Hershey 10-Q 2021-10-03

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 3, 2021

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to_

Commission file number 1-183

THE HERSHEY COMPANY

(Exact name of registrant as specified in its charter)

Delaware						23-0691590
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

19 East Chocolate Avenue, Hershey, PA 17033

(Address of principal executive offices and Zip Code)

(717) 534-4200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Common Stock, one dollar par value						HSY						New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer			x			Accelerated filer			☐			Non-accelerated filer			☐			Smaller reporting company			☐			Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Common Stock, one dollar par value—145,389,951 shares, as of October 22, 2021.

Class B Common Stock, one dollar par value—60,613,777 shares, as of October 22, 2021.

THE HERSHEY COMPANY

Quarterly Report on Form 10-Q

For the Period Ended October 3, 2021

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION						2
Item 1. Financial Statements						2
Consolidated Statements of Income for the Three and Nine Months Ended October 3, 2021 and September 27, 2020						2
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 3, 2021 and September 27, 2020						3
Consolidated Balance Sheets as of October 3, 2021 and December 31, 2020						4
Consolidated Statements of Cash Flows for the Nine Months Ended October 3, 2021 and September 27, 2020						5
Consolidated Statement of Stockholders’ Equity for the Three and Nine Months Ended October 3, 2021 and September 27, 2020						6
Notes to Unaudited Consolidated Financial Statements						8
Note 1 - Summary of Significant Accounting Policies						8
Note 2 - Business Acquisition and Divestitures						9
Note 3 - Goodwill and Intangible Assets						10
Note 4 - Short and Long-Term Debt						11
Note 5 - Derivative Instruments						12
Note 6 - Fair Value Measurements						15
Note 7 - Leases						16
Note 8 - Investments in Unconsolidated Affiliates						19
Note 9 - Business Realignment Activities						19
Note 10 - Income Taxes						21
Note 11 - Pension and Other Post-Retirement Benefit Plans						22
Note 12 - Stock Compensation Plans						23
Note 13 - Segment Information						26
Note 14 - Treasury Stock Activity						29
Note 15 - Noncontrolling Interest						29
Note 16 - Contingencies						29
Note 17 - Earnings Per Share						30
Note 18 - Other (Income) Expense, Net						32
Note 19 - Supplemental Balance Sheet Information						33
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						34
Item 3. Quantitative and Qualitative Disclosures About Market Risk						47
Item 4. Controls and Procedures						48
PART II. OTHER INFORMATION						49
Item 1. Legal Proceedings						49
Item 1A. Risk Factors						49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						49
Item 3. Defaults Upon Senior Securities						49
Item 4. Mine Safety Disclosures						49
Item 5. Other Information						49
Item 6. Exhibits						50
Signatures						51

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 1

PART I — FINANCIAL INFORMATION

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

						Three Months Ended												Nine Months Ended
						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Net sales						$	2,359,839					$	2,219,829					$	6,645,209					$	5,964,475
Cost of sales						1,298,504						1,139,805						3,609,478						3,225,277
Gross profit						1,061,335						1,080,024						3,035,731						2,739,198
Selling, marketing and administrative expense						486,139						468,614						1,448,433						1,352,947
Long-lived asset impairment charges						—						—						—						9,143
Business realignment costs (benefits)						365						—						2,748						(475)
Operating profit						574,831						611,410						1,584,550						1,377,583
Interest expense, net						30,154						37,258						97,655						111,592
Other (income) expense, net						23,004						11,644						32,612						34,394
Income before income taxes						521,673						562,508						1,454,283						1,231,597
Provision for income taxes						76,746						115,250						311,255						247,514
Net income including noncontrolling interest						444,927						447,258						1,143,028						984,083
Less: Net (loss) gain attributable to noncontrolling interest						—						(25)						1,072						(3,238)
Net income attributable to The Hershey Company						$	444,927					$	447,283					$	1,141,956					$	987,321
Net income per share—basic:
Common stock						$	2.22					$	2.21					$	5.67					$	4.87
Class B common stock						$	2.01					$	2.00					$	5.16					$	4.42
Net income per share—diluted:
Common stock						$	2.14					$	2.14					$	5.49					$	4.71
Class B common stock						$	2.01					$	2.00					$	5.14					$	4.40
Dividends paid per share:
Common stock						$	0.901					$	0.804					$	2.509					$	2.350
Class B common stock						$	0.819					$	0.731					$	2.281					$	2.135

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 2

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

						For the Three Months Ended																																				For the Nine Months Ended
						October 3, 2021																		September 27, 2020																		October 3, 2021																		September 27, 2020
						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount
Net income including noncontrolling interest																		$	444,927																	$	447,258																	$	1,143,028																	$	984,083
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments:
Foreign currency translation (losses) gains during period						$	(11,571)					$	—					(11,571)						$	7,050					$	—					7,050						$	2,623					$	—					2,623						$	(41,242)					$	—					(41,242)
Reclassification to earnings due to the sale of businesses						—						—						—						—						—						—						5,210						—						5,210						—						—						—
Pension and post-retirement benefit plans:

Showing the first 8K of 162K characters. Open the full section

This Management’s Discussion and Analysis (“MD&A”) is intended to provide an understanding of Hershey’s financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. The MD&A should be read in conjunction with our Unaudited Consolidated Financial Statements and accompanying notes. This discussion contains a number of forward-looking statements, all of which are based on current expectations. Actual results may differ materially. Refer to the Safe Harbor Statement below as well as the Risk Factors and other information contained in our 2020 Annual Report on Form 10-K for information concerning the key risks to achieving future performance goals.

