Hershey 10-Q 2023-07-02

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 July 2, 2023

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)

Not Applicable

(Former name or former address, if changed since last report)

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—149,854,381 shares, as of July 21, 2023.

Class B Common Stock, one dollar par value—54,613,514 shares, as of July 21, 2023.

THE HERSHEY COMPANY

Quarterly Report on Form 10-Q

For the Period Ended July 2, 2023

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION						2
Item 1. Financial Statements						2
Consolidated Statements of Income for the Three and Six Months Ended July 2, 2023 and July 3, 2022						2
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 2, 2023 and July 3, 2022						3
Consolidated Balance Sheets as of July 2, 2023 and December 31, 2022						4
Consolidated Statements of Cash Flows for the Three and Six Months Ended July 2, 2023 and July 3, 2022						5
Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended July 2, 2023 and July 3, 2022						6
Notes to Unaudited Consolidated Financial Statements						8
Note 1 - Summary of Significant Accounting Policies						8
Note 2 - Business Acquisitions						9
Note 3 - Goodwill and Intangible Assets						11
Note 4 - Short and Long-Term Debt						12
Note 5 - Derivative Instruments						13
Note 6 - Fair Value Measurements						16
Note 7 - Leases						18
Note 8 - Investments in Unconsolidated Affiliates						21
Note 9 - Business Realignment Activities						21
Note 10 - Income Taxes						22
Note 11 - Pension and Other Post-Retirement Benefit Plans						23
Note 12 - Stock Compensation Plans						24
Note 13 - Segment Information						26
Note 14 - Treasury Stock Activity						29
Note 15 - Contingencies						29
Note 16 - Earnings Per Share						31
Note 17 - Other (Income) Expense, Net						33
Note 18 - Related Party Transactions						33
Note 19 - Supplemental Balance Sheet Information						34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						36
Item 3. Quantitative and Qualitative Disclosures About Market Risk						46
Item 4. Controls and Procedures						47
PART II. OTHER INFORMATION						48
Item 1. Legal Proceedings						48
Item 1A. Risk Factors						48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						48
Item 3. Defaults Upon Senior Securities						48
Item 4. Mine Safety Disclosures						49
Item 5. Other Information						49
Item 6. Exhibits						50
Signatures						51

Table of Contents			The Hershey Company | Q2 2023 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												Six Months Ended
						July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Net sales						$	2,490,280					$	2,372,582					$	5,477,894					$	5,038,803
Cost of sales						1,358,181						1,372,583						2,963,473						2,793,324
Gross profit						1,132,099						999,999						2,514,421						2,245,479
Selling, marketing and administrative expense						571,804						543,468						1,153,391						1,067,684
Business realignment (benefits) costs						(370)						—						441						274
Operating profit						560,665						456,531						1,360,589						1,177,521
Interest expense, net						36,661						33,413						74,346						66,592
Other (income) expense, net						84,484						19,658						87,467						30,065
Income before income taxes						439,520						403,460						1,198,776						1,080,864
Provision for income taxes						32,537						87,904						204,608						231,830
Net income						$	406,983					$	315,556					$	994,168					$	849,034
Net income per share—basic:
Common stock						$	2.03					$	1.57					$	4.96					$	4.24
Class B common stock						$	1.88					$	1.44					$	4.57					$	3.85
Net income per share—diluted:
Common stock						$	1.98					$	1.53					$	4.83					$	4.10
Class B common stock						$	1.88					$	1.44					$	4.56					$	3.84
Dividends paid per share:
Common stock						$	1.036					$	0.901					$	2.072					$	1.802
Class B common stock						$	0.942					$	0.819					$	1.884					$	1.638

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents			The Hershey Company | Q2 2023 Form 10-Q | Page 2

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

						For the Three Months Ended																																				For the Six Months Ended
						July 2, 2023																		July 3, 2022																		July 2, 2023																		July 3, 2022
						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																		$	406,983																	$	315,556																	$	994,168																	$	849,034
Other comprehensive income, net of tax:
Foreign currency translation adjustments:
Foreign currency translation gains (losses) during period						$	12,395					$	—					12,395						$	(16,758)					$	—					(16,758)						$	21,336					$	—					21,336						$	(2,340)					$	—					(2,340)
Pension and post-retirement benefit plans:
Net actuarial gain (loss) and service cost						905						(180)						725						(32,337)						7,758						(24,579)						924						(178)						746						(38,811)						7,191

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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 2022 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 making more moments of goodness through chocolate, sweets, mints 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 100 brand names in approximately 80 countries worldwide.

