HERSHEY CO 10-Q

Item 1. Financial Statements. THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited) Three Months Ended March 30, 2025 March 31, 2024 Net sales $ 2,805,419 $ 3,252,749 Cost of sales 1,861,152 1,576,668 Gross profit 944,267 1,676,081 Selling, marketing and administrative expense 558,672 617,981 Business realignment costs 16,374 — Operating profit 369,221 1,058,100 Interest expense, net 44,622 39,822 Other (income) expense, net 945 32,020 Income before income taxes 323,654 986,258 Provision for income taxes 99,451 188,805 Net income $ 224,203 $ 797,453 Net income per share—basic: Common stock $ 1.14 $ 4.00 Class B common stock $ 1.03 $ 3.64 Net income per share—diluted: Common stock $ 1.10 $ 3.89 Class B common stock $ 1.03 $ 3.63 Dividends paid per share: Common stock $ 1.370 $ 1.370 Class B common stock $ 1.245 $ 1.245 See Notes to Unaudited Consolidated Financial Statements. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 2 THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) For the Three Months Ended March 30, 2025 March 31, 2024 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Net income $ 224,203 $ 797,453 Other comprehensive income, net of tax: Foreign currency translation adjustments: Foreign currency translation gains (losses) during period $ 9,904 $ — 9,904 $ ( 4,998 ) $ — ( 4,998 ) Pension and post-retirement benefit plans: Net actuarial gain (loss) and service cost ( 46 ) ( 32 ) ( 78 ) ( 48 ) 7 ( 41 ) Reclassification to earnings 2,883 ( 694 ) 2,189 2,541 ( 609 ) 1,932 Cash flow hedges: Gains (losses) on cash flow hedging derivatives ( 125 ) ( 152 ) ( 277 ) 1,335 ( 84 ) 1,251 Reclassification to earnings 946 ( 93 ) 853 1,854 ( 755 ) 1,099 Total other comprehensive income (loss), net of tax $ 13,562 $ ( 971 ) 12,591 $ 684 $ ( 1,441 ) ( 757 ) Comprehensive income $ 236,794 $ 796,696 See Notes to Unaudited Consolidated Financial Statements. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 3 THE HERSHEY COMPANY CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 30, 2025 December 31, 2024 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,515,252 $ 730,746 Accounts receivable—trade, net 879,633 800,402 Inventories 1,467,333 1,254,094 Prepaid expenses and other 941,918 974,215 Total current assets 4,804,136 3,759,457 Property, plant and equipment, net 3,436,981 3,458,853 Goodwill 2,707,786 2,705,753 Other intangibles 1,853,530 1,873,866 Other non-current assets 1,126,829 1,111,867 Deferred income taxes 38,502 37,065 Total assets $ 13,967,764 $ 12,946,861 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,415,460 $ 1,159,177 Accrued liabilities 826,947 807,341 Accrued income taxes 25,495 51,036 Short-term debt 144,626 1,306,976 Current portion of long-term debt 603,617 604,965 Total current liabilities 3,016,145 3,929,495 Long-term debt 5,177,251 3,190,210 Other long-term liabilities 676,257 688,259 Deferred income taxes 413,215 424,243 Total liabilities 9,282,868 8,232,207 Stockholders’ equity: The Hershey Company stockholders’ equity Preferred stock, shares issued: none in 2025 and 2024 — — Common stock, shares issued: 166,939,511 at March 30, 2025 and December 31, 2024 166,939 166,939 Class B common stock, shares issued: 54,613,514 at March 30, 2025 and December 31, 2024 54,614 54,614 Additional paid-in capital 1,372,137 1,377,226 Retained earnings 5,652,065 5,698,316 Treasury—common stock shares, at cost: 18,956,021 at March 30, 2025 and 19,169,956 at December 31, 2024 ( 2,269,560 ) ( 2,278,551 ) Accumulated other comprehensive loss ( 291,299 ) ( 303,890 ) Total stockholders’ equity 4,684,896 4,714,654 Total liabilities and stockholders’ equity $ 13,967,764 $ 12,946,861 See Notes to Unaudited Consolidated Financial Statements. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 4 THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 30, 2025 March 31, 2024 Operating Activities Net income $ 224,203 $ 797,453 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 119,564 107,764 Stock-based compensation expense 13,559 5,986 Deferred income taxes ( 12,202 ) ( 8,975 ) Write-down of equity investments — 31,391 Unrealized losses (gains) on derivative contracts 270,794 ( 269,582 ) Other 18,272 19,923 Changes in assets and liabilities, net of business acquisition: Accounts receivable—trade, net ( 73,044 ) ( 383,417 ) Inventories ( 207,243 ) 202,055 Prepaid expenses and other current assets ( 339,155 ) ( 11,415 ) Accounts payable and accrued liabilities 335,640 ( 56,334 ) Accrued income taxes 80,174 147,537 Contributions to pension and other benefit plans ( 3,126 ) ( 2,408 ) Other assets and liabilities ( 30,754 ) ( 10,844 ) Net cash provided by operating activities 396,682 569,134 Investing Activities Capital additions (including software) ( 145,527 ) ( 213,304 ) Receipts (payments) related to equity investments in tax credit qualifying partnerships 3,558 ( 13,944 ) Other investing activities ( 5,017 ) ( 321 ) Net cash used in investing activities ( 146,986 ) ( 227,569 ) Financing Activities Net (decrease) increase in short-term debt ( 1,165,724 ) 569,809 Long-term borrowings, net of debt issuance costs 1,986,026 — Repayment of long-term debt and finance leases ( 1,797 ) ( 1,568 ) Cash dividends paid ( 271,594 ) ( 273,404 ) Repurchase of common stock — ( 494,191 ) Proceeds from exercised stock options 2,738 4,103 Taxes withheld and paid on employee stock awards ( 12,573 ) ( 26,404 ) Net cash provided by (used in) financing activities 537,076 ( 221,655 ) Effect of exchange rate changes on cash and cash equivalents ( 2,266 ) ( 1,408 ) Net increase in cash and cash equivalents 784,506 118,502 Cash and cash equivalents, beginning of period 730,746 401,902 Cash and cash equivalents, end of period $ 1,515,252 $ 520,404 Supplemental Disclosure Interest paid $ 38,366 $ 33,888 Income taxes paid 38,918 31,284 See Notes to Unaudited Consolidated Financial Statements. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 5 HERSHEY COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the Three Months Ended March 30, 2025 and March 31, 2024 (in thousands) (unaudited) Preferred Stock Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Treasury Common Stock Accumulated Other Comprehensive (Loss) Income Total Stockholders’ Equity Balance, December 31, 2024 $ — $ 166,939 $ 54,614 $ 1,377,226 $ 5,698,316 $ ( 2,278,551 ) $ ( 303,890 ) $ 4,714,654 Net income 224,203 224,203 Other comprehensive income 12,591 12,591 Dividends (including dividend equivalents): Common Stock, $ 1.370 per share ( 202,460 ) ( 202,460 ) Class B Common Stock, $ 1.245 per share ( 67,994 ) ( 67,994 ) Stock-based compensation 13,647 13,647 Exercise of stock options and incentive-based transactions ( 18,736 ) 8,991 ( 9,745 ) Balance, March 30, 2025 $ — $ 166,939 $ 54,614 $ 1,372,137 $ 5,652,065 $ ( 2,269,560 ) $ ( 291,299 ) $ 4,684,896 Preferred Stock Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Treasury Common Stock Accumulated Other Comprehensive (Loss) Income Total Stockholders’ Equity Balance, December 31, 2023 $ — $ 166,939 $ 54,614 $ 1,345,580 $ 4,562,263 $ ( 1,800,232 ) $ ( 230,078 ) $ 4,099,086 Net income 797,453 797,453 Other comprehensive loss ( 757 ) ( 757 ) Dividends (including dividend equivalents): Common Stock, $ 1.370 per share ( 204,596 ) ( 204,596 ) Class B Common Stock, $ 1.245 per share ( 67,994 ) ( 67,994 ) Stock-based