The MD&A is organized in the following sections:

• Overview

• Trends Affecting Our Business

• Consolidated Results of Operations

• Segment Results

• Liquidity and Capital Resources

• Safe Harbor Statement

OVERVIEW

Hershey is a global confectionery leader known for bringing goodness to the world through chocolate, sweets, mints, gum and other great tasting snacks. We are the largest producer of quality chocolate in North America, a leading snack maker in the United States (“U.S.”) and a global leader in chocolate and non-chocolate confectionery. We market, sell and distribute our products under more than 90 brand names in approximately 85 countries worldwide.

We report our operations through two segments: North America and International and Other. The majority of our products are confectionery or confectionery-based and include chocolate and non-chocolate confectionery products, gum and mint refreshment products, spreads, snack bites and mixes, as well as pantry items such as baking ingredients, toppings and sundae syrups. The confectionery and confectionery-based portfolio is predominantly sold under the renowned brands of Hershey’s, Reese’s and Kisses, as well as Kit Kat®, Jolly Rancher, Ice Breakers, Twizzlers, Heath, Payday, Cadbury and a variety of other popular brands. Our snacks portfolio includes ready-to-eat popcorn, baked and trans fat free snacks, protein bars and other better-for-you snacks. The snacks portfolio is predominantly sold under the brands of SkinnyPop, Pirate's Booty, ONE Bar, and Paqui.

2021 Acquisition and Divestiture

In June 2021, we completed the acquisition of Lily’s Sweets, LLC (“Lily’s”), previously a privately held company that sells a line of sugar-free and low-sugar confectionery foods to retailers and distributors in the United States and Canada. 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. Lily’s is expected to generate annualized net sales over $100 million.

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd. (“LSFC”), which was previously included within the International and Other segment results in our consolidated financial statements. Total proceeds from the divestiture and the impact on our consolidated financial statements were immaterial.

2020 Divestitures

During the second quarter of 2020, we completed the divestitures of KRAVE Pure Foods, Inc. (“Krave”) and the Scharffen Berger and Dagoba brands, all of which were previously included within the North America segment results in our consolidated financial statements. Total proceeds from the divestitures and the impact on our consolidated financial statements, both individually and on an aggregate basis, were immaterial.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 34

TRENDS AFFECTING OUR BUSINESS

On March 11, 2020, the World Health Organization designated coronavirus disease 2019 (“COVID-19”) as a global pandemic, which has spread worldwide and impacted various markets around the world, including the U.S. Various policies and initiatives have been implemented to reduce the global transmission of COVID-19.

Local, state and national governments continue to emphasize the importance of food supply during this pandemic and have asked that food manufacturers and retailers remain open to meet the needs of our communities. Employee safety is our first priority, and as a result, we put preparedness plans in place at our manufacturing facilities. Our manufacturing facilities are currently open; however, we have adjusted shift schedules, enforced social distancing, increased sanitation and adjusted time and attendance policies for worker absenteeism. Our sales teams continue to support community food supplies, while adhering to social distancing guidelines, implementing flexible hours, reducing person-to-person interaction and increasing safety measures. At the onset of the pandemic, the Company temporarily closed all Hershey’s Chocolate World stores in the U.S. (3 locations), Niagara Falls (Ontario) and Singapore; however, since July 2020, all locations have been re-opened on a limited capacity basis with increased safety measures and enforced social distancing.

In June 2020 we commenced a phased-in approach to reopen our corporate headquarters in Hershey, Pennsylvania and other select offices with increased safety protocols. We have successfully onboarded several teams; however, occupancy levels remain low as we continue to monitor the latest COVID-19 related public health and government guidance. As a result, a majority of our office-based employees continue to work remotely where possible. We have crisis management teams in place to monitor the continually evolving situation and recommending risk mitigation actions as deemed necessary. Since the onset of COVID-19, there has been minimal disruption to our supply chain network. However, during the third quarter of 2021, continued strong demand for consumer goods and the effects of COVID-19 mitigation strategies have led to broad-based supply chain disruptions across the U.S., including inflation on many consumer products, labor shortages and demand outpacing supply. As a result, we experienced corresponding incremental costs and gross margin pressures during the three months ended October 3, 2021 (see Results of Operations included in this MD&A). We are working closely with our business units, contract manufacturers, distributors, contractors and other external business partners to minimize the potential impact on our business.

During 2021, many state governments began easing COVID-19 restrictions, resulting in increased travel during the summer season, full capacity at major sporting and entertainment events, increased occupancy limits for indoor gatherings and the removal of face covering requirements (subject to certain exceptions). This led to a temporary resurgence of COVID-19 cases during the summer months but has declined in recent weeks as the availability of vaccinations (including vaccine boosters) continues to increase around the world, albeit with slower than anticipated rollouts and challenges within certain countries. We experienced an increase in our net sales during the three and nine months ended October 3, 2021, which was primarily driven by strong everyday performance on our core U.S. confection brands and solid growth in our snacks portfolio and select international markets (see Segment Results included in this MD&A). Despite higher net sales, our net income during the three months ended October 3, 2021 decreased slightly due to the aforementioned supply chain disruptions and gross margin pressures.

As of October 3, 2021, we believe we have sufficient liquidity to satisfy our cash needs; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can operate effectively during the ongoing COVID-19 pandemic. We continue to monitor our discretionary spending across the organization (see Liquidity and Capital Resources included in this MD&A).