Our principal product offerings include chocolate and non-chocolate confectionery products; gum and mint refreshment products and protein bars; pantry items, such as baking ingredients, toppings and beverages; and snack items such as spreads, bars, and snack bites and mixes, popcorn and pretzels.

Business Acquisitions

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

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TRENDS AFFECTING OUR BUSINESS

Demand for consumer goods has remained strong during the first six months of 2023, with inflation slowing and continued positive consumer demand identified for our products; however, negative macroeconomic conditions and future outlook, including fears of a pending recession, have negatively impacted consumer behaviors. As a result, net sales and net income increased during the six months ended July 2, 2023; however, this was primarily driven by price realization and minimal volume increases, as consumers are buying less during the first six months of 2023, compared to the same period in 2022. Additionally, we continued to experience corresponding incremental costs and gross margin pressures during the six months ended July 2, 2023 (see Results of Operations included in this MD&A).

Furthermore, certain geopolitical events, specifically the conflict between Russia and Ukraine, have increased global economic and political uncertainty. For the six months ended July 2, 2023, this conflict did not have a material impact on our commodity prices or supply availability. However, we are continuing to monitor for any significant escalation or expansion of economic or supply chain disruptions or broader inflationary costs, which may result in material adverse effects on our results of operations.

As of July 2, 2023, we believe we have sufficient liquidity to satisfy our key strategic initiatives and other material cash requirements in both the short-term and in the long-term; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can operate effectively during the current economic environment. 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 fluctuating levels of inflation, the likelihood of a potential recession, changes in consumer shopping and consumption behavior, and the conflict between Russia and Ukraine, we may experience increasing supply chain costs, higher inflation and other impacts to our business. We will continue to evaluate the nature and extent of these potential and evolving impacts on our business, consolidated results of operations, segment results, liquidity and capital resources.

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CONSOLIDATED RESULTS OF OPERATIONS

						Three Months Ended																		Six Months Ended
						July 2, 2023						July 3, 2022						Percent Change						July 2, 2023						July 3, 2022						Percent Change
In millions of dollars except per share amounts
Net sales						$	2,490.3					$	2,372.6					5.0		%				$	5,477.9					$	5,038.8					8.7		%
Cost of sales						1,358.2						1,372.6						(1.0)		%				2,963.5						2,793.3						6.1		%
Gross profit						1,132.1						1,000.0						13.2		%				2,514.4						2,245.5						12.0		%
Gross margin						45.5		%				42.1		%										45.9		%				44.6		%
Selling, marketing & administrative (“SM&A”) expenses						571.8						543.5						5.2		%				1,153.4						1,067.7						8.0		%
SM&A expense as a percent of net sales						23.0		%				22.9		%										21.1		%				21.2		%
Business realignment activities						(0.3)						—						NM						0.4						0.3						60.9		%
Operating profit						560.6						456.5						22.8		%				1,360.6						1,177.5						15.5		%
Operating profit margin						22.5		%				19.2		%										24.8		%				23.4		%
Interest expense, net						36.7						33.4						9.7		%				74.3						66.6						11.6		%
Other (income) expense, net						84.5						19.7						329.8		%				87.5						30.1						190.9		%
Provision for income taxes						32.5						87.9						(63.0)		%				204.6						231.8						(11.7)		%
Effective income tax rate						7.4%						21.8%												17.1%						21.4%
Net income						$	406.9					$	315.5					29.0		%				$	994.2					$	849.0					17.1		%
Net income per share—diluted						$	1.98					$	1.53					29.4		%				$	4.83					$	4.10					17.8		%
NOTE: Percentage changes may not compute directly as shown due to rounding of amounts presented above.
NM = not meaningful

Results of Operations - Second Quarter 2023 vs. Second Quarter 2022

Net Sales

Net sales increased 5.0% in the second quarter of 2023 compared to the same period of 2022, reflecting a favorable price realization of 7.7% primarily due to higher list prices, primarily within our North America Confectionery and North America Salty Snacks segments. This increase was offset by a volume decrease of 2.7% driven primarily by declines in everyday core U.S. confection brands. There was no impact from foreign currency exchange rates.

Key U.S. Marketplace Metrics

For the second quarter of 2023, our total U.S. retail takeaway increased 2.2% in the expanded multi-outlet combined plus convenience store channels (IRI MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway increased 1.3% and experienced a CMG market share decline of 83 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.

Cost of Sales and Gross Margin

Cost of sales decreased 1.0% in the second quarter of 2023 compared to the same period of 2022. The decrease was driven by an incremental $2.3 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases, price realization and favorable supply chain productivity. These decreases were partially offset by higher logistics and labor costs.

