Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)						48
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting						50
Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021						52
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021						53
Consolidated Balance Sheets as of December 31, 2023 and 2022						54
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021						55
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021						56
Notes to Consolidated Financial Statements						57
Note 1 - Summary of Significant Accounting Policies						57
Note 2 - Business Acquisitions and Divestitures						63
Note 3 - Goodwill and Intangible Assets						66
Note 4 - Short and Long-Term Debt						67
Note 5 - Derivative Instruments						69
Note 6 - Fair Value Measurements						71
Note 7 - Leases						73
Note 8 - Investments in Unconsolidated Affiliates						75
Note 9 - Business Realignment Activities						75
Note 10 - Income Taxes						77
Note 11 - Pension and Other Post-Retirement Benefit Plans						80
Note 12 - Stock Compensation Plans						86
Note 13 - Segment Information						89
Note 14 - Equity and Treasury Stock Activity						92
Note 15 - Commitments and Contingencies						94
Note 16 - Earnings Per Share						94
Note 17 - Other (Income) Expense, Net						96
Note 18 - Related Party Transactions						96
Note 19 - Supplemental Balance Sheet Information						97

Table of Contents			The Hershey Company | 2023 Form 10-K | Page 47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of The Hershey Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Hershey Company (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) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 20, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Valuation of Accrued Liabilities for Trade Promotion Activities
Description of the Matter						The unsettled portion of the Company’s obligation for trade promotion activities at December 31, 2023 was $194.0 million. As discussed in Note 1 of the consolidated financial statements, the Company promotes its products through programs such as, but not limited to, discounts, coupons, rebates, in-store display incentives, and volume-based incentives. The Company recognizes the estimated costs of these trade promotion activities as a component of variable consideration when determining the transaction price. 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 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 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
We have served as the Company’s auditor since 2016.
Philadelphia, Pennsylvania
February 20, 2024

.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of The Hershey Company

Opinion on Internal Control Over Financial Reporting

We have audited The Hershey Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). 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.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 20, 2024

Table of Contents			The Hershey Company | 2023 Form 10-K | Page 51

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

For the years ended December 31,						2023						2022						2021
Net sales						$	11,164,992					$	10,419,294					$	8,971,337
Cost of sales						6,167,176						5,920,509						4,922,739
Gross profit						4,997,816						4,498,785						4,048,598
Selling, marketing and administrative expense						2,436,508						2,236,009						2,001,351
Business realignment costs						441						1,989						3,525
Operating profit						2,560,867						2,260,787						2,043,722
Interest expense, net						151,785						137,557						127,417
Other (income) expense, net						237,218						206,159						119,081
Income before income taxes						2,171,864						1,917,071						1,797,224
Provision for income taxes						310,077						272,254						314,405
Net income including noncontrolling interest						1,861,787						1,644,817						1,482,819
Less: Net gain attributable to noncontrolling interest						—						—						5,307
Net income attributable to The Hershey Company						$	1,861,787					$	1,644,817					$	1,477,512
Net income per share—basic:
Common stock						$	9.31					$	8.22					$	7.34
Class B common stock						$	8.52					$	7.47					$	6.68
Net income per share—diluted:
Common stock						$	9.06					$	7.96					$	7.11
Class B common stock						$	8.50					$	7.45					$	6.66
Dividends paid per share:
Common stock						$	4.456					$	3.874					$	3.410
Class B common stock						$	4.050					$	3.522					$	3.100

See Notes to Consolidated Financial Statements.

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THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

						For the years ended December 31,
						2023																		2022																		2021
						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount
Net income including noncontrolling interest																		$	1,861,787																	$	1,644,817																	$	1,482,819
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
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
Pension and post-retirement benefit plans:
Net actuarial (loss) gain						(39,454)						9,191						(30,263)						(32,970)						7,481						(25,489)						67,728						(13,929)						53,799
Reclassification to earnings						28,612						(6,895)						21,717						31,009						(7,392)						23,617						32,092						(8,067)						24,025
Cash flow hedges:
(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
Total other comprehensive income (loss), net of tax						$	23,637					$	(1,382)					22,255						$	(45)					$	(3,073)					(3,118)						$	120,135					$	(26,019)					94,116
Total comprehensive income including noncontrolling interest																		$	1,884,042																	$	1,641,699																	$	1,576,935
Comprehensive gain attributable to noncontrolling interest																		—																		—																		10,556
Comprehensive income attributable to The Hershey Company																		$	1,884,042																	$	1,641,699																	$	1,566,379

See Notes to Consolidated Financial Statements.

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THE HERSHEY COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

December 31,						2023						2022
ASSETS
Current assets:
Cash and cash equivalents						$	401,902					$	463,889
Accounts receivable—trade, net						823,617						711,203
Inventories						1,340,996						1,173,119
Prepaid expenses and other						345,588						272,195
Total current assets						2,912,103						2,620,406
Property, plant and equipment, net						3,309,678						2,769,702
Goodwill						2,696,050						2,606,956
Other intangibles						1,879,229						1,966,269
Other non-current assets						1,061,427						944,989
Deferred income taxes						44,454						40,498
Total assets						$	11,902,941					$	10,948,820
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable						$	1,086,183					$	970,558
Accrued liabilities						867,815						832,518
Accrued income taxes						29,457						6,710
Short-term debt						719,839						693,790
Current portion of long-term debt						305,058						753,578
Total current liabilities						3,008,352						3,257,154
Long-term debt						3,789,132						3,343,977
Other long-term liabilities						660,673						719,742
Deferred income taxes						345,698						328,403
Total liabilities						7,803,855						7,649,276
Stockholders’ equity:
The Hershey Company stockholders’ equity
Preferred stock, shares issued: none in 2023 and 2022						—						—
Common stock, shares issued: 166,939,511 in 2023 and 163,439,248 in 2022						166,939						163,439
Class B common stock, shares issued: 54,613,514 in 2023 and 58,113,777 in 2022						54,614						58,114
Additional paid-in capital						1,345,580						1,296,572
Retained earnings						4,562,263						3,589,781
Treasury—common stock shares, at cost: 17,160,099 in 2023 and 16,588,308 in 2022						(1,800,232)						(1,556,029)
Accumulated other comprehensive loss						(230,078)						(252,333)
Total stockholders’ equity						4,099,086						3,299,544
Total liabilities and stockholders’ equity						$	11,902,941					$	10,948,820

See Notes to Consolidated Financial Statements.

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THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the years ended December 31,						2023						2022						2021
Operating Activities
Net income including noncontrolling interest						$	1,861,787					$	1,644,817					$	1,482,819
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization						419,815						378,959						315,002
Stock-based compensation expense						81,021						65,991						66,711
Deferred income taxes						16,233						36,889						13,374
Write-down of equity investments						210,484						188,286						113,756
Other						103,287						120,818						96,016
Changes in assets and liabilities, net of business acquisitions and divestitures:
Accounts receivable—trade, net						(102,080)						(38,165)						(14,642)
Inventories						(157,153)						(186,963)						21,457
Prepaid expenses and other current assets						(22,444)						(14,507)						8,619
Accounts payable and accrued liabilities						50,234						216,479						39,732
Accrued income taxes						(32,481)						5,005						(29,682)
Contributions to pension and other benefit plans						(27,581)						(78,547)						(51,100)
Other assets and liabilities						(77,932)						(11,225)						20,822
Net cash provided by operating activities						2,323,190						2,327,837						2,082,884
Investing Activities
Capital additions (including software)						(771,109)						(519,481)						(495,877)
Equity investments in tax credit qualifying partnerships						(256,815)						(275,534)						(128,417)
Business acquisitions, net of cash and cash equivalents acquired						(165,818)						—						(1,601,073)
Other investing activities						(4,934)						7,639						2,539
Net cash used in investing activities						(1,198,676)						(787,376)						(2,222,828)
Financing Activities
Net increase (decrease) in short-term debt						26,049						(245,633)						869,030
Long-term borrowings, net of debt issuance costs						744,092						—						—
Repayment of long-term debt and finance leases						(755,414)						(4,741)						(439,444)
Cash dividends paid						(889,071)						(775,030)						(685,987)
Repurchase of common stock						(264,913)						(388,964)						(457,946)
Exercise of stock options						26,015						34,158						49,821
Taxes withheld and paid on employee stock awards						(35,009)						(35,515)						(16,610)
Net cash used in financing activities						(1,148,251)						(1,415,725)						(681,136)
Effect of exchange rate changes on cash and cash equivalents						(38,250)						9,887						(5,075)
(Decrease) increase in cash and cash equivalents, including cash classified as held for sale						(61,987)						134,623						(826,155)
Less: 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
Cash and cash equivalents, end of period						$	401,902					$	463,889					$	329,266
Supplemental Disclosure
Interest paid						$	160,729					$	131,757					$	127,726
Income taxes paid						303,942						221,321						275,171

See Notes to Consolidated Financial Statements.