Based on the length and severity of COVID-19, including broad-based supply chain disruptions, new trends in outbreaks and hotspots, the spread of COVID-19 variants, resurgences and the continued distribution of vaccinations, we may experience continued volatility in retail foot traffic, consumer shopping and consumption behavior and may experience increasing supply chain costs and higher inflation. We will continue to evaluate the nature and extent of these potential and evolving impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 35

CONSOLIDATED RESULTS OF OPERATIONS

						Three Months Ended																		Nine Months Ended
						October 3, 2021						September 27, 2020						Percent Change						October 3, 2021						September 27, 2020						Percent Change
In millions of dollars except per share amounts
Net sales						$	2,359.8					$	2,219.8					6.3		%				$	6,645.2					$	5,964.5					11.4		%
Cost of sales						1,298.5						1,139.8						13.9		%				3,609.5						3,225.3						11.9		%
Gross profit						1,061.3						1,080.0						(1.7)		%				3,035.7						2,739.2						10.8		%
Gross margin						45.0		%				48.7		%										45.7		%				45.9		%
Selling, marketing & administrative (“SM&A”) expenses						486.1						468.6						3.7		%				1,448.4						1,353.0						7.1		%
SM&A expense as a percent of net sales						20.6		%				21.1		%										21.8		%				22.7		%
Long-lived asset impairment charges						—						—						NM						—						9.1						NM
Business realignment costs (benefits)						0.4						—						NM						2.7						(0.5)						(678.5)		%
Operating profit						574.8						611.4						(6.0)		%				1,584.6						1,377.6						15.0		%
Operating profit margin						24.4		%				27.5		%										23.8		%				23.1		%
Interest expense, net						30.2						37.3						(19.1)		%				97.7						111.6						(12.5)		%
Other (income) expense, net						23.0						11.6						97.6		%				32.6						34.4						(5.2)		%
Provision for income taxes						76.7						115.2						(33.4)		%				311.3						247.5						25.8		%
Effective income tax rate						14.7%						20.5%												21.4%						20.1%
Net income including noncontrolling interest						444.9						447.3						(0.5)		%				1,143.0						984.1						16.2		%
Less: Net gain (loss) attributable to noncontrolling interest						—						—						NM						1.1						(3.2)						(133.1)		%
Net income attributable to The Hershey Company						$	444.9					$	447.3					(0.5)		%				$	1,141.9					$	987.3					15.7		%
Net income per share—diluted						$	2.14					$	2.14					—		%				$	5.49					$	4.71					16.6		%
NOTE: Percentage changes may not compute directly as shown due to rounding of amounts presented above.
NM = not meaningful

Results of Operations - Third Quarter 2021 vs. Third Quarter 2020

Net Sales

Net sales increased 6.3% in the third quarter of 2021 compared to the same period of 2020, reflecting a favorable price realization of 3.1% due to higher prices on certain products, a 1.4% increase from the 2021 acquisition of Lily’s, a volume increase of 1.3% due to an increase in our snacks portfolio, as well as, a favorable impact from foreign currency exchange rates of 0.5%.

Key U.S. Marketplace Metrics

For the third quarter of 2021, our total U.S. retail takeaway increased 8.9% in the expanded multi-outlet combined plus convenience store channels (IRI MULO + C-Stores), which includes candy, mint, gum, salty snacks, meat snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway increased 8.0% and experienced a CMG market share loss of approximately 95 basis points.

The CMG consumer takeaway and market share information reflects measured channels of distribution accounting for approximately 90% of our U.S. confectionery retail business. These channels of distribution primarily include food, drug, mass merchandisers, and convenience store channels, plus Wal-Mart Stores, Inc., partial dollar, club and military channels. These metrics are based on measured market scanned purchases as reported by Information Resources, Incorporated (“IRI”), the Company’s market insights and analytics provider, and provide a means to assess our retail takeaway and market position relative to the overall category.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 36

Cost of Sales and Gross Margin

Cost of sales increased 13.9% in the third quarter of 2021 compared to the same period of 2020. The increase was driven by higher sales volume, higher freight and logistics costs and additional plant costs, as well as, the incremental $40.6 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases. The increase was partially offset by favorable price realization and supply chain productivity.

Gross margin decreased by 370 basis points in the third quarter of 2021 compared to the same period of 2020. The decrease was driven by higher freight and logistics costs and additional plant costs and the unfavorable year-over-year mark-to-market impact from commodity derivative instruments. These factors were offset by favorable price realization and supply chain productivity.

SM&A Expenses

SM&A expenses increased $17.5 million or 3.7% in the third quarter of 2021 driven by increased corporate expenses. Total advertising and related consumer marketing expenses decreased 3.6% driven by lower advertising in the North America segment in response to sustained consumer demand and capacity constraints on select brands. SM&A expenses, excluding advertising and related consumer marketing, increased approximately 8.1% in the third quarter of 2021 driven by higher compensation costs and investments in capabilities and technology.

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. In the third quarter of 2021, we recorded business realignment costs of $0.4 million related to the International Optimization Program, a program focused on optimizing our China operating model to improve our operational efficiency and provide for a strong, sustainable and simplified base going forward. There were no business realignment costs in the third quarter of 2020. Costs associated with business realignment activities are classified in our Consolidated Statements of Income as described in Note 9 to the Unaudited Consolidated Financial Statements.

Operating Profit and Operating Profit Margin

Operating profit decreased 6.0% in the third quarter of 2021 compared to the same period of 2020 predominantly due to lower gross profit, as well as higher SM&A expenses, as noted above. Operating profit margin decreased to 24.4% in 2021 from 27.5% in 2020 driven by these same factors.

Interest Expense, Net

Net interest expense was $7.1 million lower in the third quarter of 2021 compared to the same period of 2020. The decrease was primarily due to lower long-term debt balances in 2021 versus 2020, specifically resulting from $785 million of long-term debt repayments with varying maturity dates during the last twelve months preceding October 3, 2021.

Other (Income) Expense, Net

Other (income) expense, net was $23.0 million in the third quarter of 2021 versus net expense of $11.6 million in the third quarter of 2020. The increase in net expense was primarily due to higher write-downs on equity investments qualifying for historic and renewable energy tax credits in 2021 versus 2020 and higher non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans during 2021.