compensation 6,390 6,390 Exercise of stock options and incentive-based transactions ( 36,157 ) 13,856 ( 22,301 ) Repurchase of common stock (including excise tax) ( 498,994 ) ( 498,994 ) Balance, March 31, 2024 $ — $ 166,939 $ 54,614 $ 1,315,813 $ 5,087,126 $ ( 2,285,370 ) $ ( 230,835 ) $ 4,108,287 Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 6 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except share data or if otherwise indicated) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited consolidated financial statements provided in this report include the accounts of The Hershey Company (the “Company,” “Hershey,” “we” or “us”) and our majority-owned subsidiaries and entities in which we have a controlling financial interest after the elimination of intercompany accounts and transactions. We have a controlling financial interest if we own a majority of the outstanding voting common stock and minority shareholders do not have substantive participating rights, we have significant control through contractual or economic interests in which we are the primary beneficiary or we have the power to direct the activities that most significantly impact the entity’s economic performance. We use the equity method of accounting when we have a 20% to 50% interest in other companies and exercise significant influence. 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 method investments and cost, less impairment, investments are included as Other non-current assets in the Consolidated Balance Sheets. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not contain certain information and disclosures required by GAAP for comprehensive financial statements. The financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in our opinion, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods. Operating results for the quarter ended March 30, 2025 may not be indicative of the results that may be expected for the year ending December 31, 2025 because of seasonal effects on our business. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (our “2024 Annual Report on Form 10-K”), which provides a more complete understanding of our accounting policies, financial position, operating results and other matters. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. We adopted the provisions of this ASU in the fourth quarter of 2024 and applied the provisions retrospectively to each period presented in the consolidated financial statements. Adoption of the new standard did not have a material impact on our consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted 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 update 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. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 7 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires entities to disclose certain additional expense information including, among other items, purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each Consolidated Statement of Income expense caption. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the update 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. 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. 2. BUSINESS ACQUISITIONS LesserEvil, LLC On March 31, 2025, we entered into a Merger Agreement to acquire LesserEvil, LLC, a privately held company that produces and sells organic popcorn and puffed snack products to retailers and distributors in the United States and Canada, which complements Hershey’s existing product portfolio. The Merger Agreement contains customary conditions, including, among others, (i) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the absence of any law or order prohibiting the consummation of the transactions contemplated in the Merger Agreement and (iii) the accuracy, to specified degrees, of representations and warranties set forth therein and material compliance with covenants. If approved, the Company expects the acquisition to close by mid-2025 and will be financed with of cash on hand and short-term borrowings. Sour Strips On November 8, 2024, we completed the acquisition of the Sour Strips brand from Actual Candy, LLC. Sour Strips is an emerging sour candy brand and is available in a wide range of food distribution channels in the United States. The initial cash consideration paid for Sour Strips was deemed immaterial and consisted of cash on hand and short-term borrowings; however, the Company may be required to pay additional contingent consideration if certain defined targets are met over a multi-year period. Acquisition-related costs for the Sour Strips acquisition were immaterial. The acquisition has been accounted for as a business combination and, accordingly, Sour Strips has been included within the North America Confectionery segment from the date of acquisition. The purchase consideration, inclusive of the acquisition date fair value of the contingent consideration, was allocated to minimal net assets acquired, goodwill and other intangible assets. The first quarter of 2025 includes an immaterial amount of measurement period adjustments to the initial allocation. We are in process of evaluating additional information necessary to finalize the valuation of assets acquired and liabilities assumed as of the acquisition date. We expect to finalize the purchase price allocation by mid-2025. Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired (including the identifiable intangible assets). The goodwill derived from this acquisition is expected to be deductible for tax purposes and reflects the value of leveraging our brand building expertise, commercial capabilities and retail relationships to accelerate growth. Other intangible assets include trademarks valued at $ 41,800 and customer relationships valued at $ 41,300 . Trademarks were assigned an estimated useful life of 22 years and customer relationships were assigned estimated useful lives ranging from 14 to 16 years. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 8 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 3. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying value of goodwill by reportable segment for the three months ended March 30, 2025 are as follows: North America Confectionery North America Salty Snacks International Total Balance at December 31, 2024 $ 2,032,857 $ 657,001 $ 15,895 $ 2,705,753 Measurement period adjustments 1,382 — — 1,382 Foreign currency translation 463 — 188 651 Balance at March 30, 2025 $ 2,034,702 $ 657,001 $ 16,083 $ 2,707,786 The following table provides the gross carrying amount and accumulated amortization for each major class of intangible asset: March 30, 2025 December 31, 2024 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Intangible assets subject to amortization: Trademarks $ 1,721,369 $ ( 295,458 ) $ 1,721,159 $ ( 282,819 ) Customer-related 552,733 ( 159,553 ) 552,594 ( 151,409 ) Patents 7,614 ( 7,614 ) 7,579 ( 7,579 ) Total 2,281,716 ( 462,625 ) 2,281,332 ( 441,807 ) Intangible assets not subject to amortization: Trademarks 34,439 34,341 Total other intangible assets $ 1,853,530 $ 1,873,866 Total amortization expense for the three months ended March 30, 2025 and March 31, 2024 was $ 20,568 and $ 19,554 , respectively. 4. 