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THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

						Preferred Stock						Common Stock						Class B Common Stock						Additional Paid-in Capital						Retained Earnings						Treasury Common Stock						Accumulated Other Comprehensive Income (Loss)						Noncontrolling Interests in Subsidiaries						Total Stockholders’ Equity
Balance, January 1, 2021						$	—					$	160,939					$	60,614					$	1,191,200					$	1,928,673					$	(768,992)					$	(338,082)					$	3,531					$	2,237,883
Net income																														1,477,512																		5,307						1,482,819
Other comprehensive income																																										88,867						5,249						94,116
Dividends (including dividend equivalents):
Common Stock, $3.410 per share																														(498,346)																								(498,346)
Class B Common Stock, $3.100 per share																														(187,903)																								(187,903)
Stock-based compensation																								67,482																														67,482
Exercise of stock options and incentive-based transactions																								1,649												31,562																		33,211
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						—						160,939						60,614						1,260,331						2,719,936						(1,195,376)						(249,215)						—						2,757,229
Net income																														1,644,817																		—						1,644,817
Other comprehensive loss																																										(3,118)						—						(3,118)
Dividends (including dividend equivalents):
Common Stock, $3.874 per share																														(567,839)																								(567,839)
Class B Common Stock, $3.522 per share																														(207,133)																								(207,133)
Conversion of Class B Common Stock into Common Stock												2,500						(2,500)																																				—
Stock-based compensation																								65,909																														65,909
Exercise of stock options and incentive-based transactions																								(29,668)												28,311																		(1,357)
Repurchase of common stock																																				(388,964)																		(388,964)
Balance, December 31, 2022						—						163,439						58,114						1,296,572						3,589,781						(1,556,029)						(252,333)						—						3,299,544
Net income																														1,861,787																		—						1,861,787
Other comprehensive income																																										22,255						—						22,255
Dividends (including dividend equivalents):
Common Stock, $4.456 per share																														(663,410)																								(663,410)
Class B Common Stock, $4.050 per share																														(225,895)																								(225,895)
Conversion of Class B Common Stock into Common Stock												3,500						(3,500)																																				—
Stock-based compensation																								81,130																														81,130
Exercise of stock options and incentive-based transactions																								(32,122)												23,128																		(8,994)
Repurchase of common stock (including excise tax)																																				(267,331)																		(267,331)
Balance, December 31, 2023						$	—					$	166,939					$	54,614					$	1,345,580					$	4,562,263					$	(1,800,232)					$	(230,078)					$	—					$	4,099,086

See Notes to Consolidated Financial Statements.

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THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

The Hershey Company together with its wholly-owned subsidiaries and entities in which it has a controlling interest, (the “Company,” “Hershey,” “we” or “us”) is a global confectionery leader known for its branded portfolio of chocolate, sweets, mints and other great tasting snacks. The Company has more than 90 brands worldwide including such iconic brand names as Hershey’s, Reese’s, Kisses, Jolly Rancher and Ice Breakers, which are marketed, sold and distributed in approximately 80 countries worldwide. Hershey’s structure is designed to ensure continued focus on North America, coupled with an emphasis on profitable growth in our focus international markets. The Company currently operates through three segments that are aligned with its management structure and the key markets it serves: (i) North America Confectionery, (ii) North America Salty Snacks and (iii) International. For additional information on our segment presentation, see Note 13.

Basis of Presentation

Our consolidated financial statements include the accounts of The Hershey Company and its majority-owned or controlled subsidiaries. Intercompany transactions and balances have been eliminated. 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. In addition, we use the equity method of accounting for our investments in partnership entities which make equity investments in projects eligible to receive federal historic and energy tax credits. 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 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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. Our significant estimates and assumptions include, among others, pension and other post-retirement benefit plan assumptions, valuation assumptions of goodwill and other intangible assets, useful lives of long-lived assets, marketing and trade promotion accruals and income taxes. These estimates and assumptions are based on management’s best judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and the effects of any revisions are reflected in the consolidated financial statements in the period that they are determined. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

Revenue Recognition

The majority of our revenue contracts represent a single performance obligation related to the fulfillment of customer orders for the purchase of our products, including chocolate, sweets, mints and other grocery and snack offerings. Net sales reflect the transaction prices for these contracts based on our selling list price which is then reduced by estimated costs for trade promotional programs, consumer incentives, and allowances and discounts associated with aged or potentially unsaleable products. We recognize revenue at the point in time that control of the ordered product(s) is transferred to the customer, which is typically upon delivery to the customer or other customer-designated delivery point. Amounts billed and due from our customers are classified as accounts receivables on the balance sheet and require payment on a short-term basis.

Our trade promotional programs and consumer incentives are used to promote our products and include, but are not limited to, discounts, coupons, rebates, in-store display incentives, and volume-based incentives. The estimated costs

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THE HERSHEY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

associated with these programs and incentives are based upon our analysis of the programs offered, expectations regarding customer and consumer participation, historical sales and payment trends, and our experience with payment patterns associated with similar programs offered in the past. The estimated costs of these programs are reasonably likely to change in future periods due 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. Differences between estimated expense and actual program performance are recognized as a change in estimate in a subsequent period and are normally not significant. During 2023, 2022 and 2021, actual promotional costs have not deviated from the estimated amount by more than 3%. The Company’s unsettled portion remaining in accrued liabilities at year-end for these activities was $194,032 and $215,688 at December 31, 2023 and 2022, respectively.

We also recognize a minor amount of royalty income (less than 1% of our consolidated net sales) from sales-based licensing arrangements, pursuant to which revenue is recognized as the third-party licensee sales occur. Shipping and handling costs incurred to deliver product to the customer are recorded within cost of sales. Sales, value add and other taxes we collect concurrent with revenue producing activities are excluded from revenue.

The majority of our products are confectionery or confectionery-based and, therefore, exhibit similar economic characteristics, as they are based on similar ingredients and are marketed and sold through the same channels to the same customers. In connection with our recent acquisitions, we have expanded our portfolio of salty snacking products, which also exhibit similar economic characteristics to our confectionery products and are sold through the same channels to the same customers. See Note 13 for revenues reported by geographic segment, which is consistent with how we organize and manage our operations, as well as product line net sales information.

In 2023, 2022 and 2021, approximately 28%, 28% and 30%, respectively, of our consolidated net sales were made to McLane Company, Inc., one of the largest wholesale distributors in the United States to convenience stores, drug stores, wholesale clubs and mass merchandisers and the primary distributor of our products to Wal-Mart Stores, Inc.

Cost of Sales

Cost of sales represents costs directly related to the manufacture and distribution of our products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling, warehousing and the depreciation of manufacturing, warehousing and distribution facilities. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance and property taxes.

Selling, Marketing and Administrative Expense

Selling, marketing and administrative expense (“SM&A”) represents costs incurred in generating revenues and in managing our business. Such costs include advertising and other marketing expenses, selling expenses, research and development costs, administrative and other indirect overhead costs, amortization of capitalized software and intangible assets and depreciation of administrative facilities. Research and development costs, charged to expense as incurred, totaled $50,030 in 2023, $46,943 in 2022 and $40,107 in 2021. Advertising expense is also charged to expense as incurred and totaled $604,853 in 2023, $517,677 in 2022 and $511,798 in 2021. There was no prepaid advertising expense as of December 31, 2023. Prepaid advertising expense was $241 as of December 31, 2022.

Cash Equivalents

Cash equivalents consist of highly liquid debt instruments, time deposits and money market funds with original maturities of three months or less. The fair value of cash equivalents approximates the carrying amount.

Accounts Receivable—Trade

In the normal course of business, we extend credit to customers that satisfy pre-defined credit criteria, based upon the results of our recurring financial account reviews and our evaluation of current and projected economic conditions. Our primary concentration of credit risk is associated with McLane Company, Inc., one customer served principally by our North America Confectionery segment. As of December 31, 2023, McLane Company, Inc. accounted for approximately 24% of our total accounts receivable. No other customer accounted for more than 10% of our year-end accounts receivable. We believe that we have little concentration of credit risk associated with the remainder of our customer base. Accounts receivable-trade in the Consolidated Balance Sheets is presented net of allowances for bad debts and anticipated discounts of $31,663 and $26,001 at December 31, 2023 and 2022, respectively.

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

Inventories

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. 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. The adjustment to LIFO, as shown in Note 19, approximates the excess of replacement cost over the stated LIFO inventory value. The net impact of LIFO acquisitions and liquidations was not material to 2023, 2022 or 2021.

Property, Plant and Equipment

Property, plant and equipment is stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets, as follows: 3 to 15 years for machinery and equipment; and 25 to 40 years for buildings and related improvements. At December 31, 2023 and December 31, 2022, property, plant and equipment included assets under finance lease arrangements with net book values totaling $69,863 and $72,160, respectively. Total depreciation expense for the years ended December 31, 2023, 2022 and 2021 was $265,604, $253,582 and $230,638, respectively, and included depreciation on assets recorded under finance lease arrangements. Maintenance and repairs are expensed as incurred. We capitalize applicable interest charges incurred during the construction of new facilities and production lines and amortize these costs over the assets’ estimated useful lives.

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We measure the recoverability of assets to be held and used by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated. If these assets are considered to be impaired, we measure impairment as the amount by which the carrying amount of the assets exceeds the fair value of the assets. We report assets held for sale or disposal at the lower of the carrying amount or fair value less cost to sell.