Income Taxes and Effective Tax Rate

The effective income tax rate was 14.7% for the third quarter of 2021 compared with 20.5% for the third quarter of 2020. Relative to the 21% statutory rate, the 2021 effective tax rate benefited from investment tax credits and the utilization (during the third quarter of 2021) of previously generated capital losses, partially offset by state taxes. Relative to the 21% statutory rate, the 2020 effective tax rate benefited from favorable foreign rate differential and investment tax credits, partially offset by state taxes.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 37

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

Net income decreased $2.4 million, or 0.5%, while EPS-diluted had no change, in the third quarter of 2021 compared to the same period of 2020. The decrease in net income was driven primarily by lower gross profit, as well as higher SM&A expenses and other expenses, partially offset by lower income taxes, as noted above. Our 2021 EPS-diluted benefited from lower weighted-average shares outstanding as a result of share repurchases pursuant to our Board-approved repurchase programs.

Results of Operations - First Nine Months 2021 vs. First Nine Months 2020

Net Sales

Net sales increased 11.4% in the first nine months of 2021 compared to the same period of 2020, reflecting a volume increase of 8.5% due to an increase in everyday core U.S. confection brands and our snacks portfolio, a favorable price realization of 2.0% due to higher prices on certain products, a 0.5% increase from net acquisitions and divestitures (predominantly driven by the 2021 acquisition of Lily’s, partially offset by the 2020 divestitures of Krave and the Scharffen Berger and Dagoba brands), as well as, a favorable impact from foreign currency exchange rates of 0.4%.

Cost of Sales and Gross Margin

Cost of sales increased 11.9% in the first nine months of 2021 compared to the same period of 2020. The increase was driven by higher sales volume, higher freight and logistics costs and additional plant costs. These drivers were partially offset by the incremental $64.4 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases; however, our mark-to-market activity was significantly impacted by financial market volatility during March 2020 amid COVID-19 fears. Additionally, the increase was partially offset by favorable price realization and supply chain productivity.

Gross margin decreased by 20 basis points in the first nine months of 2021 compared to the same period of 2020. The decrease was driven by higher freight and logistics costs and additional plant costs. These factors were partially offset by favorable price realization, supply chain productivity and the favorable year-over-year mark-to-market impact from commodity derivative instruments.

SM&A Expenses

SM&A expenses increased $95.5 million or 7.1% in the first nine months of 2021. Total advertising and related consumer marketing expenses increased 2.5% driven by increased investment in core brands and incremental sponsorships in North America. SM&A expenses, excluding advertising and related consumer marketing, increased approximately 9.6% in the first nine months of 2021 driven by higher compensation costs and investments in capabilities and technology.

Long-Lived Asset Impairment Charges

We had no impairment charges during the first nine months of 2021. During the first nine months of 2020, we recorded long-lived asset impairment charges of $9.1 million, predominantly comprising of impairment charges to adjust long-lived asset values of our LSFC disposal group which was previously classified as held for sale. Additionally, in connection with a previous sale, the Company wrote-down certain receivables deemed uncollectible.

Business Realignment Activities

During the first nine months of 2021, we recorded business realignment costs of $2.7 million related to the International Optimization Program. During the first nine months of 2020, we recorded business realignment benefits of $0.5 million related to the Margin for Growth Program. Costs associated with business realignment activities are classified in our Consolidated Statements of Income as described in Note 9 to the Unaudited Consolidated Financial Statements.

Operating Profit and Operating Profit Margin

Operating profit increased 15.0% in the first nine months of 2021 compared to the same period of 2020 predominantly due to higher gross profit and lower impairment charges, partially offset by higher SM&A expenses, as noted above. Operating profit margin increased to 23.8% in 2021 from 23.1% in 2020 driven by these same factors.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 38

Interest Expense, Net

Net interest expense was $13.9 million lower in the first nine months of 2021 compared to the same period of 2020. The decrease was primarily due to lower long-term debt balances in 2021 versus 2020, specifically resulting from $785 million of long-term debt repayments with varying maturity dates during the last twelve months preceding October 3, 2021.

Other (Income) Expense, Net

Other (income) expense, net was $32.6 million in the first nine months of 2021 versus expense of $34.4 million in the first nine months of 2020. The decrease in net expense was primarily due to lower non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans during 2021 and lower write-downs on equity investments qualifying for historic and renewable energy tax credits in 2021 versus 2020.

Income Taxes and Effective Tax Rate

Our effective income tax rate was 21.4% for the first nine months of 2021 compared with 20.1% for the first nine months of 2020. Relative to the 21% statutory rate, the 2021 effective tax rate was impacted by incremental tax reserves incurred as a result of an adverse ruling in connection with a non-U.S. tax litigation matter as well as state taxes, partially offset by investment tax credits and the utilization (during the third quarter of 2021) of previously generated capital losses. Relative to the 21% statutory rate, the 2020 effective tax rate was favorably impacted by investment tax credits and the benefit of employee share-based payments, partially offset by state taxes.

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

Net income increased $154.6 million, or 15.7%, while EPS-diluted increased $0.78, or 16.6%, in the first nine months of 2021 compared to the same period of 2020. The increase in both net income and EPS-diluted was driven primarily by higher gross profit, as well as, lower interest expense and impairment charges, partially offset by higher SM&A expenses and higher income taxes. Our 2021 EPS-diluted also benefited from lower weighted-average shares outstanding as a result of share repurchases pursuant to our Board-approved repurchase programs.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 39

SEGMENT RESULTS

The summary that follows provides a discussion of the results of operations of our two reportable segments: North America and International and Other. The segments reflect our operations on a geographic basis. 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 largely managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM and used for resource allocation and internal management reporting and performance evaluation. Segment income and segment income margin, which are presented in the segment discussion that follows, are non-GAAP measures and do not purport to be alternatives to operating income as a measure of operating performance. We believe that these measures are useful to investors and other users of our financial information in evaluating ongoing operating profitability as well as in evaluating operating performance in relation to our competitors, as they exclude the activities that are not directly attributable to our ongoing segment operations.

