at December 31, 2022 to 5.1 % at December 31, 2023.

The accumulated benefit obligation for all defined benefit pension plans was $ 789,257 as of December 31, 2023 and $ 799,635 as of December 31, 2022.

9 unchanged sentences

Fair value of plan assets

Plans with projected benefit obligations in excess of plan assets were as follows:

December 31, 2023 2022

Projected benefit obligation

$ 84,416 $ 79,932

Accumulated benefit obligation 71,046 68,665

Fair value of plan assets

50,718 44,584

Net Periodic Benefit Cost

6 unchanged sentences

Expected return on plan assets ( 48,978 ) ( 47,637 ) ( 49,091 ) — — —

Amortization of prior service (credit) cost ( 5,651 ) ( 6,142 ) ( 7,308 ) — — 300

Amortization of net loss 16,060 20,556 26,952 ( 92 ) 1,593 ( 39 )

Amortization of prior service credit ( 5,658 ) ( 5,651 ) ( 6,142 ) ( 50 ) — —

Amortization of net (gain) loss 19,846 16,060 20,556 ( 966 ) ( 92 ) 1,593

Curtailment credit — — — ( 740 ) — —

Settlement loss 15,254 20,692 16,085 926 — —

7 unchanged sentences

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

The Hershey Company | 2023 Form 10-K | Page 82

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The weighted-average assumptions used in computing the year end benefit obligations were as follows:

4 unchanged sentences

Rate of increase in compensation levels

3.4 % 3.5 % 4.0 % N/A

3.6 % 3.4 % 4.0 % 4.0 %

Interest crediting rate

4.8 % 4.7 % N/A N/A

The Hershey Company | 2022 Form 10-K | Page 79

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The weighted-average assumptions used in computing net periodic benefit cost were as follows:

15 unchanged sentences

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

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

The Society of Actuaries did not update the Pri-2012 mortality tables in 2022 or 2023.

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

5 unchanged sentences

Alternative investments, including real estate, listed infrastructure and other

As of December 31, 2022, actual allocations were consistent with the targets and within our allowable ranges.

We expect the level of volatility in pension plan asset returns to be in line with the overall volatility of the markets within each asset class.

The Hershey Company | 2023 Form 10-K | Page 83

2 unchanged sentences

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

As of December 31, 2023, actual allocations were consistent with the targets and within our allowable ranges.

We expect the level of volatility in pension plan asset returns to be in line with the overall volatility of the markets within each asset class.

The following table sets forth by level, within the fair value hierarchy (as defined in Note 6 ), pension plan assets at their fair values as of December 31, 2023:

6 unchanged sentences

Equity securities:

International all-cap — — — 395 395

Global all-cap (a) — — — 209,245 209,245

33 unchanged sentences

$ 327 $ 29,595 $ — $ 818,510 $ 848,432

(1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in our Obligations and Funded Status table.

The Hershey Company | 2023 Form 10-K | Page 84

2 unchanged sentences

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

(a) This category comprises equity funds that primarily track the MSCI World Index or MSCI All Country World Index.

27 unchanged sentences

9,589 9,107 8,619 8,050 7,461 32,107

The Hershey Company | 2023 Form 10-K | Page 85

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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.

Savings Plans

3 unchanged sentences

Expense associated with the defined contribution plans was $ 67,763 in 2023, $ 61,477 in 2022 and $ 58,883 in 2021.

The Hershey Company | 2022 Form 10-K | Page 82

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

STOCK COMPENSATION PLANS

22 unchanged sentences

As of December 31, 2023, total stock-based compensation expense related to non-vested awards not yet recognized was $ 91,479 and the weighted-average period over which this amount is expected to be recognized was approximately 1.8 years.

The Hershey Company | 2023 Form 10-K | Page 86

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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 | 2022 Form 10-K | Page 83

THE HERSHEY COMPANY

NOTES TO 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 year ended December 31, 2023 is as follows:

28 unchanged sentences

As of December 31, 2023, there was $ 832 of total unrecognized compensation expense related to non-vested stock option awards granted under the EICP, which we expect to recognize over a weighted-average period of 0.8 years.