We assess asset retirement obligations on a periodic basis and recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. We capitalize associated asset retirement costs as part of the carrying amount of the long-lived asset.

Computer Software

We capitalize costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and it is probable the software being developed will be completed and placed in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project and (iii) interest costs incurred, when material, while developing internal-use software. We cease capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose.

The unamortized amount of capitalized software totaled $360,205 and $320,034 at December 31, 2023 and 2022, respectively. We amortize software costs using the straight-line method over the expected life of the software, generally 3 to 7 years. Accumulated amortization of capitalized software was $395,410 and $350,620 as of 2023 and 2022, respectively. Such amounts are recorded within other assets in the Consolidated Balance Sheets.

We review the carrying value of software and development costs for impairment in accordance with our policy pertaining to the impairment of long-lived assets.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually or more often if indicators of a potential impairment are present. Our annual impairment tests are conducted at the beginning of the fourth quarter. We test goodwill for impairment by performing either a qualitative or quantitative assessment. If we choose to perform a qualitative assessment, we evaluate economic, industry and company-specific factors in assessing the fair value of the related reporting unit. If we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying value, a quantitative test is then performed. Otherwise, no further testing is

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

required. For those reporting units tested using a quantitative approach, we compare the fair value of each reporting unit with the carrying amount of the reporting unit, including goodwill. If the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, impairment is indicated, requiring recognition of a goodwill impairment charge for the differential (up to the carrying value of goodwill). We test individual indefinite-lived intangible assets by comparing the estimated fair values with the book values of each asset.

We determine the fair value of our reporting units and indefinite-lived intangible assets using an income approach. Under the income approach, we calculate the fair value of our reporting units and indefinite-lived intangible assets based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate the future cash flows used to measure fair value. Our estimates of future cash flows consider past performance, current and anticipated market conditions and internal projections and operating plans which incorporate estimates for sales growth and profitability, and cash flows associated with taxes and capital spending. Additional assumptions include forecasted growth rates, estimated discount rates, which may be risk-adjusted for the operating market of the reporting unit, and estimated royalty rates that would be charged for comparable branded licenses. We believe such assumptions also reflect current and anticipated market conditions and are consistent with those that would be used by other marketplace participants for similar valuation purposes. Such assumptions are subject to change due to changing economic and competitive conditions.

The cost of intangible assets with finite useful lives is amortized on a straight-line basis. Our finite-lived intangible assets consist primarily of certain trademarks, customer-related intangible assets and patents obtained through business acquisitions. The weighted-average amortization period for our finite-lived intangible assets is approximately 28 years, which is primarily driven by recently acquired trademarks. If certain events or changes in operating conditions indicate that the carrying value of these assets, or related asset groups, may not be recoverable, we perform an impairment assessment and may adjust the remaining useful lives. See Note 3 for additional information regarding the results of impairment tests.

Supplier Finance Program Obligations

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. We have no economic interest in a supplier’s decision to enter into these agreements. Once a qualifying supplier elects to participate in the supplier finance program and reaches an agreement with a financial institution, they elect which individual Company invoices they sell to the financial institution. However, all Company payments to participating suppliers are paid to the financial institution on the invoice due date, regardless of whether the individual invoice is sold by the supplier to the financial institution. The financial institution pays the supplier on the invoice due date for any invoices that were not previously sold under the supplier finance program. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted by our suppliers’ decisions to sell amounts under these arrangements. The payment of these obligations is included in cash provided by operating activities in the Consolidated Statements of Cash Flows. 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:

						2023
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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Currency Translation

The financial statements of our foreign entities with functional currencies other than the U.S. dollar are translated into U.S. dollars, with the resulting translation adjustments recorded as a component of other comprehensive income (loss). Assets and liabilities are translated into U.S. 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.

Derivative Instruments

We use derivative instruments principally to offset exposure to market risks arising from changes in commodity prices, foreign currency exchange rates and interest rates. See Note 5 for additional information on our risk management strategy and the types of instruments we use.

Derivative instruments are recognized on the Consolidated Balance Sheets at their fair values. When we become party to a derivative instrument and intend to apply hedge accounting, we designate the instrument for financial reporting purposes as a cash flow or fair value hedge. The accounting for changes in fair value (gains or losses) of a derivative instrument depends on whether we have designated it and it qualified as part of a hedging relationship, as noted below:

• Changes in the fair value of a derivative that is designated as a cash flow hedge are recorded in accumulated other comprehensive income (“AOCI”) to the extent effective and reclassified into earnings in the same period or periods during which the transaction hedged by that derivative also affects earnings.

• Changes in the fair value of a derivative that is designated as a fair value hedge, along with the offsetting loss or gain on the hedged asset or liability that is attributable to the risk being hedged, are recorded in earnings, thereby reflecting in earnings the net extent to which the hedge is not effective in achieving offsetting changes in fair value.

• Changes in the fair value of a derivative not designated as a hedging instrument are recognized in earnings in cost of sales or SM&A, consistent with the related exposure.

For derivatives designated as hedges, we assess, both at the hedge’s inception and on an ongoing basis, whether they are highly effective in offsetting changes in fair values or cash flows of hedged items. The ineffective portion, if any, is recorded directly in earnings. In addition, if we determine that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, we discontinue hedge accounting prospectively.

We do not hold or issue derivative instruments for trading or speculative purposes and are not a party to any instruments with leverage or prepayment features.

Cash flows related to the derivative instruments we use to manage interest, commodity or other currency exposures are classified as operating activities.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. Entities may apply this ASU upon issuance through December 31, 2022 on a prospective basis. We early adopted the provisions of this ASU in the first quarter of 2022. Adoption of the new standard did not have a material impact on our consolidated financial statements.

In September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations. This ASU requires a buyer in a supplier finance program to disclose qualitative and quantitative information about the program including the program’s nature, activity during the period, changes from period to period and potential magnitude. ASU 2022-04 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods. 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

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(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.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) rather than adjust them to fair value at the acquisition date. ASU 2021-08 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods. This ASU should be applied prospectively to business combinations occurring on or after the date of adoption. As a result, we adopted the provisions of this ASU in the first quarter of 2023. This new standard was not applicable to 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.

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

2. BUSINESS ACQUISITIONS AND DIVESTITURES

Acquisitions of businesses are accounted for as business combinations and, accordingly, the results of operations of the businesses acquired have been included in the consolidated financial statements since the respective dates of the acquisitions. The purchase price for each acquisition is allocated to the assets acquired and liabilities assumed.

In conjunction with acquisitions noted below, we used various valuation techniques to determine fair value of the assets acquired, with the primary techniques being discounted cash flow analysis, relief-from-royalty, a form of the multi-period excess earnings and the with-and-without valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Inputs to these valuation approaches require significant judgment including: (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.

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.

On December 14, 2021, we completed the acquisition of Pretzels Inc. (“Pretzels”), previously a privately held company that manufactures and sells pretzels and other salty snacks for other branded products and private labels in the United States. Pretzels is an industry leader in the pretzel category with a product portfolio that includes filled, gluten free and seasoned pretzels, as well as extruded snacks that complements Hershey’s snacks portfolio. Based in Bluffton, Indiana, Pretzels operates three manufacturing locations in Indiana and Kansas. Pretzels provides Hershey with deep pretzel category and product expertise and the manufacturing capabilities to support brand growth and future pretzel innovation. The cash consideration paid for Pretzels totaled $304,334 and consisted of cash on hand and short-term borrowings. Acquisition-related costs for the Pretzels acquisition were immaterial.

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(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. The purchase consideration was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

Goodwill			$	166,191
Other intangible assets			26,100
Current assets acquired			30,835
Property, plant and equipment, net			100,716
Other non-current assets, primarily operating lease ROU assets			111,787
Deferred income taxes			773
Current liabilities acquired			(22,713)
Other long-term liabilities, primarily operating lease liabilities			(109,355)
Net assets acquired			$	304,334

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, 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). A portion of goodwill derived from this acquisition is deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Pretzels’ products.

Other intangible assets include trademarks valued at $5,700 and customer relationships valued at $20,400. Trademarks were assigned an estimated useful life of five years and customer relationships were assigned an estimated useful life of 19 years.

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, which 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. Acquisition-related costs for the Dot’s acquisition were immaterial.

The acquisition has been accounted for as a business combination and, accordingly, Dot’s 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 as follows:

Goodwill			$	284,427
Other intangible assets			543,100
Current assets acquired			51,121
Property, plant and equipment, net			40,266
Other non-current assets			2,201
Other liabilities assumed, primarily current liabilities			(29,946)
Net assets acquired			$	891,169

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

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(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). The goodwill derived from this acquisition is deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Dot’s products.

Other intangible assets include trademarks valued at $336,600 and customer relationships valued at $206,500. Trademarks were assigned an estimated useful life of 33 years and customer relationships were assigned estimated useful life of 18 years.