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. The credit facility is scheduled to expire on April 26, 2028; however, we may extend the termination date for up to two additional one-year periods upon notice to the administrative agent. The credit agreements governing the credit facility contain certain financial and other covenants, customary representations, warranties and events of default. As of March 30, 2025, we were in compliance with all covenants pertaining to the credit facility, and we had no significant compensating balance agreements that legally restricted access to these funds. For more information, refer to the Consolidated Financial Statements included in our 2024 Annual Report on Form 10-K. In addition to the revolving credit facility, we maintain lines of credit with domestic and international commercial banks. Commitment fees relating to our revolving credit facility and lines of credit are not material. Short-term debt consisted of the following: Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 9 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) March 30, 2025 December 31, 2024 Short-term foreign bank borrowings against lines of credit $ 144,626 $ 161,364 U.S. commercial paper — 1,145,612 Total short-term debt $ 144,626 $ 1,306,976 Weighted average interest rate on outstanding commercial paper — % 4.5 % Long-term Debt Long-term debt consisted of the following: Debt Type and Rate Maturity Date March 30, 2025 December 31, 2024 0.900 % Notes June 1, 2025 300,000 300,000 3.200 % Notes August 21, 2025 300,000 300,000 2.300 % Notes August 15, 2026 500,000 500,000 7.200 % Debentures August 15, 2027 193,639 193,639 4.550 % Notes (1) February 24, 2028 500,000 — 4.250 % Notes May 4, 2028 350,000 350,000 2.450 % Notes November 15, 2029 300,000 300,000 4.750 % Notes (1) February 24, 2030 500,000 — 1.700 % Notes June 1, 2030 350,000 350,000 4.950 % Notes (1) February 24, 2032 500,000 — 4.500 % Notes May 4, 2033 400,000 400,000 5.100 % Notes (1) February 24, 2035 500,000 — 3.375 % Notes August 15, 2046 300,000 300,000 3.125 % Notes November 15, 2049 400,000 400,000 2.650 % Notes June 1, 2050 350,000 350,000 Finance lease obligations (see Note 7 ) 72,381 73,802 Net impact of interest rate swaps, debt issuance costs and unamortized debt discounts ( 35,152 ) ( 22,266 ) Total long-term debt 5,780,868 3,795,175 Less—current portion 603,617 604,965 Long-term portion $ 5,177,251 $ 3,190,210 (1) During the first quarter of 2025, we issued $ 500,000 of 4.550 % Notes due in February 2028, $ 500,000 of 4.750 % Notes due in February 2030, $ 500,000 of 4.950 % Notes due in February 2032 and $ 500,000 of 5.100 % Notes due in February 2035 (together, the “2025 Notes”). Proceeds from the issuance of the 2025 Notes, net of discounts and issuance costs, totaled $ 1,986,026 . The 2025 Notes were issued under a shelf registration on Form S-3 filed in May 2024 that registered an indeterminate amount of debt securities. Interest Expense Net interest expense consists of the following: Three Months Ended March 30, 2025 March 31, 2024 Interest expense $ 54,916 $ 46,044 Capitalized interest ( 4,309 ) ( 4,436 ) Interest expense 50,607 41,608 Interest income ( 5,985 ) ( 1,786 ) Interest expense, net $ 44,622 $ 39,822 Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 10 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 5. DERIVATIVE INSTRUMENTS We are exposed to market risks arising principally from changes in foreign currency exchange rates, interest rates and commodity prices. We use certain derivative instruments to manage these risks. These include interest rate swaps to manage interest rate risk, foreign currency forward exchange contracts to manage foreign currency exchange rate risk, and commodities futures and options contracts to manage commodity market price risk exposures. In entering into these contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. We mitigate this risk by entering into exchange-traded contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties. We do not expect any significant losses from counterparty defaults. Commodity Price Risk We enter into commodities futures and options contracts and other commodity derivative instruments to reduce the effect of future price fluctuations associated with the purchase of raw materials, energy requirements and transportation services. We generally hedge commodity price risks for 3 - to 24 -month periods. Our open commodity derivative contracts had a notional value of $ 274,738 as of March 30, 2025 and $ 667,421 as of December 31, 2024. Derivatives used to manage commodity price risk are not designated for hedge accounting treatment. Therefore, the changes in fair value of these derivatives are recorded as incurred within cost of sales. As discussed in Note 13 , we define our segment income to exclude gains and losses on commodity derivatives until the related inventory is sold, at which time the related gains and losses are reflected within segment income. 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. Foreign Exchange Price Risk We are exposed to foreign currency exchange rate risk related to our international operations, including non-functional currency intercompany debt and other non-functional currency transactions of certain subsidiaries. Principal currencies hedged include the euro, Canadian dollar, Japanese yen, British pound, Brazilian real, Malaysian ringgit, Mexican peso and Swiss franc. We typically utilize foreign currency forward exchange contracts to hedge these exposures for periods ranging from 3 to 18 months. The contracts are either designated as cash flow hedges or are undesignated. The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $ 102,965 at March 30, 2025 and $ 79,028 at December 31, 2024. The effective portion of the changes in fair value on these contracts is recorded in other comprehensive income and reclassified into earnings in the same period in which the hedged transactions affect earnings. The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $ 95,887 at March 30, 2025 and $ 123,014 at December 31, 2024. The change in fair value on these instruments is recorded directly in cost of sales or selling, marketing and administrative (“SM&A”) expense, depending on the nature of the underlying exposure. Interest Rate Risk 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 We are exposed to market price changes in certain broad market indices related to our deferred compensation obligations to our employees. To mitigate this risk, we use equity swap contracts to hedge the portion of the exposure that is linked to market-level equity returns. These contracts are not designated as hedges for accounting purposes and are entered into for periods of 3 to 12 months. The change in fair value of these derivatives is recorded in selling, marketing and administrative expense, together with the change in the related liabilities. The notional amount of the contracts outstanding at March 30, 2025 and December 31, 2024 was $ 31,391 and $ 30,524 , respectively. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 11 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of March 30, 2025 and December 31, 2024: March 30, 2025 December 31, 2024 Assets (1) Liabilities (1) Assets (1) Liabilities (1) Derivatives designated as cash flow hedging instruments: Foreign exchange contracts $ 5,225 $ 1,386 $ 8,598 $ 3,280 Derivatives not designated as hedging instruments: Commodities futures and options (2) 242,791 8,424 514,623 14,321 Deferred compensation derivatives — 1,886 460 — Foreign exchange contracts — 159 164 4,800 242,791 10,469 515,247 19,121 Total $ 248,016 $ 11,855 $ 523,845 $ 22,401 (1) Derivative assets are classified on our Consolidated Balance Sheets within prepaid expenses and other as well as other non-current assets. Derivative liabilities are classified on our Consolidated Balance Sheets within accrued liabilities and other long-term liabilities. (2) As of March 30, 2025, amounts reflected on a net basis in assets were assets of $ 311,408 and liabilities of $ 74,132 , 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, 2024 were assets of $ 533,115 and liabilities of $ 32,998 . At March 30, 2025 and December 31, 2024, the remaining amount reflected in assets and liabilities related to the fair value of other non-exchange traded derivative instruments, respectively. Income Statement Impact of Derivative Instruments The effect of derivative instruments on the Consolidated Statements of Income for the three months ended March 30, 2025 and March 31, 2024 was as follows: Non-designated Hedges Cash Flow Hedges Gains (losses) recognized in income (a) Gains (losses) recognized in other comprehensive income (“OCI”) Gains (losses) reclassified from accumulated OCI (“AOCI”) into income (b) 2025 2024 2025 2024 2025 2024 Commodities futures and options $ ( 53,857 ) $ 197,764 $ — $ — $ — $ — Foreign exchange contracts 3,951 ( 267 ) ( 125 ) 1,335 1,354 445 Interest rate swap agreements — — — — ( 2,300 ) ( 2,299 ) Deferred compensation derivatives ( 1,886 ) 2,271 — — — — Total $ ( 51,792 ) $ 199,768 $ ( 125 ) $ 1,335 $ ( 946 ) $ ( 1,854 ) (a) Gains (losses) recognized in income for non-designated commodities futures and options contracts were included in cost of sales. Gains (losses) recognized in income for non-designated foreign currency forward exchange contracts and deferred compensation derivatives were included in selling, marketing and administrative expenses. (b) Gains (losses) reclassified from AOCI into income for foreign currency forward exchange contracts were included in selling, marketing and administrative expenses. Losses reclassified from AOCI into income for interest rate swap agreements were included in interest expense. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 12 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) The amount of pre-tax net loss on derivative instruments, including interest rate swap agreements and foreign currency forward exchange contracts expected to be reclassified into earnings in the next 12 months was approximately $ 5,361 as of March 30, 2025. This amount is primarily associated with interest rate swap agreements. 6. FAIR VALUE MEASUREMENTS Accounting guidance on fair value measurements requires that financial assets and liabilities be classified and disclosed in one of the following categories of the fair value hierarchy: Level 1 – Based on unadjusted quoted prices for identical assets or liabilities in an active market. Level 2 – Based on observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3 – Based on unobservable inputs that reflect the entity’s own assumptions about the assumptions that a market participant would use in pricing the asset or liability. We did no t have any Level 3 financial assets or liabilities, nor were there any transfers between levels during the periods presented. The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of March 30, 2025 and December 31, 2024: Assets / Liabilities Level 1 Level 2 Level 3 Total March 30, 2025: Derivative Instruments: Assets: Foreign exchange contracts (1) $ — $ 5,225 $ — $ 5,225 Commodities futures and options (3) $ 242,791 $ — $ — $ 242,791 Liabilities: Foreign exchange contracts (1) $ — $ 1,545 $ — $ 1,545 Deferred compensation derivatives (2) — 1,886 — 1,886 Commodities futures and options (3) $ 8,424 $ — $ — $ 8,424 December 31, 2024: Assets: Foreign exchange contracts (1) $ — $ 8,761 $ — $ 8,761 Deferred compensation derivatives (2) $ — $ 460 $ — $ 460 Commodities futures and options (3) $ 514,623 $ — $ — $ 514,623 Liabilities: Foreign exchange contracts (1) $ — $ 8,080 $ — $ 8,080 Commodities futures and options (3) $ 14,321 $ — $ — $ 14,321 (1) The fair value of foreign currency forward exchange contracts is the difference between the contract and current market foreign currency exchange rates at the end of the period. We estimate the fair value of foreign currency forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences. (2) The fair value of deferred compensation derivatives is based on quoted prices for market interest rates and a broad market equity index. (3) The fair value of commodities futures and options contracts is based on quoted market prices. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 13 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) Other Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of March 30, 2025 and December 31, 2024 because of the relatively short maturity of these instruments. The estimated fair value of our long-term debt is based on quoted market prices for similar debt issues and is, therefore, classified as Level 2 within the valuation hierarchy. The fair values and carrying values of long-term debt, including the current portion, were as follows: Fair Value Carrying Value March 30, 2025 December 31, 2024 March 30, 2025 December 31, 2024 Current portion of long-term debt $ 600,324 $ 597,547 $ 603,617 $ 604,965 Long-term debt 4,778,927 2,734,322 5,177,251 3,190,210 Total $ 5,379,251 $ 3,331,869 $ 5,780,868 $ 3,795,175 Other Fair Value Measurements In addition to assets and liabilities that are recorded at fair value on a recurring basis, GAAP requires that, under certain circumstances, we also record assets and liabilities at fair value on a nonrecurring basis. 2024 Activity In connection with the acquisition of Sour Strips in 2024, 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. Additionally, we estimated the fair value of the contingent consideration using a Monte Carlo simulation model. 7. LEASES We lease office and retail space, warehouse and distribution facilities, land, vehicles, and equipment. We determine if an agreement is or contains a lease at inception. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are based on the estimated present value of lease payments over the lease term and are recognized at the lease commencement date. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate in determining the present value of lease payments. The estimated incremental borrowing rate is derived from information available at the lease commencement date. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. A limited number of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements generally do not contain residual value guarantees or material restrictive covenants. For real estate, equipment and vehicles that support selling, marketing and general administrative activities, the Company accounts for the lease and non-lease components as a single lease component. These asset categories comprise the majority of our leases. The lease and non-lease components of real estate and equipment leases supporting production activities are not accounted for as a single lease component. Consideration for such contracts are allocated to the lease and non-lease components based upon relative standalone prices either observable or estimated if observable prices are not readily available. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 14 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) The components of lease expense for the three months ended March 30, 2025 and March 31, 2024 were as follows: Three Months Ended Lease expense Classification March 30, 2025 March 31, 2024 Operating lease cost Cost of sales or SM&A (1) $ 14,211 $ 12,215 Finance lease cost: Amortization of ROU assets Depreciation and amortization (1) 2,250 2,213 Interest on lease liabilities Interest expense, net 1,134 1,185 Net lease cost (2) $ 17,595 $ 15,613 (1) Supply chain-related amounts were included in cost of sales. (2) Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial. Information regarding our lease terms and discount rates were as follows: March 30, 2025 December 31, 2024 Weighted-average remaining lease term (years) Operating leases 11.7 12.4 Finance leases 26.2 25.9 Weighted-average discount rate Operating leases 3.8 % 3.7 % Finance leases 6.3 % 6.3 % Supplemental balance sheet information related to leases were as follows: Leases Classification March 30, 2025 December 31, 2024 Assets Operating lease ROU assets Other non-current assets $ 357,070 $ 337,739 Finance lease ROU assets, at cost Property, plant and equipment, gross 87,077 87,999 Accumulated amortization Accumulated depreciation ( 27,020 ) ( 25,515 ) Finance lease ROU assets, net Property, plant and equipment, net 60,057 62,484 Total leased assets $ 417,127 $ 400,223 Liabilities Current Operating Accrued liabilities $ 45,682 $ 40,636 Finance Current portion of long-term debt 4,905 5,666 Non-current Operating Other long-term liabilities 319,640 304,767 Finance Long-term debt 67,476 68,136 Total lease liabilities $ 437,703 $ 419,205 Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 15 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) The maturities of our lease liabilities as of March 30, 2025 were as follows: Operating leases Finance leases Total 2025 (rest of year) $ 44,082 $ 7,109 $ 51,191 2026 55,757 6,922 62,679 2027 53,087 4,902 57,989 2028 35,740 4,396 40,136 2029 32,388 4,245 36,633 Thereafter 227,053 133,709 360,762 Total lease payments 448,107 161,283 609,390 Less: Imputed interest 82,785 88,902 171,687 Total lease liabilities $ 365,322 $ 72,381 $ 437,703 Supplemental cash flow and other information related to leases were as follows: Three Months Ended March 30, 2025 March 31, 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 13,538 $ 11,824 Operating cash flows from finance leases 1,134 1,185 Financing cash flows from finance leases 1,798 1,563 ROU assets obtained in exchange for lease liabilities: Operating leases $ 29,501 $ 9,043 Finance leases 62 983 8. INVESTMENTS IN UNCONSOLIDATED AFFILIATES We invest in partnerships that make equity investments in projects eligible to receive federal historic and renewable energy tax credits. The tax credits, when realized, are recognized as a reduction of tax expense under the flow-through method, at which time the corresponding equity investment is written-down to reflect the remaining value of the future benefits to be realized. The equity investment write-down is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 17 ). Additionally, we acquire ownership interests in emerging snacking businesses and startup companies, which vary in method of accounting based on our percentage of ownership and ability to exercise significant influence over decisions relating to operating and financial affairs. These investments afford the Company the rights to distribute brands that the Company does not own to third-party customers primarily in North America. Net sales and expenses of our equity method investees are not consolidated into our financial statements; 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 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 were $ 209,578 and $ 212,928 as of March 30, 2025 and December 31, 2024, respectively. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 16 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 9. 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. Advancing Agility & Automation Initiative On February 2, 2024, the Board of Directors of the Company approved a multi-year productivity initiative (“Advancing Agility & Automation Initiative” or "AAA Initiative") 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 to $ 350,000 . Since inception through March 30, 2025, we recognized total costs associated with the AAA Initiative of $ 143,390 . These charges predominantly included employee severance and related separation benefits related to workforce reductions and third-party costs supporting the design and implementation of the new organizational structure, as well as technology capability costs. The costs and related benefits of the AAA Initiative predominantly relates to the North America Confectionery segment and Corporate. However, segment operating results do not include these business realignment expenses because we evaluate segment performance excluding such costs. Costs associated with business realignment activities are classified in our Consolidated Statements of Income as follows: Three Months Ended March 30, 2025 March 31, 2024 Cost of sales $ — $ 2,612 Selling, marketing and administrative expense 9,480 14,054 Business realignment costs 16,374 — Costs associated with business realignment activities $ 25,854 $ 16,666 Costs recorded by program during the three months ended March 30, 2025 and March 31, 2024 related to these activities were as follows: Three Months Ended March 30, 2025 March 31, 2024 Advancing Agility & Automation Initiative: Severance and employee benefit costs $ 16,374 $ — Other program costs 9,480 16,666 Total $ 25,854 $ 16,666 The following table presents the liability activity for costs qualifying as exit and disposal costs for the three months ended March 30, 2025: Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 17 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) Total Liability balance at December 31, 2024 (1) $ 10,417 2025 business realignment charges (2) 16,374 Cash payments ( 5,412 ) Liability balance at March 30, 2025 (1) $ 21,379 (1) The liability balances reflected above are reported within accrued liabilities and other long-term liabilities. (2) The costs reflected in the liability roll-forward represent employee-related charges. 10. INCOME TAXES The majority of our taxable income is generated in the United States and taxed at the United States statutory rate of 21 %. The effective tax rates for the three months ended March 30, 2025 and March 31, 2024 were 30.7 % and 19.1 %, respectively. Relative to the statutory rate, the 2025 effective tax rate was primarily impacted by foreign rate differential and state taxes. 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, Canada, Switzerland and the United States. The outcome of tax audits cannot be predicted with certainty, including the timing of resolution or potential settlements. If any issues addressed in our tax audits are resolved in a manner not consistent with management’s expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Based on our current assessments, we believe adequate provision has been made for all income tax uncertainties. We reasonably expect reductions in the liability for unrecognized tax benefits of approximately $ 17,885 within the next 12 months because of the expiration of statutes of limitations and settlements of tax audits. 11. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS Net Periodic Benefit Cost The components of net periodic benefit cost for the three months ended March 30, 2025 and March 31, 2024 were as follows: Pension Benefits Other Benefits Three Months Ended Three Months Ended March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 Service cost $ 3,502 $ 3,849 $ 27 $ 34 Interest cost 9,220 9,687 1,228 1,218 Expected return on plan assets ( 12,011 ) ( 12,808 ) — — Amortization of prior service credit ( 889 ) ( 1,373 ) ( 96 ) ( 38 ) Amortization of net loss (gain) 3,553 3,813 315 139 Total net periodic benefit cost $ 3,375 $ 3,168 $ 1,474 $ 1,353 We made contributions of $ 689 and $ 2,437 to the pension plans and other benefits plans, respectively, during the first quarter of 2025. In the first quarter of 2024, we made contributions of $ 816 and $ 1,592 to our pension plans and other benefit plans, respectively. The contributions in 2025 and 2024 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans. The non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 17 ). Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 18 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 12. STOCK COMPENSATION PLANS Share-based grants for compensation and incentive purposes are made pursuant to the Equity and Incentive Compensation Plan (“EICP”). The EICP provides for grants of one or more of the following stock-based compensation awards to employees, non-employee directors and certain service providers upon whom the successful conduct of our business is dependent: • Non-qualified stock options (“stock options”); • Performance stock units (“PSUs”) and performance stock; • Stock appreciation rights; • Restricted stock units (“RSUs”) and restricted stock; and • Other stock-based awards. The EICP also provides for the deferral of stock-based compensation awards by participants if approved by the Compensation and Human Capital Committee of our Board and if in accordance with an applicable deferred compensation plan of the Company. Currently, the Compensation and Human Capital Committee has authorized the deferral of PSU and RSU awards by certain eligible employees under the Company’s Deferred Compensation Plan. Our Board has authorized our non-employee directors to defer any portion of their cash retainer, committee chair fees and RSUs awarded that they elect to convert into deferred stock units under our Directors’ Compensation Plan. At the time stock options are exercised or PSUs and RSUs become payable, Common Stock is issued from our accumulated treasury shares. Dividend equivalents are credited on RSUs on the same date and at the same rate as dividends paid on our Common Stock. Dividend equivalents are charged to retained earnings and included in accrued liabilities until paid. Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. In addition, historical data is used to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest. For the periods presented, compensation expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows: Three Months Ended March 30, 2025 March 31, 2024 Pre-tax compensation expense $ 13,559 $ 5,986 Related income tax benefit 3,308 1,221 Compensation expenses for stock compensation plans are primarily included in SM&A expense. As of March 30, 2025, total stock-based compensation expense related to non-vested awards not yet recognized was $ 105,959 and the weighted-average period over which this amount is expected to be recognized was approximately 2.1 years. Stock Options The exercise price of each stock option awarded under the EICP equals the closing price of our Common Stock on the New York Stock Exchange on the date of grant. Each stock option has a maximum term of 10 years. Grants of stock options provide for pro-rated vesting, typically over a four-year period. 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. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 19 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) A summary of activity relating to grants of stock options for the period ended March 30, 2025 is as follows: Stock Options Shares Weighted-Average Exercise Price (per share) Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at beginning of year 579,834 $ 106.73 2.7 years Exercised ( 30,277 ) $ 101.12 Outstanding as of March 30, 2025 549,557 $ 107.04 2.5 years $ 35,081 Options exercisable as of March 30, 2025 544,098 $ 105.93 2.4 years $ 35,081 No options were granted for the period ended March 30, 2025. The weighted-average fair value of options granted was $ 45.95 per share for the period ended March 31, 2024. The fair value was estimated on the date of grant using a Black-Scholes option-pricing model and the following weighted-average assumptions: Three Months Ended March 31, 2024 Dividend yields 2.0 % Expected volatility 21.3 % Risk-free interest rates 4.3 % Expected term in years 6.3 The total intrinsic value of options exercised was $ 1,833 and $ 4,148 for the periods ended March 30, 2025 and March 31, 2024, respectively. Performance Stock Units and Restricted Stock Units Under the EICP, we grant PSUs to select executives and other key employees. Vesting is contingent upon the achievement of certain performance objectives. We grant PSUs over three-year performance cycles. If we meet targets for financial measures at the end of the applicable three-year performance cycle, we award a resulting number of shares of our Common Stock to the participants. The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award. For PSUs granted, the target award is a combination of a market-based total shareholder return and performance-based components. For market-based condition components, market volatility and other factors are taken into consideration in determining the grant date fair value and the related compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. For performance-based condition components, we estimate the probability that the performance conditions will be achieved each quarter and adjust compensation expenses accordingly. The performance scores of PSU grants during the three months ended March 30, 2025 and March 31, 2024 can range from 0 % to 250 % of the targeted amounts. We recognize the compensation expenses associated with PSUs ratably over the three-year term. Compensation expenses are based on the grant date fair value because the grants can only be settled in shares of our Common Stock. The grant date fair value of PSUs is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s Common Stock on the date of grant for performance-based components. During the three months ended March 30, 2025 and March 31, 2024, we awarded RSUs to certain executive officers and other key employees under the EICP. We also awarded RSUs to non-employee directors. We recognize the compensation expenses associated with employee RSUs over a specified award vesting period based on the grant date fair value of our Common Stock. We recognize expense for employee RSUs based on the straight- Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 20 