Our segment results, including a reconciliation to our consolidated results, were as follows:

						Three Months Ended												Nine Months Ended
						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
In millions of dollars
Net Sales:
North America						$	2,125.6					$	2,014.1					$	5,986.7					$	5,442.8
International and Other						234.2						205.7						658.5						521.7
Total						$	2,359.8					$	2,219.8					$	6,645.2					$	5,964.5
Segment Income:
North America						$	666.1					$	647.1					$	1,893.6					$	1,726.3
International and Other						38.7						24.5						114.7						36.5
Total segment income						704.8						671.6						2,008.3						1,762.8
Unallocated corporate expense (1)						145.0						132.0						434.0						363.4
Unallocated mark-to-market (gains) losses on commodity derivatives (2)						(18.4)						(71.8)						(24.1)						10.5
Long-lived asset impairment charges						—						—						—						9.1
Costs associated with business realignment activities						3.4						—						13.8						2.2
Operating profit						574.8						611.4						1,584.6						1,377.6
Interest expense, net						30.1						37.3						97.7						111.6
Other (income) expense, net						23.0						11.6						32.6						34.4
Income before income taxes						$	521.7					$	562.5					$	1,454.3					$	1,231.6

(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.

(2)Net (gains) losses on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses. See Note 13 to the Unaudited Consolidated Financial Statements.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 40

North America

The North America segment is responsible for our chocolate and non-chocolate confectionery market position, as well as our grocery and growing snacks market positions, in the United States and Canada. This includes developing and growing our business in chocolate and non-chocolate confectionery, pantry, food service and other snacking product lines. North America results, which accounted for 90.1% and 90.7% of our net sales for the three months ended October 3, 2021 and September 27, 2020, respectively, were as follows:

						Three Months Ended																		Nine Months Ended
						October 3, 2021						September 27, 2020						Percent Change						October 3, 2021						September 27, 2020						Percent Change
In millions of dollars
Net sales						$	2,125.6					$	2,014.1					5.5		%				$	5,986.7					$	5,442.8					10.0		%
Segment income						666.1						647.1						2.9		%				1,893.6						1,726.3						9.7		%
Segment margin						31.3		%				32.1		%										31.6		%				31.7		%

Results of Operations - Third Quarter 2021 vs. Third Quarter 2020

Net sales of our North America segment increased $111.5 million or 5.5% in the third quarter of 2021 compared to the same period of 2020, reflecting a favorable price realization of 2.4% due to higher prices on certain products, a volume increase of 1.3% due to an increase in our snacks portfolio, a 1.5% increase from the 2021 acquisition of Lily’s, and a favorable impact from foreign currency exchange rates of 0.3%.

Our North America segment income increased $19.0 million or 2.9% in the third quarter of 2021 compared to the same period of 2020, primarily due to volume increases and favorable price realization, partially offset by higher supply chain-related costs, higher freight and logistics costs, as well as unfavorable product mix.

Results of Operations - First Nine Months 2021 vs. First Nine Months 2020

Net sales of our North America segment increased $543.9 million or 10.0% in the first nine months of 2021 compared to the same period of 2020, reflecting a volume increase of 7.6% due to an increase in everyday core U.S. confection brands and our snacks portfolio, favorable price realization of 1.5% attributed to higher prices on certain products, a 0.5% increase from net acquisitions and divestitures (predominantly driven by the 2021 acquisition of Lily’s, partially offset by the 2020 divestitures of Krave and the Scharffen Berger and Dagoba brands) and a favorable impact from foreign currency exchange rates of 0.4%.

Our North America segment income increased $167.3 million or 9.7% in the first nine months of 2021 compared to the same period of 2020, primarily due to volume increases and favorable price realization, partially offset by higher supply chain-related costs and higher freight and logistics costs.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 41

International and Other

The International and Other segment includes all other countries where we currently manufacture, import, market, sell or distribute chocolate and non-chocolate confectionery and other products. Currently, this includes our operations in India and other Asia markets, Latin America, Europe, Africa and the Middle East, along with exports to these regions. While a less significant component, this segment also includes our global retail operations, including Hershey’s Chocolate World stores in Hershey, Pennsylvania, New York City, Las Vegas, Niagara Falls (Ontario) and Singapore, as well as operations associated with licensing the use of certain trademarks and products to third parties around the world. International and Other results, which accounted for 9.9% and 9.3% of our net sales for the three months ended October 3, 2021 and September 27, 2020, respectively, were as follows:

						Three Months Ended																		Nine Months Ended
						October 3, 2021						September 27, 2020						Percent Change						October 3, 2021						September 27, 2020						Percent Change
In millions of dollars
Net sales						$	234.2					$	205.7					13.9		%				$	658.5					$	521.7					26.2		%
Segment income						38.7						24.5						58.1		%				114.7						36.5						214.2		%
Segment margin						16.5		%				11.9		%										17.4		%				7.0		%

Results of Operations - Third Quarter 2021 vs. Third Quarter 2020

Net sales of our International and Other segment increased $28.5 million or 13.9% in the third quarter of 2021 compared to the same period of 2020, reflecting a favorable price realization of 9.5% and volume increase of 1.9%. The volume increase was primarily attributed to solid marketplace growth in Mexico, Brazil, and India, where net sales increased by 72.3%, 13.0%, and 5.0%, respectively. These increases also benefited from a favorable impact from foreign currency exchange rates of 2.5%.

Our International and Other segment also includes licensing, owned retail and world travel retail. At the onset of the pandemic, all Hershey's Chocolate World stores were temporarily closed and subsequently re-opened in July 2020 with increased safety measures. This included the United States (3 locations), Niagara Falls (Ontario) and Singapore. As a result, our net sales increased approximately 47.7% during the third quarter of 2021 compared to the same period of 2020.