Lily's Sweets, LLC

On June 25, 2021, we completed the acquisition of Lily’s Sweets, LLC (“Lily’s”), previously a privately held company that sells a line of sugar-free and low-sugar confectionery foods to retailers and distributors in the United States and Canada. Lily’s products include dark and milk chocolate style bars, baking chips, peanut butter cups and other confection products that complement Hershey’s confectionery and confectionery-based portfolio. The cash consideration paid for Lily’s totaled $422,210 and the Company may be required to pay additional cash consideration if certain defined targets related to net sales and gross margin are exceeded during the period from the closing date through December 31, 2021. 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 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.

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. The purchase consideration, inclusive of the acquisition date fair value of the contingent consideration, was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

Goodwill			$	175,826
Other intangible assets			235,800
Other assets acquired, primarily current assets			33,092
Other liabilities assumed, primarily current liabilities			(9,620)
Deferred income taxes			(7,888)
Net assets acquired			$	427,210

The purchase price allocation presented above has been finalized as of the fourth quarter of 2021 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.

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 majority of goodwill derived from this acquisition is expected to be deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Lily’s products.

Other intangible assets include trademarks valued at $151,600 and customer relationships valued at $84,200. Trademarks were assigned an estimated useful life of 33 years and customer relationships were assigned estimated useful lives ranging from 17 to 18 years.

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(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.

3. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill by segment for the years ended December 31, 2023 and 2022 are as follows:

						North America Confectionery						North America Salty Snacks						International						Total
Goodwill						$	2,030,979					$	589,798					$	374,745					$	2,995,522
Accumulated impairment loss						(4,973)						—						(357,375)						(362,348)
Balance at January 1, 2022						2,026,006						589,798						17,370						2,633,174
Measurement period adjustments						—						(18,028)						—						(18,028)
Foreign currency translation						(7,576)						—						(614)						(8,190)
Balance at December 31, 2022						2,018,430						571,770						16,756						2,606,956
Acquired during the period (see Note 2)						—						85,231						—						85,231
Foreign currency translation						2,401						—						1,462						3,863
Balance at December 31, 2023						$	2,020,831					$	657,001					$	18,218					$	2,696,050

We had no goodwill impairment charges in 2023, 2022 or 2021.

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

December 31,						2023												2022
						Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Intangible assets subject to amortization:
Trademarks						$	1,703,029					$	(249,947)					$	1,701,932					$	(190,045)
Customer-related						513,910						(123,282)						513,188						(93,495)
Patents						8,233						(8,233)						8,053						(8,053)
Total						2,225,172						(381,462)						2,223,173						(291,593)
Intangible assets not subject to amortization:
Trademarks						35,519												34,689
Total other intangible assets						$	1,879,229											$	1,966,269

Total amortization expense for the years ended December 31, 2023, 2022 and 2021 was $88,771, $79,690 and $52,124, respectively.

Amortization expense for the next five years, based on current intangible asset balances, is estimated to be as follows:

Year ending December 31,						2024						2025						2026						2027						2028
Amortization expense						$	78,276					$	78,276					$	78,276					$	77,136					$	77,136

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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. 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.

The unsecured committed revolving credit agreement contains a financial covenant whereby the ratio of (a) pre-tax income from operations from the most recent four fiscal quarters to (b) consolidated interest expense for the most recent four fiscal quarters may not be less than 2.0 to 1.0 at the end of each fiscal quarter. The credit agreement also contains customary representations, warranties and events of default. Payment of outstanding advances may be accelerated, at the option of the lenders, should we default in our obligation under the credit agreement. As of December 31, 2023, we are in compliance with all affirmative and negative covenants and the financial covenant pertaining to our credit agreement. There were no significant compensating balance agreements that legally restricted these funds.

In addition to the revolving credit facility, we maintain lines of credit with domestic and international commercial banks. Our credit limit in various currencies was $411,553 at December 31, 2023 and $313,195 at December 31, 2022. These lines permit us to borrow at the respective banks’ prime commercial interest rates, or lower. Commitment fees relating to our revolving credit facility and lines of credit are not material. Short-term debt consisted of the following:

			December 31, 2023						December 31, 2022
Short-term foreign bank borrowings against lines of credit			$	192,278					$	135,555
U.S. commercial paper			527,561						558,235
Total short-term debt			$	719,839					$	693,790
Weighted average interest rate on outstanding commercial paper			5.4		%				4.3		%

The maximum amount of short-term borrowings outstanding during 2023 and 2022 was $859,773 and $937,593, respectively. 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

Long-term debt consisted of the following:

December 31,						Maturity Date						2023						2022
2.625% Notes (1)						May 1, 2023						—						250,000
3.375% Notes (1)						May 15, 2023						—						500,000
2.050% Notes						November 15, 2024						300,000						300,000
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
4.250% Notes (2)						May 4, 2028						350,000						—
2.450% Notes						November 15, 2029						300,000						300,000
1.700% Notes						June 1, 2030						350,000						350,000
4.500% Notes (2)						May 4, 2033						400,000						—
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)												76,385						73,479
Net impact of interest rate swaps, debt issuance costs and unamortized debt discounts												(25,834)						(19,563)
Total long-term debt												4,094,190						4,097,555
Less—current portion												305,058						753,578
Long-term portion												$	3,789,132					$	3,343,977

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

(2) During the second quarter of 2023, we issued $350,000 of 4.250% Notes due in May 2028 and $400,000 of 4.500% Notes due in May 2033 (the “2023 Notes”). Proceeds from the issuance of the 2023 Notes, net of discounts and issuance costs, totaled $744,092. The 2023 Notes were issued under a shelf registration on Form S-3 filed in May 2021 that registered an indeterminate amount of debt securities.

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:

2024			$	300,000
2025			600,000
2026			500,000
2027			193,639
2028			350,000
Thereafter			2,100,000

Our debt is principally unsecured and of equal priority. None of our debt is convertible into our Common Stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Interest Expense

Net interest expense consists of the following:

For the years ended December 31,						2023						2022						2021
Interest expense						$	176,066					$	148,226					$	139,156
Capitalized interest						(14,555)						(8,131)						(9,310)
Interest expense						161,511						140,095						129,846
Interest income						(9,726)						(2,538)						(2,429)
Interest expense, net						$	151,785					$	137,557					$	127,417

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 exchanged-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 $94,917 as of December 31, 2023 and $243,009 as of December 31, 2022.

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 12 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 $80,068 at December 31, 2023 and $59,448 at December 31, 2022. The effective portion of the changes in fair value on these contracts is recorded in other comprehensive income and reclassified into earnings in the same period in which the hedged transactions affect earnings. The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $13,665 at December 31, 2023 and $1,843 at December 31, 2022. The change in fair value on these instruments is recorded directly in cost of sales or selling, marketing and administrative expense, depending on the nature of the underlying exposure.

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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, 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 SM&A expense, together with the change in the related liabilities. The notional amount of the contracts outstanding at December 31, 2023 and 2022 was $22,867 and $18,803, respectively.

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

December 31,						2023												2022
						Assets (1)						Liabilities (1)						Assets (1)						Liabilities (1)
Derivatives designated as cash flow hedging instruments:
Foreign exchange contracts						$	1,219					$	1,670					$	3,921					$	261
Derivatives not designated as hedging instruments:
Commodities futures and options (2)						66						679						685						662
Deferred compensation derivatives						2,343						—						1,222						—
Foreign exchange contracts						1,123						—						246						—
						3,532						679						2,153						662
Total						$	4,751					$	2,349					$	6,074					$	923

(1)Derivatives 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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Income Statement Impact of Derivative Instruments

The effect of derivative instruments on the Consolidated Statements of Income for the years ended December 31, 2023 and 2022 was as follows:

						Non-designated Hedges												Cash Flow Hedges
						Gains (losses) recognized in income (a)												Gains (losses) recognized in other comprehensive income (“OCI”)												Gains (losses) reclassified from AOCI into income (b)
						2023						2022						2023						2022						2023						2022
Commodities futures and options						$	(53,085)					$	44,569					$	—					$	—					$	—					$	—
Foreign exchange contracts						1,111						(274)						(4,860)						2,056						(1,150)						636
Interest rate swap agreements						—						—						5,814						—						(9,716)						(10,836)
Deferred compensation derivatives						4,119						(4,920)						—						—						—						—
Total						$	(47,855)					$	39,375					$	954					$	2,056					$	(10,866)					$	(10,200)

(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.

The amount of pretax net losses on derivative instruments, including interest rate swap agreements and foreign currency forward exchange contracts expected to be reclassified into earnings in the next 12 months was approximately $9,659 as of December 31, 2023. 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 not have any Level 3 financial assets or liabilities, nor were there any transfers between levels during the periods presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

						Assets / Liabilities
						Level 1						Level 2						Level 3						Total
December 31, 2023:
Derivative Instruments:
Assets:
Foreign exchange contracts (1)						$	—					$	2,342					$	—					$	2,342
Deferred compensation derivatives (2)						—						2,343						—						2,343
Commodities futures and options (3)						66						—						—						66
Liabilities:
Foreign exchange contracts (1)						—						1,670						—						1,670
Commodities futures and options (3)						679						—						—						679
December 31, 2022:
Assets:
Foreign exchange contracts (1)						$	—					$	4,167					$	—					$	4,167
Deferred compensation derivatives (2)						—						1,222						—						1,222
Commodities futures and options (3)						685						—						—						685
Liabilities:
Foreign exchange contracts (1)						—						261						—						261
Commodities futures and options (3)						662						—						—						662

(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.

Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of December 31, 2023 and December 31, 2022 because of the relatively short maturity of these instruments.

The estimated fair value of our long-term debt is based on quoted market prices for similar debt issuances 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
At December 31,						2023						2022						2023						2022
Current portion of long-term debt						$	297,842					$	749,345					$	305,058					$	753,578
Long-term debt						3,413,411						2,854,165						3,789,132						3,343,977
Total						$	3,711,253					$	3,603,510					$	4,094,190					$	4,097,555

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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.

2023 Activity

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

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.

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 balance sheet.

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 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 components of lease expense were as follows:

Lease expense						Classification						2023						2022
Operating lease cost						Cost of sales or SM&A (1)						$	48,577					$	48,988
Finance lease cost:
Amortization of ROU assets						Depreciation and amortization (1)						8,140						7,043
Interest on lease liabilities						Interest expense, net						4,593						4,192
Net lease cost (2)												$	61,310					$	60,223

(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.

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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:

						2023						2022
Weighted-average remaining lease term (years)
Operating leases						14.4						15.0
Finance leases						25.9						27.7
Weighted-average discount rate
Operating leases						3.5		%				3.2		%
Finance leases						6.2		%				6.1		%

Supplemental balance sheet information related to leases were as follows:

Leases						Classification						2023						2022
Assets
Operating lease ROU assets						Other non-current assets						$	307,976					$	326,472
Finance lease ROU assets, at cost						Property, plant and equipment, gross						89,335						86,703
Accumulated amortization						Accumulated depreciation						(19,472)						(14,543)
Finance lease ROU assets, net						Property, plant and equipment, net						69,863						72,160
Total leased assets												$	377,839					$	398,632
Liabilities
Current
Operating						Accrued liabilities						$	34,494					$	31,787
Finance						Current portion of long-term debt						5,900						4,285
Non-current
Operating						Other long-term liabilities						277,089						294,849
Finance						Long-term debt						70,485						69,194
Total lease liabilities												$	387,968					$	400,115

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The maturity of our lease liabilities as of December 31, 2023 were as follows:

			Operating leases						Finance leases						Total
2024			$	44,708					$	10,240					$	54,948
2025			31,395						8,651						40,046
2026			26,669						5,442						32,111
2027			26,063						4,288						30,351
2028			25,064						4,189						29,253
Thereafter			243,161						137,877						381,038
Total lease payments			397,060						170,687						567,747
Less: Imputed interest			85,477						94,302						179,779
Total lease liabilities			$	311,583					$	76,385					$	387,968

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

						2023						2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	45,176					$	45,179
Operating cash flows from finance leases						$	4,593					$	4,192
Financing cash flows from finance leases						$	5,381					$	4,717
ROU assets obtained in exchange for lease liabilities:
Operating leases						$	18,469					$	13,998
Finance leases						$	7,448					$	9,617

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 was $207,177 and $133,029 as of December 31, 2023 and December 31, 2022, respectively.

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NOTES TO 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. 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
Cost of sales						$	527					$	3					$	5,220
Selling, marketing and administrative expense						2,472						2,425						7,854
Business realignment costs						441						1,989						3,525
Costs associated with business realignment activities						$	3,440					$	4,417					$	16,599

Costs recorded by program in 2023, 2022 and 2021 related to these activities were as follows:

For the years ended December 31,						2023						2022						2021
International Optimization Program:
Severance and employee benefit costs						$	441					$	2,001					$	3,982
Other program costs						2,999						2,416						12,617
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, 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 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. This program was completed in 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(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.

10. INCOME TAXES

The components of income before income taxes were as follows:

For the years ended December 31,						2023						2022						2021
Domestic						$	1,832,771					$	1,816,622					$	1,775,361
Foreign						339,093						100,449						21,863
Income before income taxes						$	2,171,864					$	1,917,071					$	1,797,224

The components of our provision for income taxes were as follows:

For the years ended December 31,						2023						2022						2021
Current:
Federal						$	141,753					$	121,968					$	161,402
State						83,802						85,741						60,979
Foreign						68,289						27,656						78,650
						293,844						235,365						301,031
Deferred:
Federal						28,191						34,848						26,726
State						(9,531)						3,393						8,253
Foreign						(2,427)						(1,352)						(21,605)
						16,233						36,889						13,374
Total provision for income taxes						$	310,077					$	272,254					$	314,405

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Deferred taxes reflect temporary differences between the tax basis and financial statement carrying value of assets and liabilities. The significant temporary differences that comprised the deferred tax assets and liabilities are as follows:

December 31,						2023						2022
Deferred tax assets:
Post-retirement benefit obligations						$	24,969					$	40,100
Accrued expenses and other reserves						85,601						78,523
Stock-based compensation						21,656						19,847
Derivative instruments						12,268						3,983
Lease liabilities						90,405						91,099
Accrued trade promotion reserves						18,796						23,082
Net operating loss carryforwards						110,342						130,944
Capital loss carryforwards						—						1,999
Other						83,011						52,802
Gross deferred tax assets						447,048						442,379
Valuation allowance						(114,149)						(137,531)
Total deferred tax assets						332,899						304,848
Deferred tax liabilities:
Property, plant and equipment, net						271,465						247,964
Acquired intangibles						228,711						193,160
Lease ROU assets						71,150						72,602
Inventories						13,250						28,573
Pension						10,001						11,038
Other						39,566						39,416
Total deferred tax liabilities						634,143						592,753
Net deferred tax liabilities						$	(301,244)					$	(287,905)
Included in:
Non-current deferred tax assets, net						$	44,454					$	40,498
Non-current deferred tax liabilities, net						(345,698)						(328,403)
Net deferred tax liabilities						$	(301,244)					$	(287,905)

Changes in deferred taxes were primarily due to acquired intangibles and accelerated tax depreciation on property, plant and equipment.

The valuation allowances as of December 31, 2023 and 2022 were primarily related to various foreign jurisdictions' net operating loss carryforwards and other deferred tax assets that we do not expect to realize.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The following table reconciles the federal statutory income tax rate with our effective income tax rate:

For the years ended December 31,						2023						2022						2021
Federal statutory income tax rate						21.0		%				21.0		%				21.0		%
Increase (reduction) resulting from:
State income taxes, net of Federal income tax benefits						2.8						3.2						2.8
Foreign rate differences						(1.0)						(0.1)						(0.2)
Historic and solar tax credits						(9.5)						(9.9)						(6.2)
Tax contingencies						1.1						0.4						1.7
Stock compensation						(0.5)						(0.7)						(0.5)
Other, net						0.4						0.3						(1.1)
Effective income tax rate						14.3		%				14.2		%				17.5		%

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

December 31,						2023						2022
Balance at beginning of year						$	148,345					$	143,305
Additions for tax positions taken during prior years						11,567						17,987
Reductions for tax positions taken during prior years						(26)						(9,310)
Additions for tax positions taken during the current year						6,194						4,112
Settlements						(9,838)						—
Expiration of statutes of limitations						(6,617)						(7,749)
Balance at end of year						$	149,625					$	148,345

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $122,706 as of December 31, 2023 and $120,699 as of December 31, 2022.

We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized a net tax expense of $12,027, $4,862 and $8,924 in 2023, 2022 and 2021, respectively, for interest and penalties. Accrued net interest and penalties were $37,355 as of December 31, 2023 and $25,328 as of December 31, 2022.

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 $51,355 within the next 12 months because of the expiration of statutes of limitations and settlements of tax audits.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Investments in Partnerships Qualifying for Tax Credits

We invest in partnerships which make equity investments in projects eligible to receive federal historic and energy tax credits. The investments are accounted for under the equity method and reported within other non-current assets in our Consolidated Balance Sheets. 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. For the years ended December 31, 2023, 2022 and 2021 we recognized investment tax credits and related outside basis difference benefits totaling $251,827, $228,819 and $136,243, respectively, and we wrote-down the equity investment by $210,484, $188,286 and $113,756, respectively, to reflect the realization of these benefits. The equity investment write-down is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 17).

Inflation Reduction Act

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. 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.

11. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

We sponsor a number of defined benefit pension plans. 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: health care and life insurance. The health care plan is contributory, with participants’ contributions adjusted annually. The life insurance plan is non-contributory.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Obligations and Funded Status

A summary of the changes in benefit obligations, plan assets and funded status of these plans is as follows:

						Pension Benefits												Other Benefits
December 31,						2023						2022						2023						2022
Change in benefit obligation
Projected benefit obligation at beginning of year						$	830,285					$	1,076,180					$	164,889					$	211,490
Service cost						14,991						17,500						221						302
Interest cost						41,205						30,491						7,171						4,603
Actuarial (gain) loss						23,187						(184,775)						38,789						(28,145)
Curtailment						—						—						(740)						—
Settlement						(66,132)						(82,907)						(88,689)						—
Currency translation and other						2,466						(3,268)						(324)						(613)
Benefits paid						(23,967)						(22,936)						(21,006)						(22,748)
Projected benefit obligation at end of year						822,035						830,285						100,311						164,889
Change in plan assets
Fair value of plan assets at beginning of year						848,432						1,098,191						—						—
Actual return on plan assets						70,096						(196,969)						—						—
Employer contributions						6,576						55,799						21,006						22,748
Settlement						(66,132)						(82,907)						(88,689)						—
Annuity purchase						—						—						88,689						—
Currency translation and other						1,838						(2,746)						—						—
Benefits paid						(23,967)						(22,936)						(21,006)						(22,748)
Fair value of plan assets at end of year						836,843						848,432						—						—
Funded status at end of year						$	14,808					$	18,147					$	(100,311)					$	(164,889)
Amounts recognized in the Consolidated Balance Sheets:
Other assets						$	48,506					$	53,495					$	—					$	—
Accrued liabilities						(4,749)						(7,652)						(9,593)						(17,715)
Other long-term liabilities						(28,949)						(27,696)						(90,718)						(147,174)
Total						$	14,808					$	18,147					$	(100,311)					$	(164,889)
Amounts recognized in Accumulated Other Comprehensive Income (Loss), net of tax:
Actuarial net (loss) gain						$	(129,184)					$	(150,378)					$	(7,704)					$	19,689
Net prior service credit						8,561						12,435						527						—
Net amounts recognized in AOCI						$	(120,623)					$	(137,943)					$	(7,177)					$	19,689

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

December 31,						2023						2022
Projected benefit obligation						$	40,278					$	36,669
Accumulated benefit obligation						33,812						32,167
Fair value of plan assets						6,695						3,606

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

The components of net periodic benefit cost were as follows:

						Pension Benefits																		Other Benefits
For the years ended December 31,						2023						2022						2021						2023						2022						2021
Amounts recognized in net periodic benefit cost
Service cost						$	14,991					$	17,500					$	21,361					$	221					$	302					$	1,879
Interest cost						41,205						30,491						18,320						7,171						4,603						3,857
Expected return on plan assets						(48,978)						(47,637)						(49,091)						—						—						—
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						—						—
Total net periodic benefit cost						$	36,660					$	31,455					$	21,089					$	6,562					$	4,813					$	7,329
Change in plan assets and benefit obligations recognized in AOCI, pre-tax
Actuarial net (gain) loss						$	(32,720)					$	22,609					$	(80,047)					$	38,698					$	(26,212)					$	(16,374)
Prior service cost (credit)						5,670						5,601						6,447						(736)						—						—
Total recognized in other comprehensive (income) loss, pre-tax						$	(27,050)					$	28,210					$	(73,600)					$	37,962					$	(26,212)					$	(16,374)
Net amounts recognized in periodic benefit cost and AOCI						$	9,610					$	59,665					$	(52,511)					$	44,524					$	(21,399)					$	(9,045)

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).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Assumptions

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

						Pension Benefits												Other Benefits
December 31,						2023						2022						2023						2022
Discount rate						5.1		%				5.5		%				5.2		%				5.5		%
Rate of increase in compensation levels						3.6		%				3.4		%				4.0		%				4.0		%
Interest crediting rate						4.8		%				4.7		%				N/A						N/A

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

						Pension Benefits																		Other Benefits
For the years ended December 31,						2023						2022						2021						2023						2022						2021
Discount rate						5.5		%				2.7		%				2.3		%				5.5		%				2.9		%				2.5		%
Expected long-term return on plan assets						6.2		%				4.9		%				4.8		%				N/A						N/A						N/A
Rate of compensation increase						3.4		%				3.5		%				3.5		%				N/A						N/A						N/A

The Company’s discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with maturities matching the plans’ expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates. We base the asset return assumption on current and expected asset allocations, as well as historical and expected returns on the plan asset categories.

We utilize a full yield curve approach in the estimation of service and interest costs by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. This approach provides a more precise measurement of service and interest costs by improving the correlation between the projected cash flows to the corresponding spot rates along the yield curve. This approach does not affect the measurement of our pension and other post-retirement benefit liabilities, but generally results in lower benefit expense in periods when the yield curve is upward sloping.

For purposes of measuring our post-retirement benefit obligation at December 31, 2023, we assumed a 6.4% annual rate of increase in the per capita cost of covered health care benefits for 2024, grading down to 5.0% by 2030. For purposes of measuring our post-retirement benefit obligation at December 31, 2022, we assumed a 6.7% annual rate of increase in the per capita cost of covered health care benefits for 2023, grading down to 5.0% by 2030.

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 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.

Plan Assets

We broadly diversify our pension plan assets across public equity, fixed income, diversified credit strategies and diversified alternative strategies asset classes. Our target asset allocation for our major domestic pension plans as of December 31, 2023 was as follows:

Asset Class						Target Asset Allocation
Cash						1%
Equity securities						27%
Fixed income securities						48%
Alternative investments, including real estate, listed infrastructure and other						24%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(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:

						Quoted prices in active markets of identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant other unobservable inputs (Level 3)						Investments Using NAV as a Practical Expedient (1)						Total
Cash and cash equivalents						$	909					$	42,202					$	—					$	600					$	43,711
Equity securities:
International all-cap						—						—						—						395						395
Global all-cap (a)						—						—						—						209,245						209,245
Fixed income securities:
U.S. government/agency						—						—						—						186,095						186,095
Corporate bonds (b)						—						—						—						60,293						60,293
International government/corporate bonds (c)						—						—						—						29,254						29,254
Diversified credit (d)						—						—						—						123,081						123,081
Alternative investments:
Global diversified assets (e)						—						—						—						68,856						68,856
Real assets fund (f)						—						—						—						115,913						115,913
Total pension plan assets						$	909					$	42,202					$	—					$	793,732					$	836,843

The following table sets forth by level, within the fair value hierarchy, pension plan assets at their fair values as of December 31, 2022:

						Quoted prices in active markets of identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant other unobservable inputs (Level 3)						Investments Using NAV as a Practical Expedient (1)												Total
Cash and cash equivalents						$	327					$	29,595					$	—					$	566											$	30,488
Equity securities:
Global all-cap (a)						—						—						—						206,636												206,636
Fixed income securities:
U.S. government/agency						—						—						—						173,122												173,122
Corporate bonds (b)						—						—						—						58,646												58,646
International government/corporate bonds (c)						—						—						—						26,489												26,489
Diversified credit (d)						—						—						—						109,926												109,926
Alternative investments:
Global diversified assets (e)						—						—						—						95,243												95,243
Real assets fund (f)						—						—						—						147,882												147,882
Total pension plan assets						$	327					$	29,595					$	—					$	818,510											$	848,432

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

(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.

(a)			This category comprises equity funds that primarily track the MSCI World Index or MSCI All Country World Index.
(b)			This category comprises fixed income funds primarily invested in investment grade and high yield bonds.
(c)			This category comprises fixed income funds primarily invested in Canadian and other international bonds.
(d)			This category comprises fixed income funds primarily invested in high yield bonds, loans, securitized debt and emerging market debt.
(e)			This category comprises diversified funds invested across alternative asset classes.
(f)			This category comprises funds primarily invested in publicly traded real estate securities, publicly listed infrastructure securities and real estate debt.

The fair value of the Level 1 assets was based on quoted prices in active markets for the identical assets. The fair value of the Level 2 assets was determined by management based on an assessment of valuations provided by asset management entities and was calculated by aggregating market prices for all underlying securities.

Investment objectives for our domestic plan assets are:

• To ensure high correlation between the value of plan assets and liabilities;

• To maintain careful control of the risk level within each asset class; and

• To focus on a long-term return objective.

We believe that there are no significant concentrations of risk within our plan assets as of December 31, 2023. We comply with the rules and regulations promulgated under the Employee Retirement Income Security Act of 1974 (“ERISA”) and we prohibit investments and investment strategies not allowed by ERISA. We do not permit direct purchases of our Company’s securities or the use of derivatives for the purpose of speculation. We invest the assets of non-domestic plans in compliance with laws and regulations applicable to those plans.

Cash Flows and Plan Termination

Our policy is to fund domestic pension liabilities in accordance with the limits imposed by the ERISA, federal income tax laws and the funding requirements of the Pension Protection Act of 2006. We fund non-domestic pension liabilities in accordance with laws and regulations applicable to those plans.

We made total contributions to the pension plans of $6,576 during 2023. In 2022, we made total contributions of $55,799 to the pension plans. For 2024, minimum funding requirements for our pension plans are approximately $1,943.

Total benefit payments expected to be paid to plan participants, including pension benefits funded from the plans and other benefits funded from Company assets, are as follows:

			Expected Benefit Payments
			2024						2025						2026						2027						2028						2029-2033
Pension Benefits			$	113,052					$	89,810					$	93,596					$	75,694					$	74,212					$	312,386
Other Benefits			9,589						9,107						8,619						8,050						7,461						32,107

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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

The Company sponsors several defined contribution plans to provide retirement benefits to employees. Contributions to The Hershey Company 401(k) Plan and similar plans for non-domestic employees are based on a portion of eligible pay up to a defined maximum. All matching contributions were made in cash. Expense associated with the defined contribution plans was $67,763 in 2023, $61,477 in 2022 and $58,883 in 2021.