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) line method. The compensation expenses associated with non-employee director RSUs is recognized ratably over the vesting period, net of estimated forfeitures. A summary of activity relating to grants of PSUs and RSUs for the period ended March 30, 2025 is as follows: Performance Stock Units and Restricted Stock Units Number of units Weighted-average grant date fair value for equity awards (per unit) Outstanding at beginning of year 538,803 $ 204.65 Granted 420,478 $ 166.02 Performance assumption change (1) 79,674 $ 268.24 Vested ( 273,976 ) $ 207.25 Forfeited ( 27,134 ) $ 204.08 Outstanding as of March 30, 2025 737,845 $ 188.55 (1) Reflects the net number of PSUs above and below target levels based on the performance metrics. The following table sets forth information about the fair value of the PSUs and RSUs granted for potential future distribution to employees and non-employee directors. In addition, the table provides assumptions used to determine the fair value of the market-based total shareholder return component using the Monte Carlo simulation model on the date of grant. Three Months Ended March 30, 2025 March 31, 2024 Units granted 420,478 315,389 Weighted-average fair value at date of grant $ 166.02 $ 196.16 Monte Carlo simulation assumptions: Estimated values $ 65.27 $ 84.13 Dividend yields 3.3 % 2.8 % Expected volatility 21.7 % 18.5 % The fair value of shares vested totaled $ 46,251 and $ 84,998 for the periods ended March 30, 2025 and March 31, 2024, respectively. Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 244,525 units as of March 30, 2025. Each unit is equivalent to one share of the Company’s Common Stock. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 21 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 13. SEGMENT INFORMATION The Company reports its operations through three segments: (i) North America Confectionery, (ii) North America Salty Snacks and (iii) International. This organizational structure aligns with how our CODM, Michele Buck, Chairman of the Board, President, and Chief Executive Officer, 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. This includes our business in chocolate and non-chocolate confectionery, gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines. This segment also includes our retail operations, including Hershey’s Chocolate World stores in Hershey, Pennsylvania; New York, New York; Las Vegas, Nevada; Niagara Falls (Ontario) and Singapore, as well as operations associated with licensing the use of certain of the Company’s trademarks and products to third parties around the world. • North America Salty Snacks – This segment is responsible for our salty snacking products in the United States. This includes ready-to-eat popcorn, baked and trans fat free snacks, pretzels and other snacks. • International – International is a combination of all other operating segments that are not individually material, including those geographic regions where we operate outside of North America. 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 Asia, Latin America, Middle East, Europe, Africa and other regions. For segment reporting purposes, the CODM uses “segment income” to evaluate segment performance and allocate resources, including considering budget-to-actual variances and prior year-to-actual variances on a monthly basis. Segment income excludes unallocated general corporate administrative expenses, unallocated mark-to-market gains and losses on commodity derivatives, business realignment and impairment charges, acquisition-related costs and other unusual gains or losses that are not part of our measurement of segment performance. These items of our operating profit are managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM as well as the measure of segment performance used for incentive compensation purposes. As discussed in Note 5 , derivatives used to manage commodity price risk are not designated for hedge accounting treatment. These derivatives are recognized at fair market value with the resulting realized and unrealized (gains) losses recognized in unallocated derivative (gains) losses outside of the reporting segment results until the related inventory is sold, at which time the related gains and losses are reallocated to segment income. This enables us 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. Certain manufacturing, warehousing, distribution and other activities supporting our global operations are integrated to maximize efficiency and productivity. As a result, assets and capital expenditures are not managed on a segment basis and are not included in the information reported to the CODM for the purpose of evaluating performance or allocating resources. We disclose depreciation and amortization that is generated by segment-specific assets, since these amounts are included within the measure of segment income reported to the CODM. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 22 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) Our segment net sales and earnings were as follows: For the three months ended March 30, 2025 North America Confectionery North America Salty Snacks International Total Net sales $ 2,300,140 $ 277,798 $ 227,481 $ 2,805,419 Cost of sales 1,315,076 180,638 153,984 SM&A expense 288,690 55,307 44,771 Total segment income $ 696,374 $ 41,853 $ 28,726 $ 766,953 Unallocated corporate expense (1) 160,425 Unallocated mark-to-market losses on commodity derivatives 211,453 Costs associated with business realignment activities (see Note 9 ) 25,854 Operating profit $ 369,221 Interest expense, net (see Note 4 ) 44,622 Other (income) expense, net (see Note 17 ) 945 Income before income taxes $ 323,654 For the three months ended March 31, 2024 North America Confectionery North America Salty Snacks International Total Net sales $ 2,707,310 $ 275,106 $ 270,333 $ 3,252,749 Cost of sales 1,428,391 183,747 179,932 SM&A expense 330,724 52,654 47,651 Total segment income $ 948,195 $ 38,705 $ 42,750 $ 1,029,650 Unallocated corporate expense (1) 172,899 Unallocated mark-to-market gains on commodity derivatives ( 218,015 ) Costs associated with business realignment activities (see Note 9 ) 16,666 Operating profit $ 1,058,100 Interest expense, net (see Note 4 ) 39,822 Other (income) expense, net (see Note 17 ) 32,020 Income before income taxes $ 986,258 (1) 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, (d) acquisition and integration-related costs, and (e) other gains or losses that are not integral to segment performance. Activity within the unallocated mark-to-market adjustment for commodity derivatives is as follows: Three Months Ended March 30, 2025 March 31, 2024 Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in income $ 53,857 $ ( 197,764 ) Net gains (losses) on commodity derivative positions reclassified from unallocated to segment income 157,596 ( 20,251 ) Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses $ 211,453 $ ( 218,015 ) As of March 30, 2025, the cumulative amount of mark-to-market gains on commodity derivatives that have been recognized in our consolidated cost of sales and not yet allocated to reportable segments was $ 198,776 . Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pre-tax gains on commodity derivatives of $ 163,720 to segment operating results in the next twelve months. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 23 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) Depreciation and amortization expense included within segment income presented above is as follows: Three Months Ended March 30, 2025 March 31, 2024 North America Confectionery $ 69,773 $ 62,421 North America Salty Snacks 21,846 19,843 International 6,185 6,071 Corporate 21,760 19,429 Total $ 119,564 $ 107,764 Additional information regarding our net sales disaggregated by geographical region is as follows: Three Months Ended March 30, 2025 March 31, 2024 Net sales: United States $ 2,467,754 $ 2,854,432 All other countries 337,665 398,317 Total $ 2,805,419 $ 3,252,749 14. TREASURY STOCK ACTIVITY A summary of our treasury stock activity is as follows: Three Months Ended March 30, 2025 Shares Dollars In thousands Shares issued for stock options and incentive compensation ( 213,935 ) $ ( 8,991 ) In May 2021, our Board of Directors approved a $ 500 million share repurchase authorization, which was completed as of March 31, 2024. In December 2023, our Board of Directors approved an additional $ 500 million share repurchase authorization. This program commenced after the existing May 2021 authorization was completed. As a result of the share repurchase authorization, approximately $ 470 million remains available for repurchases under our December 2023 share repurchase authorization. We are authorized to purchase our outstanding shares in open market and privately negotiated transactions. The program has no expiration date and acquired shares of Common Stock will be held as treasury shares. Purchases under approved share repurchase authorizations are in addition to our practice of buying back shares sufficient to offset those issued under incentive compensation plans. 15. CONTINGENCIES 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. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 24 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 16. EARNINGS PER SHARE We compute basic earnings per share for Common Stock and Class B common stock using the two-class method. The Class B common stock is convertible into Common Stock on a share-for-share basis at any time. The computation of diluted earnings per share for Common Stock assumes the conversion of Class B common stock using the if-converted method, while the diluted earnings per share of Class B common stock does not assume the conversion of those shares. Three Months Ended March 30, 2025 March 31, 2024 Common Stock Class B Common Stock Common Stock Class B Common Stock Basic earnings per share: Numerator: Allocation of distributed earnings (cash dividends paid) $ 203,600 $ 67,994 $ 205,411 $ 67,994 Allocation of undistributed earnings ( 35,496 ) ( 11,895 ) 393,508 130,540 Total earnings—basic $ 168,104 $ 56,099 $ 598,919 $ 198,534 Denominator (shares in thousands): Total weighted-average shares—basic 148,097 54,614 149,609 54,614 Earnings Per Share—basic $ 1.14 $ 1.03 $ 4.00 $ 3.64 Diluted earnings per share: Numerator: Allocation of total earnings used in basic computation $ 168,104 $ 56,099 $ 598,919 $ 198,534 Reallocation of total earnings as a result of conversion of Class B common stock to Common stock 56,099 — 198,534 — Reallocation of undistributed earnings — 26 — ( 425 ) Total earnings—diluted $ 224,203 $ 56,125 $ 797,453 $ 198,109 Denominator (shares in thousands): Number of shares used in basic computation 148,097 54,614 149,609 54,614 Weighted-average effect of dilutive securities: Conversion of Class B common stock to Common shares outstanding 54,614 — 54,614 — Employee stock options 196 — 318 — Performance and restricted stock units 234 — 334 — Total weighted-average shares—diluted 203,141 54,614 204,875 54,614 Earnings Per Share—diluted $ 1.10 $ 1.03 $ 3.89 $ 3.63 The earnings per share calculations for the three months ended March 30, 2025 and March 31, 2024 excluded 27 and 12 stock options (in thousands), respectively, that would have been antidilutive. Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 25 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 17. OTHER (INCOME) EXPENSE, NET Other (income) expense, net reports certain gains and losses associated with activities not directly related to our core operations. A summary of the components of other (income) expense, net is as follows: Three Months Ended March 30, 2025 March 31, 2024 Write-down of equity investments in partnerships qualifying for historic and renewable energy tax credits (see Note 8 ) $ — $ 31,391 Non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans (see Note 11 ) 1,320 638 Other (income) expense, net ( 375 ) ( 9 ) Total $ 945 $ 32,020 Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 26 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 18. SUPPLEMENTAL BALANCE SHEET INFORMATION The components of certain asset accounts included within our Consolidated Balance Sheets are as follows: March 30, 2025 December 31, 2024 Inventories: Raw materials $ 767,802 $ 477,592 Goods in process 305,364 204,674 Finished goods 986,432 990,785 Inventories at First In First Out 2,059,598 1,673,051 Adjustment to Last In First Out ( 592,265 ) ( 418,957 ) Total inventories $ 1,467,333 $ 1,254,094 Prepaid expenses and other: Prepaid expenses $ 165,291 $ 269,792 Other current assets 776,627 704,423 Total prepaid expenses and other $ 941,918 $ 974,215 Property, plant and equipment: Land $ 195,475 $ 194,502 Buildings 2,010,638 1,991,937 Machinery and equipment 4,248,792 4,147,530 Construction in progress 405,561 478,842 Property, plant and equipment, gross 6,860,466 6,812,811 Accumulated depreciation ( 3,423,485 ) ( 3,353,958 ) Property, plant and equipment, net $ 3,436,981 $ 3,458,853 Other non-current assets: Pension $ 39,031 $ 41,298 Capitalized software, net 360,577 367,087 Operating lease ROU assets 357,070 337,739 Investments in unconsolidated affiliates 209,578 212,928 Other non-current assets 160,573 152,815 Total other non-current assets $ 1,126,829 $ 1,111,867 Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 27 THE HERSHEY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) The components of certain liability and stockholders’ equity accounts included within our Consolidated Balance Sheets are as follows: March 30, 2025 December 31, 2024 Accounts payable: Accounts payable—trade $ 775,019 $ 807,918 Supplier finance program obligations 305,180 215,122 Other 335,261 136,137 Total accounts payable $ 1,415,460 $ 1,159,177 Accrued liabilities: Payroll, compensation and benefits $ 170,892 $ 226,774 Advertising, promotion and product allowances 379,927 359,986 Operating lease liabilities 45,682 40,636 Other 230,446 179,945 Total accrued liabilities $ 826,947 $ 807,341 Other long-term liabilities: Post-retirement benefits liabilities $ 85,790 $ 87,006 Pension benefits liabilities 29,168 33,837 Operating lease liabilities 319,640 304,767 Other 241,659 262,649 Total other long-term liabilities $ 676,257 $ 688,259 Accumulated other comprehensive loss: Foreign currency translation adjustments $ ( 167,837 ) $ ( 177,741 ) Pension and post-retirement benefit plans, net of tax ( 119,987 ) ( 122,098 ) Cash flow hedges, net of tax ( 3,475 ) ( 4,051 ) Total accumulated other comprehensive loss $ ( 291,299 ) $ ( 303,890 ) Table of Contents The Hershey Company | Q1 2025 Form 10-Q | Page 28