Our International and Other segment generated income of $38.7 million in the third quarter of 2021 compared to $24.5 million in the third quarter of 2020 with the improvement primarily resulting from execution of our International Optimization Program in China, as we streamline and optimize our China operating model, as well as volume increases and favorable price realization.

Results of Operations - First Nine Months 2021 vs. First Nine Months 2020

Net sales of our International and Other segment increased $136.8 million or 26.2% in the first nine months of 2021 compared to the same period of 2020, reflecting a volume increase of 17.2% and favorable price realization of 8.1%. The volume increase was primarily attributed to solid marketplace growth in Mexico, Brazil, India and AEMEA Markets, where net sales increased by 50.0%, 25.4%, 34.4% and 17.5%, respectively. These increases also benefited from a favorable impact from foreign currency exchange rates of 0.9%.

Our International and Other segment also includes licensing, owned retail and world travel retail. At the onset of the pandemic, all Hershey’s Chocolate World stores were temporarily closed and subsequently re-opened in July 2020 with increased safety measures. This included the United States (3 locations), Niagara Falls (Ontario) and Singapore. As a result, our net sales increased approximately 42.6% during the first nine months of 2021 compared to the same period of 2020.

Our International and Other segment generated income of $114.7 million in the first nine months of 2021 compared to $36.5 million in the first nine months of 2020 with the improvement primarily resulting from execution of our International Optimization Program in China, as we streamline and optimize our China operating model, as well as volume increases and favorable price realization.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 42

Unallocated Corporate Expense

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

In the third quarter of 2021, unallocated corporate expense totaled $145.0 million, as compared to $132.0 million in the third quarter of 2020. The increase is primarily driven by higher incentive compensation, higher group insurance costs from COVID-19-related delays in preventive care, and incremental investments in capabilities and technology.

In the first nine months of 2021, unallocated corporate expense totaled $434.0 million, as compared to $363.4 million in the first nine months of 2020. The increase is primarily driven by higher incentive compensation, higher group insurance costs from COVID-19-related delays in preventive care, and incremental investments in capabilities and technology.

LIQUIDITY AND CAPITAL RESOURCES

Historically, our primary source of liquidity has been cash generated from operations. Domestic seasonal working capital needs, which typically peak during the summer months, are generally met by utilizing cash on hand, bank borrowings or the issuance of commercial paper. Commercial paper may also be issued, from time to time, to finance ongoing business transactions, such as the repayment of long-term debt, business acquisitions and for other general corporate purposes.

At October 3, 2021, our cash and cash equivalents totaled $675.5 million, a decrease of $468.5 million compared to the 2020 year-end balance. We believe we have sufficient liquidity to satisfy our cash needs; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during the ongoing COVID-19 pandemic. Additional detail regarding the net uses of cash are outlined in the following discussion.

Approximately 90% of the balance of our cash and cash equivalents at October 3, 2021 was held by subsidiaries domiciled outside of the United States. During the first nine months of 2021, previously undistributed earnings of certain international subsidiaries were no longer considered indefinitely reinvested; however, the Company had previously recognized a one-time U.S. repatriation tax due under U.S. tax reform, and as a result, only an immaterial amount of withholding tax was recognized. For the remainder of the Company’s cash held by international subsidiaries, we intend to continue to reinvest the undistributed earnings indefinitely. We believe we have sufficient liquidity to satisfy our cash needs for at least the next twelve months, including our cash needs in the United States.

Cash Flow Summary

The following table is derived from our Consolidated Statements of Cash Flows:

						Nine Months Ended
In millions of dollars						October 3, 2021						September 27, 2020
Net cash provided by (used in):
Operating activities						$	1,403.7					$	1,095.3
Investing activities						(839.7)						(341.3)
Financing activities						(1,037.8)						(20.0)
Effect of exchange rate changes on cash and cash equivalents						(6.1)						(10.7)
Less: Cash classified as assets held for sale						11.4						(10.7)
(Decrease) increase in cash and cash equivalents						$	(468.5)					$	712.6

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 43

Operating activities

We generated cash of $1.4 billion from operating activities in the first nine months of 2021, an increase of $308.4 million compared to $1.1 billion in the same period of 2020. This increase in net cash provided by operating activities was mainly driven by the following factors:

• Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, long-lived asset charges, a write-down of equity investments and other charges) resulted in $205.1 million of higher cash flow in 2021 relative to 2020.

• Net working capital (comprised of trade accounts receivable, inventory, accounts payable and accrued liabilities) consumed cash of $185.3 million in 2021, compared to $295.3 million in 2020. This $110.0 million fluctuation was mainly driven by strong demand of U.S. inventories, specifically our everyday core U.S. confection brands.

Investing activities

We used cash of $839.7 million for investing activities in the first nine months of 2021, an increase of $498.4 million compared to $341.3 million in the same period of 2020. This increase in net cash used in investing activities was mainly driven by the following factors:

*•*Capital spending. Capital expenditures, including capitalized software, primarily to support capacity expansion, innovation and cost savings, were $347.5 million in the first nine months of 2021 compared to $292.1 million in the same period of 2020. For full year 2021, we now expect capital expenditures, including capitalized software, to approximate $500 million to $525 million, a reduction from our previously announced estimate of $550 million, as we evaluate and re-prioritize our capital projects to align with consumer demand and broad-based supply chain disruptions. Our 2021 capital expenditures are largely driven by the continuation of our new global enterprise resource planning system implementation, as well as our supply chain capacity projects.

• Investments in partnerships qualifying for tax credits. We make investments in partnership entities that in turn make equity investments in projects eligible to receive federal historic and renewable energy tax credits. We invested approximately $75.9 million in the first nine months of 2021, compared to $46.4 million in the same period of 2020.