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.

As of December 31, 2023, 68.5 million shares were authorized and approved by our stockholders for grants under the EICP. 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:

For the years ended December 31,						2023						2022						2021
Pre-tax compensation expense						$	81,021					$	65,991					$	66,711
Related income tax benefit						11,910						9,635						11,608

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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.

A summary of activity relating to grants of stock options for the year ended December 31, 2023 is as follows:

Stock Options			Shares			Weighted-Average Exercise Price (per share)			Weighted-Average Remaining Contractual Term			Aggregate Intrinsic Value
Outstanding at beginning of the period			976,634			$104.36			3.8 years
Granted			5,215			$240.90
Exercised			(255,148)			$103.41
Forfeited			—			$0.00
Expired			—			$0.00
Outstanding as of December 31, 2023			726,701			$105.67			3.3 years			$	59,044
Options exercisable as of December 31, 2023			700,646			$103.12			3.1 years			$	58,394

The weighted-average fair value of options granted was $57.65, $37.28 and $24.12 per share in 2023, 2022 and 2021, respectively. The fair value was estimated on the date of grant using a Black-Scholes option-pricing model and the following weighted-average assumptions:

For the years ended December 31,						2023						2022						2021
Dividend yields						1.7		%				1.9		%				2.2		%
Expected volatility						20.9		%				21.1		%				21.8		%
Risk-free interest rates						4.1		%				1.9		%				1.0		%
Expected term in years						6.3						6.3						6.3

• “Dividend yields” means the sum of dividends declared for the four most recent quarterly periods, divided by the average price of our Common Stock for the comparable periods;

• “Expected volatility” means the historical volatility of our Common Stock over the expected term of each grant;

• “Risk-free interest rates” means the U.S. Treasury yield curve rate in effect at the time of grant for periods within the contractual life of the stock option; and

• “Expected term” means the period of time that stock options granted are expected to be outstanding based on historical data.

The total intrinsic value of options exercised was $35,474, $40,882 and $38,645 in 2023, 2022 and 2021, respectively.

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.

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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:

						Options Outstanding																		Options Exercisable
Range of Exercise Prices						Number Outstanding as of 12/31/23						Weighted-Average Remaining Contractual Life in Years						Weighted-Average Exercise Price						Number Exercisable as of 12/31/23						Weighted-Average Exercise Price
$60.68 - $99.90						388,522						3.4						$96.78						388,522						$96.78
$99.91 - $107.95						210,214						2.2						$107.09						210,214						$107.09
$107.96 - $240.90						127,965						4.7						$130.31						101,910						$119.09
$60.68 - $240.90						726,701						3.3						$105.67						700,646						$103.12

Performance Stock Units and Restricted Stock Units

Under the EICP, we grant PSUs to selected executives and other key employees. Vesting is contingent upon the achievement of certain performance objectives. We grant PSUs over 3-year performance cycles. If we meet targets for financial measures at the end of the applicable 3-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 PSUs granted in 2023, 2022, and 2021 can range from 0% to 250% of the targeted amounts.

We recognize the compensation expense associated with PSUs ratably over the 3-year term. Compensation expense is 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.

In 2023, 2022 and 2021, we awarded RSUs to certain executive officers and other key employees under the EICP. We also awarded RSUs quarterly to non-employee directors.

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

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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:

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						1,141,679						$181.91
Granted						341,374						$241.41
Performance assumption change (1)						24,325						$(88.67)
Vested						(443,502)						$173.02
Forfeited						(24,185)						$207.81
Outstanding at end of year						1,039,691						$198.31

(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.

For the years ended December 31,						2023						2022						2021
Units granted						341,374						313,285						404,517
Weighted-average fair value at date of grant						$	241.41					$	211.85					$	154.83
Monte Carlo simulation assumptions:
Estimated values						$	118.90					$	100.41					$	66.44
Dividend yields						1.7		%				1.8		%				2.2		%
Expected volatility						19.2		%				25.3		%				26.4		%

• “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;

• “Dividend yields” means the sum of dividends declared for the four most recently quarterly periods, divided by the average price of our Common Stock for the comparable periods;

• “Expected volatility” means the historical volatility of our Common Stock over the expected term of each grant.

The fair value of shares vested totaled $106,243, $105,668 and $52,008 in 2023, 2022 and 2021, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 257,942 units as of December 31, 2023. Each unit is equivalent to one share of the Company’s Common Stock.

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NOTES TO 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 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, we use “segment income” to evaluate segment performance and allocate resources. 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 income are managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM as well the measure of segment performance used for incentive compensation purposes.

Accounting policies associated with our operating segments are generally the same as those described in Note 1.

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.

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NOTES TO 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 years ended December 31,									2023						2022						2021
Net sales:
North America Confectionery									$	9,123,139					$	8,536,480					$	7,682,416
North America Salty Snacks									1,092,689						1,029,405						555,424
International									949,164						853,409						733,497
Total									$	11,164,992					$	10,419,294					$	8,971,337
Segment income:
North America Confectionery									$	3,117,044					$	2,811,066					$	2,475,873
North America Salty Snacks									158,333						159,935						100,777
International									148,259						107,927						74,170
Total segment income									3,423,636						3,078,928						2,650,820
Unallocated corporate expense (1)									800,390						735,542						614,875
Unallocated mark-to-market losses (gains) on commodity derivatives									58,939						78,182						(24,376)
Costs associated with business realignment activities (see Note 9)									3,440						4,417						16,599
Operating profit									2,560,867						2,260,787						2,043,722
Interest expense, net (see Note 4)									151,785						137,557						127,417
Other (income) expense, net (see Note 17)									237,218						206,159						119,081
Income before income taxes									$	2,171,864					$	1,917,071					$	1,797,224

(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-related costs and (e) other gains or losses that are not integral to segment performance.

Activity within the unallocated mark-to-market losses (gains) on commodity derivatives is as follows:

For the years ended December 31,						2023						2022						2021
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
Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative losses (gains)						$	58,939					$	78,182					$	(24,376)

As of December 31, 2023, the cumulative amount of mark-to-market gains on commodity derivatives that have been recognized in our consolidated cost of sales and not yet allocated to reportable segments was $50,207. Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pretax gains on commodity derivatives of $39,333 to segment operating results in the next twelve months.

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NOTES TO 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:

For the years ended December 31,									2023						2022						2021
North America Confectionery									$	238,786					$	228,399					$	213,113
North America Salty Snacks									85,566						68,600						29,744
International									23,699						23,148						22,754
Corporate									71,764						58,812						49,391
Total									$	419,815					$	378,959					$	315,002

Additional information regarding our net sales and long-lived assets disaggregated by geographical region is as follows:

For the years ended December 31,									2023						2022						2021
Net sales:
United States									$	9,752,314					$	9,121,166					$	7,807,606
Other									1,412,678						1,298,128						1,163,731
Total									$	11,164,992					$	10,419,294					$	8,971,337
Long-lived assets:
United States									$	2,732,787					$	2,272,811					$	2,099,786
Other									576,891						496,891						486,401
Total									$	3,309,678					$	2,769,702					$	2,586,187

14. EQUITY AND TREASURY STOCK ACTIVITY

We had 1,055,000,000 authorized shares of capital stock as of December 31, 2023. Of this total, 900,000,000 shares were designated as Common Stock, 150,000,000 shares were designated as Class B Common Stock (“Class B Stock”) and 5,000,000 shares were designated as Preferred Stock. Each class has a par value of one dollar per share.

Holders of the Common Stock and the Class B Stock generally vote together without regard to class on matters submitted to stockholders, including the election of directors. The holders of Common Stock have 1 vote per share and the holders of Class B Common Stock have 10 votes per share. However, the Common Stock holders, voting separately as a class, are entitled to elect one-sixth of the Board. With respect to dividend rights, the Common Stock holders are entitled to cash dividends 10% higher than those declared and paid on the Class B Common Stock.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Changes in the outstanding shares of Common Stock for the past three years were as follows:

For the years ended December 31,						2023						2022						2021
Shares issued						221,553,025						221,553,025						221,553,025
Treasury shares at beginning of year						(16,588,308)						(15,444,011)						(13,325,898)
Stock repurchases:
Shares repurchased in the open market under pre-approved share repurchase programs						—						—						(871,144)
Milton Hershey School Trust repurchase						(1,000,000)						(1,000,000)						—
Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation						(127,609)						(824,701)						(2,005,500)
Stock issuances:
Shares issued for stock options and incentive compensation						555,818						680,404						758,531
Treasury shares at end of year						(17,160,099)						(16,588,308)						(15,444,011)
Net shares outstanding at end of year						204,392,926						204,964,717						206,109,014

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. 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.

Hershey Trust Company

Hershey Trust Company, as trustee for the School Trust and as direct owner of investment shares, held 2,105,749 shares of our Common Stock as of December 31, 2023. As trustee for the School Trust, Hershey Trust Company held 54,612,012 shares of the Class B Common Stock as of December 31, 2023, and was entitled to cast approximately 79% of all of the votes entitled to be cast on matters requiring the vote of both classes of our common stock voting together. Hershey Trust Company, as trustee for the School Trust, or any successor trustee, or Milton Hershey School, as appropriate, must approve any issuance of shares of Common Stock or other action that would result in it not continuing to have voting control of our Company.