The Hershey Company | 2023 Form 10-K | Page 87

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The following table summarizes information about stock options outstanding as of December 31, 2023:

9 unchanged sentences

726,701 3.3 $ 105.67 700,646 $ 103.12

The Hershey Company | 2022 Form 10-K | Page 84

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Performance Stock Units and Restricted Stock Units

16 unchanged sentences

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

The Hershey Company | 2023 Form 10-K | Page 88

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

A summary of activity relating to grants of PSUs and RSUs for the period ended December 31, 2023 is as follows:

23 unchanged sentences

19.2 % 25.3 % 26.4 %

The Hershey Company | 2022 Form 10-K | Page 85

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

• “Estimated values” means the fair value for the market-based total shareholder return component of each PSU at the date of grant using a Monte Carlo simulation model;

4 unchanged sentences

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

The Hershey Company | 2023 Form 10-K | Page 89

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

SEGMENT INFORMATION

1 unchanged sentence

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

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

This organizational structure aligns with how our CODM manages our business, including resource allocation and performance assessment, and further aligns with our product categories and the key markets we serve.

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

28 unchanged sentences

Total $ 11,164,992 $ 10,419,294 $ 8,971,337

Segment income (loss):

Segment income:

North America Confectionery $ 3,117,044 $ 2,811,066 $ 2,475,873

4 unchanged sentences

Unallocated mark-to-market losses (gains) on commodity derivatives 58,939 78,182 ( 24,376 )

Long-lived asset impairment charges (see Note 6 )

Costs associated with business realignment activities (see Note 9 )

9 unchanged sentences

For the years ended December 31, 2023 2022 2021

Net gains on mark-to-market valuation of commodity derivative positions recognized in income $ ( 44,569 ) $ ( 85,402 ) $ ( 6,593 )

Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in income $ 53,085 $ ( 44,569 ) $ ( 85,402 )

Net gains on commodity derivative positions reclassified from unallocated to segment income 5,854 122,751 61,026

33 unchanged sentences

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

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

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

During 2023 and 2022, 3,500,000 shares and 2,500,000 shares, respectively, of Class B Common Stock were converted to Common Stock by Hershey Trust Company, as trustee for the Milton Hershey School Trust (the “School Trust”).

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

The Hershey Company | 2023 Form 10-K | Page 92

14 unchanged sentences

Net shares outstanding at end of year 204,392,926 204,964,717 206,109,014

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

As of December 31, 2022, $ 109,983 remained available for repurchases of our Common Stock under this program.

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

On August 16, 2022, the IRA was signed into law, which enacted a 1% excise tax on share repurchases beginning after December 31, 2022.

As of December 31, 2023, Hershey’s excise tax associated with net share repurchases is $ 2.4 million.

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

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

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

As a result of the February 2023 Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, the July 2018 share repurchase authorization was completed and as of December 31, 2023, approximately $ 370 million remains 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.

36 unchanged sentences

Legal contingencies

On February 12, 2021, Issouf Coubaly, individually and on behalf of proposed class members, filed a complaint (Coubaly v.

Nestlé U.S.A.

et al., 1:21-cv-00386-DLF (D.D.C.

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

The Company was among several defendants named in the suit.

The defendants filed a joint motion to dismiss the case on July 30, 2021, and on June 28, 2022, the District Court granted the motion and dismissed the case without prejudice.

On July 22, 2022, the plaintiffs filed an appeal in the U.S.

Court of Appeals for the District of Columbia challenging the dismissal of the case.

The Company continues to believe that the suit, including the appeal, is without merit and is defending vigorously against the appeal.

In addition to the above-referenced matter, the Company is subject to certain legal proceedings and claims arising out of the ordinary course of our business, which cover a wide range of matters including trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters, human and workplace rights matters and tax.

The Company is subject to certain legal proceedings and claims arising out of the ordinary course of our business, which cover a wide range of matters including trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters, human and workplace rights matters and tax.

While it is not feasible to predict or determine the outcome of such proceedings and claims with certainty, in our opinion these matters, both individually and in the aggregate, are not expected to have a material effect on our financial condition, results of operations or cash flows.

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

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Collective Bargaining

10 unchanged sentences

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

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

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

44 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 year ended December 31, 2022 is as follows:

A summary of material related party transactions with Hershey Trust Company and/or its affiliates for the years ended December 31, 2023 and 2022 is noted below.

There were no material related party transactions with Hershey Trust Company and/or its affiliates for the year ended December 31, 2021.

Sale and Donation of Property, Plant and Equipment

12 unchanged sentences

SUPPLEMENTAL BALANCE SHEET INFORMATION

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

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

December 31, 2023 2022

24 unchanged sentences

Total other non-current assets $ 1,061,427 $ 944,989

The Hershey Company | 2023 Form 10-K | Page 97

THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

December 31, 2023 2022

Accounts Payable:

Accounts Payable—trade $ 630,536 $ 636,472

Supplier finance program obligations 149,261 105,293

Other 306,386 228,793

Total accounts payable $ 1,086,183 $ 970,558

Accrued liabilities:

18 unchanged sentences

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What changed 10-K

Item 8. Financial Statements and Supplementary Data