• Business Acquisition. In June 2021, we acquired Lily’s for an initial cash purchase price of $419.5 million. Further details regarding our business acquisition activity is provided in Note 2 to the Unaudited Consolidated Financial Statements.

Financing activities

We used cash of $1,037.8 million for financing activities in the first nine months of 2021, an increase of $1,017.8 million compared to $20.0 million in the same period of 2020. This increase in net cash used in financing activities was mainly driven by the following factors:

*•*Short-term borrowings, net. In addition to utilizing cash on hand, we use short-term borrowings (commercial paper and bank borrowings) to fund seasonal working capital requirements and ongoing business needs. During the first nine months of 2021, we generated cash flow of $340.0 million predominantly through the issuance of short-term commercial paper, partially offset by a reduction in short-term foreign borrowings. During the first nine months of 2020, we generated cash flow of $13.4 million due to an increase in short-term foreign bank borrowings.

• Long-term debt borrowings and repayments. During the first nine months of 2021, we repaid $84.7 million of 8.800% Debentures due upon their maturity and $350.0 million of 3.100% Notes due upon their maturity. During the first nine months of 2020, we issued $300 million of 0.900% Notes due in 2025, $350 million of 1.700% Notes due in 2030 and $350 million of 2.650% Notes due in 2050 (the “2020 Notes”). Proceeds from the issuance of the 2020 Notes, net of discounts and issuance costs, totaled $989.9 million. Additionally, in May 2020, we repaid $350 million of 2.900% Notes due upon their maturity.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 44

• Dividend payments. Total dividend payments to holders of our Common Stock and Class B Common Stock were $505.2 million during the first nine months of 2021, an increase of $27.2 million compared to $478.0 million in the same period of 2020. Details regarding our 2021 cash dividends paid to stockholders are as follows:

						Quarter Ended
In millions of dollars except per share amounts						April 4, 2021						July 4, 2021						October 3, 2021
Dividends paid per share – Common stock						$	0.804					$	0.804					$	0.901
Dividends paid per share – Class B common stock						$	0.731					$	0.731					$	0.819
Total cash dividends paid						$	162.7					$	161.6					$	180.9
Declaration date						February 2, 2021						April 27, 2021						July 23, 2021
Record date						February 19, 2021						May 21, 2021						August 20, 2021
Payment date						March 15, 2021						June 15, 2021						September 15, 2021

*•*Share repurchases. We used cash for total share repurchases of $458.0 million and $211.2 million during the first nine months of 2021 and 2020, respectively, pursuant to our practice of replenishing treasury shares available for issuance for stock options and incentive compensation, as well as our share repurchases in the open market under pre-approved share repurchase programs. In July 2018, our Board of Directors approved a $500 million share repurchase authorization. As of October 3, 2021, approximately $110 million remained available for repurchases of our Common Stock under this program. The share repurchase program does not have an expiration date. In May 2021, our Board of Directors approved an additional $500 million share repurchase authorization. This program is to commence after the existing 2018 authorization is completed and is to be utilized at management’s discretion.

*•*Proceeds from the exercise of stock options, including tax benefits. We received $23.4 million from employee exercises of stock options, net of employee taxes withheld from share-based awards, during the first nine months of 2021, a minimal increase compared to $19.1 million in the same period of 2020.

Recent Accounting Pronouncements

Information on recently adopted and issued accounting standards is included in Note 1 to the Unaudited Consolidated Financial Statements.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 45

Safe Harbor Statement

We are subject to changing economic, competitive, regulatory and technological risks and uncertainties that could have a material impact on our business, financial condition or results of operations. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we note the following factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions that we have discussed directly or implied in this Prospectus. Many of these forward-looking statements can be identified by the use of words such as “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “potential,” “predict,” “project,” “strategy,” “target” and similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will” and “would,” among others.

The factors that could cause our actual results to differ materially from the results projected in our forward-looking statements include, but are not limited to the following:

• Our business and financial results may be negatively impacted by the failure to successfully manage a disruption in consumer and trade patterns, as well as operational challenges associated with the actual or perceived effects of a disease outbreak, including epidemics, pandemics or similar widespread public health concerns, such as the COVID-19 pandemic;

• Our Company’s reputation or brand image might be impacted as a result of issues or concerns relating to the quality and safety of our products, ingredients or packaging, human and workplace rights, and other environmental, social or governance matters, which in turn could result in litigation or otherwise negatively impact our operating results;

• Disruption to our manufacturing operations or supply chain could impair our ability to produce or deliver finished products, resulting in a negative impact on our operating results;

• We might not be able to hire, engage and retain the talented global workforce we need to drive our growth strategies;

• Increases in raw material and energy costs along with the availability of adequate supplies of raw materials could affect future financial results;

• Price increases may not be sufficient to offset cost increases and maintain profitability or may result in sales volume declines associated with pricing elasticity;

• Market demand for new and existing products could decline;

• Increased marketplace competition could hurt our business;

• Our financial results may be adversely impacted by the failure to successfully execute or integrate acquisitions, divestitures and joint ventures;

• Our international operations may not achieve projected growth objectives, which could adversely impact our overall business and results of operations;

• We may not fully realize the expected cost savings and/or operating efficiencies associated with our strategic initiatives or restructuring programs, which may have an adverse impact on our business;

• Changes in governmental laws and regulations could increase our costs and liabilities or impact demand for our products;

• Political, economic and/or financial market conditions could negatively impact our financial results;

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 46

• Disruptions, failures or security breaches of our information technology infrastructure could have a negative impact on our operations;

• Complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations; and

• Such other matters as discussed in our 2020 Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q for the quarterly periods ended April 4, 2021 and July 4, 2021, and this Quarterly Report on Form 10-Q, including Part II, Item 1A, ”Risk Factors.”

We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date this Quarterly Report on Form 10-Q is filed.