Stock Purchase Agreements

In February 2023, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the School Trust at a price equal to $239.91 per share, for a total purchase price of $239,910. As a result of this repurchase, our July 2018 share repurchase authorization program was completed in February 2023.

In February 2022, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the School Trust at a price equal to $203.35 per share, for a total purchase price of $203,350.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

15. COMMITMENTS AND CONTINGENCIES

Purchase obligations

We enter into certain obligations for the purchase of raw materials. These obligations are primarily in the form of forward contracts for the purchase of raw materials from third-party brokers and dealers. These contracts minimize the effect of future price fluctuations by fixing the price of part or all of these purchase obligations. Total obligations consisted of fixed price contracts for the purchase of commodities and unpriced contracts that were valued using market prices as of December 31, 2023.

The cost of commodities associated with the unpriced contracts is variable as market prices change over future periods. We mitigate the variability of these costs to the extent that we have entered into commodities futures contracts or other commodity derivative instruments to hedge our costs for those periods. Increases or decreases in market prices are offset by gains or losses on commodities futures contracts or other commodity derivative instruments. Taking delivery of and making payments for the specific commodities for use in the manufacture of finished goods satisfies our obligations under the forward purchase contracts. For each of the three years in the period ended December 31, 2023, we satisfied these obligations by taking delivery of and making payment for the specific commodities.

As of December 31, 2023, we had entered into agreements for the purchase of raw materials with various suppliers. Subject to meeting our quality standards, the purchase obligations covered by these agreements were as follows as of December 31, 2023:

in millions						2024						2025						2026						2027						2028
Purchase obligations						$	2,111.1					$	614.8					$	16.4					$	14.2					$	14.2

Environmental contingencies

We have a number of facilities that contain varying amounts of asbestos in certain locations within the facilities. Our asbestos management program is compliant with current applicable regulations, which require that we handle or dispose of asbestos in a special manner if such facilities undergo major renovations or are demolished. We do not have sufficient information to estimate the fair value of any asset retirement obligations related to these facilities. We cannot specify the settlement date or range of potential settlement dates and, therefore, sufficient information is not available to apply an expected present value technique. We expect to maintain the facilities with repairs and maintenance activities that would not involve or require the removal of significant quantities of asbestos.

Legal 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.

Collective Bargaining

As of December 31, 2023, the Company employed approximately 18,650 full-time and 1,855 part-time employees worldwide. Collective bargaining agreements covered approximately 6,295 employees, or approximately 31% of the Company’s employees worldwide. During 2024, agreements will be negotiated for certain employees at five facilities, four of which are outside of the United States, comprising approximately 72% of total employees under collective bargaining agreements. We currently expect that we will be able to renegotiate such agreements on satisfactory terms when they expire.

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NOTES TO 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.

We compute basic and diluted earnings per share based on the weighted-average number of shares of Common Stock and Class B common stock outstanding as follows:

For the years ended December 31,						2023												2022												2021
						Common Stock						Class B Common Stock						Common Stock						Class B Common Stock						Common Stock						Class B Common Stock
Basic earnings per share:
Numerator:
Allocation of distributed earnings (cash dividends paid)						$	663,176					$	225,895					$	567,897					$	207,133					$	498,084					$	187,903
Allocation of undistributed earnings						728,175						244,541						637,438						232,349						574,772						216,753
Total earnings—basic						$	1,391,351					$	470,436					$	1,205,335					$	439,482					$	1,072,856					$	404,656
Denominator (shares in thousands):
Total weighted-average shares—basic						149,499						55,239						146,713						58,822						146,120						60,614
Earnings Per Share—basic						$	9.31					$	8.52					$	8.22					$	7.47					$	7.34					$	6.68
Diluted earnings per share:
Numerator:
Allocation of total earnings used in basic computation						$	1,391,351					$	470,436					$	1,205,335					$	439,482					$	1,072,856					$	404,656
Reallocation of total earnings as a result of conversion of Class B common stock to Common stock						470,436						—						439,482						—						404,656						—
Reallocation of undistributed earnings						—						(987)						—						(1,201)						—						(1,098)
Total earnings—diluted						$	1,861,787					$	469,449					$	1,644,817					$	438,281					$	1,477,512					$	403,558
Denominator (shares in thousands):
Number of shares used in basic computation						149,499						55,239						146,713						58,822						146,120						60,614
Weighted-average effect of dilutive securities:
Conversion of Class B common stock to Common shares outstanding						55,239						—						58,822						—						60,614						—
Employee stock options						424						—						571						—						609						—
Performance and restricted stock units						385						—						469						—						415						—
Total weighted-average shares—diluted						205,547						55,239						206,575						58,822						207,758						60,614
Earnings Per Share—diluted						$	9.06					$	8.50					$	7.96					$	7.45					$	7.11					$	6.66

The earnings per share calculations for the years ended December 31, 2023, 2022 and 2021 excluded 15, 5 and 43 stock options (in thousands), respectively, that would have been antidilutive.

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NOTES TO 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:

For the years ended December 31,						2023						2022						2021
Write-down of equity investments in partnerships qualifying for historic and renewable energy tax credits (see Note 8)						$	210,484					$	188,286					$	113,756
Non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans (see Note 11)						28,010						18,466						5,177
Other (income) expense, net						(1,276)						(593)						148
Total						$	237,218					$	206,159					$	119,081

18. RELATED PARTY TRANSACTIONS

Hershey Trust Company, as trustee for the trust established by Milton S. and Catherine S. Hershey that has as its sole beneficiary the School Trust, maintains voting control over The Hershey Company.

In any given year, we may engage in certain transactions with Hershey Trust Company, Milton Hershey School, the Milton Hershey School Trust and companies owned by and/or affiliated with any of the foregoing. Most transactions with these related parties are immaterial and do not require disclosure, but certain transactions are more significant in nature and have been deemed material for disclosure.

A summary of material related party transactions with Hershey Trust Company and/or its affiliates for the 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

In May 2022, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company agreed to sell certain real and personal property consisting of approximately six acres of land located in Hershey, Pennsylvania, together with portions of a building located on the land. Additionally, in June 2022, the Company entered into a Donation Agreement with Hershey Trust Company, as trustee for The M.S. Hershey Foundation, pursuant to which the Company agreed to donate a portion of the building concurrently with the closing of the Purchase Agreement. The sale and donation transactions closed in June 2022. Total proceeds from the sale were approximately $6,300 (net of transaction and closing costs), resulting in a loss of $13,568, which was recorded in the SM&A expense caption within the Consolidated Statements of Income. The fair values of the disposed assets were supported by a proposed sales price submitted by a third-party buyer received prior to executing the Purchase Agreement.

Stock Purchase Agreements

In February 2023 and February 2022, the Company entered into Stock Purchase Agreements with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company purchased shares of its Common Stock from the School Trust (see Note 14).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

19. SUPPLEMENTAL BALANCE SHEET INFORMATION

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

December 31,						2023						2022
Inventories:
Raw materials						$	481,111					$	372,612
Goods in process						192,232						137,298
Finished goods						948,974						855,217
Inventories at FIFO						1,622,317						1,365,127
Adjustment to LIFO						(281,321)						(192,008)
Total inventories						$	1,340,996					$	1,173,119
Prepaid expenses and other:
Prepaid expenses						$	227,567					$	143,888
Other current assets						118,021						128,307
Total prepaid expenses and other						$	345,588					$	272,195
Property, plant and equipment:
Land						$	180,751					$	155,963
Buildings						1,763,070						1,545,053
Machinery and equipment						3,861,006						3,592,251
Construction in progress						644,244						416,220
Property, plant and equipment, gross						6,449,071						5,709,487
Accumulated depreciation						(3,139,393)						(2,939,785)
Property, plant and equipment, net						$	3,309,678					$	2,769,702
Other non-current assets:
Pension						$	48,506					$	53,495
Capitalized software, net						360,205						320,034
Operating lease ROU assets						307,976						326,472
Investments in unconsolidated affiliates						207,177						133,029
Other non-current assets						137,563						111,959
Total other non-current assets						$	1,061,427					$	944,989

Table of Contents			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:
Payroll, compensation and benefits						$	261,961					$	293,865
Advertising, promotion and product allowances						343,444						337,024
Operating lease liabilities						34,494						31,787
Other						227,916						169,842
Total accrued liabilities						$	867,815					$	832,518
Other long-term liabilities:
Post-retirement benefits liabilities						$	90,718					$	147,174
Pension benefits liabilities						28,949						27,696
Operating lease liabilities						277,089						294,849
Other						263,917						250,023
Total other long-term liabilities						$	660,673					$	719,742
Accumulated other comprehensive loss:
Foreign currency translation adjustments						$	(87,706)					$	(110,364)
Pension and post-retirement benefit plans, net of tax						(126,800)						(118,254)
Cash flow hedges, net of tax						(15,572)						(23,715)
Total accumulated other comprehensive loss						$	(230,078)					$	(252,333)

Table of Contents			The Hershey Company | 2023 Form 10-K | Page 98