In December 2020, our fixed-to-floating interest rate swap matured in connection with the repayment of certain long-term debt upon its maturity. Therefore, as of October 3, 2021 and December 31, 2020, we had no interest rate swap derivative instruments in a fair value hedging relationship. A hypothetical 100 basis point increase in interest rates applied to this variable-rate debt through its December 2020 maturity would have increased interest expense by approximately $3.2 million for the year 2020. There is no hypothetical impact for 2021.

In addition, the total amount of short-term debt, net of cash, amounted to net cash positions of $265.1 million and $1.1 billion, at October 3, 2021 and December 31, 2020, respectively. A hypothetical 100 basis point increase in interest rates applied to this variable-rate short-term debt as of October 3, 2021 would have changed interest expense by approximately $3.9 million for the first nine months of 2021 and $8.6 million for the full year 2020.

We consider our current risk related to market fluctuations in interest rates on our remaining debt portfolio, excluding fixed-rate debt converted to variable rates with fixed-to-floating instruments, to be minimal since this debt is largely long-term and fixed-rate in nature. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. A 100 basis point increase in market interest rates would decrease the fair value of our fixed-rate long-term debt at October 3, 2021 and December 31, 2020 by approximately $323 million and $357 million, respectively. However, since we currently have no plans to repurchase our outstanding fixed-rate instruments before their maturities, the impact of market interest rate fluctuations on our long-term debt does not affect our results of operations or financial position.

The potential decline in fair value of foreign currency forward exchange contracts resulting from a hypothetical near-term adverse change in market rates of 10% was $29.0 million as of October 3, 2021 and $25.6 million as of December 31, 2020, generally offset by a reduction in foreign exchange associated with our transactional activities.

Our open commodity derivative contracts had a notional value of $383.9 million as of October 3, 2021 and $279.8 million as of December 31, 2020. At the end of the first quarter 2021, the potential change in fair value of commodity derivative instruments, assuming a 10% decrease in the underlying commodity price, would have increased our net unrealized losses by $43.1 million, generally offset by a reduction in the cost of the underlying commodity purchases.

Other than as described above, market risks have not changed significantly from those described in our 2020 Annual Report on Form 10-K.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 47

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of October 3, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of October 3, 2021.

We rely extensively on information systems and technology to manage our business and summarize operating results. We are in the process of a multi-year implementation of a new global enterprise resource planning (“ERP”) system, which will replace our existing operating and financial systems. The ERP system is designed to accurately maintain the Company’s financial records, enhance operational functionality and provide timely information to the Company’s management team related to the operation of the business. The implementation is expected to occur in phases over the next several years. When the next phases of the updated processes are rolled out in connection with the ERP implementation, we will give appropriate consideration to whether these process changes necessitate changes in the design of and testing for effectiveness of internal controls over financial reporting.

There have been no changes in our internal control over financial reporting during the quarter ended October 3, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 48

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

Information on legal proceedings is included in Note 16 to the Unaudited Consolidated Financial Statements.

When evaluating an investment in our Common Stock, investors should consider carefully, among other things, the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” of our 2020 Annual Report on Form 10-K, Part II and the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table shows the purchases of shares of Common Stock made by or on behalf of Hershey, or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of Hershey, for each fiscal month in the three months ended October 3, 2021:

Period						Total Number of Shares Purchased (1)						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)						Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
																								(in thousands of dollars)
July 5 through August 1						—						$	—					—						$	109,983
August 2 through August 29						—						$	—					—						$	109,983
August 30 through October 3						134,000						$	176.12					—						$	109,983
Total						134,000						$	176.12					—

(1) During the three months ended October 3, 2021, 134,000 shares of Common Stock were purchased in open market transactions in connection with our practice of buying back shares sufficient to offset those issued under incentive compensation plans.

(2) In July 2018, our Board of Directors approved a $500 million share repurchase authorization. As of October 3, 2021, approximately $110 million remained available for repurchases of our Common Stock under this program. The share repurchase program does not have an expiration date. In May 2021, our Board of Directors approved an additional $500 million share repurchase authorization (excluded from the table above). This program is to commence after the existing 2018 authorization is completed and is to be utilized at management’s discretion.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Not applicable.

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 49

The following exhibits are filed as part of this Quarterly Report on Form 10-Q:

Exhibit Number						Description
3.1						The Company’s Restated Certificate of Incorporation, as amended, is incorporated by reference from Exhibit 3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2005.
3.2						The Company's By-laws, as amended and restated as of February 21, 2017, are incorporated by reference from Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
10.1						Employee Confidentiality and Restrictive Covenant Agreement, amended as of September 8, 2021.*+
31.1						Certification of Michele G. Buck, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2						Certification of Steven E. Voskuil, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1						Certification of Michele G. Buck, Chief Executive Officer, and Steven E. Voskuil, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema
101.CAL						XBRL Taxonomy Extension Calculation Linkbase
101.LAB						XBRL Taxonomy Extension Label Linkbase
101.PRE						XBRL Taxonomy Extension Presentation Linkbase
101.DEF						XBRL Taxonomy Extension Definition Linkbase
104						The cover page from the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 3, 2021, formatted in Inline XBRL and contained in Exhibit 101.
*						Filed herewith
**						Furnished herewith
+						Management contract, compensatory plan or arrangement

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 50

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

									THE HERSHEY COMPANY
									(Registrant)
Date:			October 28, 2021						/s/ Steven E. Voskuil
									Steven E. Voskuil
									Senior Vice President, Chief Financial Officer
									(Principal Financial Officer)
Date:			October 28, 2021						/s/ Jennifer L. McCalman
									Jennifer L. McCalman
									Vice President, Chief Accounting Officer
									(Principal Accounting Officer)

Table of Contents			The Hershey Company | Q3 2021 Form 10-Q | Page 51