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Gross margin increased by 340 basis points in the second quarter of 2023 compared to the same period of 2022. The increase was driven by favorable year-over-year mark-to-market impact from commodity derivative instruments, favorable price realization and favorable product mix. These increases were offset by higher logistics and labor costs.

SM&A Expenses

SM&A expenses increased $28.3 million, or 5.2%, in the second quarter of 2023 compared to the same period of 2022. Total advertising and related consumer marketing expenses increased 14.9% driven by increases across reportable segments. SM&A expenses, excluding advertising and related consumer marketing, increased approximately 1.3% in the second quarter of 2023 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 second quarter of 2023, we recorded $0.3 million business realignment benefits related to the International Optimization Program. There were no business realignment costs in the second quarter of 2022 related to the International Optimization Program. This program is focused on optimizing our China operating model to improve our operational efficiency and provide for a strong, sustainable and simplified base going forward. 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 was $560.7 million in the second quarter of 2023 compared to $456.5 million in the same period of 2022 predominantly due to higher gross profit, partially offset by higher SM&A expenses, as noted above. Operating profit margin increased to 22.5% in 2023 from 19.2% in 2022 driven by the same factors noted above that resulted in higher gross margin for the period.

Interest Expense, Net

Net interest expense was $3.3 million higher in the second quarter of 2023 compared to the same period of 2022. The increase was primarily due to higher rates on short-term debt balances in 2023 versus 2022, specifically related to outstanding commercial paper borrowings. The increase was partially offset by higher interest income.

Other (Income) Expense, Net

Other (income) expense, net was $84.5 million in the second quarter of 2023 versus net expense of $19.7 million in the second quarter of 2022. The increase in net expense was primarily due to higher write-downs on equity investments qualifying for tax credits in 2023 versus the second quarter of 2022 and higher non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

Income Taxes and Effective Tax Rate

The effective income tax rate was 7.4% for the second quarter of 2023 compared with 21.8% for the second quarter of 2022. Relative to the 21% statutory rate, the 2023 effective tax rate was impacted by investment tax credits and employee share-based payments partially offset by state taxes and tax reserves. Relative to the 21% statutory rate, the 2022 effective tax rate was impacted by state taxes, partially offset by investment tax credits and the benefit of employee share-based payments.

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

Net income increased $91.4 million, or 29.0%, while EPS-diluted increased $0.45, or 29.4%, in the second quarter of 2023 compared to the same period of 2022. The increase in both net income and EPS-diluted was driven primarily by higher gross profit and lower income taxes, partially offset by higher SM&A expenses and higher other income and expenses. Our 2023 EPS-diluted also benefited from lower weighted-average shares outstanding as a result of share repurchases pursuant to our Board-approved repurchase programs.

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Results of Operations - First Six Months 2023 vs. First Six Months 2022

Net Sales

Net sales increased 8.7% in the first six months of 2023 compared to the same period of 2022, reflecting a favorable price realization of 8.6% primarily due to higher list prices across our reportable segments and a volume increase of 0.2% driven by increases in everyday core brands within the North America Salty Snacks and International segments, partially offset by a decrease in everyday core U.S. brands. These increases were offset by an unfavorable impact from foreign currency exchange rates of 0.1%.

Cost of Sales and Gross Margin

Cost of sales increased 6.1% in the first six months of 2023 compared to the same period of 2022. The increase was driven by an incremental $59.1 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases, higher sales volume and higher supply chain costs, including higher logistics and labor costs. The increase was partially offset by favorable price realization and supply chain productivity.

Gross margin increased by 130 basis points in the first six months of 2023 compared to the same period of 2022. The increases were driven by favorable price realization and volume increases. The increase was partially offset by unfavorable year-over-year mark-to-market impact from commodity derivative instruments, higher supply chain inflation costs, including higher logistics and labor costs and unfavorable product mix.

SM&A Expenses

SM&A expenses increased $85.7 million, or 8.0%, in the first six months of 2023 compared to the same period of 2022. Total advertising and related consumer marketing expenses increased 11.6% driven by increased investment in core brands and sponsorships in the North America Confectionery segment.. SM&A expenses, excluding advertising and related consumer marketing, increased approximately 6.4% in the first six months of 2023 driven by an increase in compensation costs, investments in capabilities and technology and broad-based marketplace inflation.

Business Realignment Activities

During the first six months of 2023, we recorded business realignment costs of $0.4 million versus $0.3 million in the first six months of 2022 related to the International Optimization 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 15.5% in the first six months of 2023 compared to the same period of 2022 predominantly due to higher gross profit, partially offset by higher SM&A expenses, as noted above. Operating profit margin was 24.8% in 2023 and 23.4% in 2022 driven by the same factors noted above that resulted in higher gross margin for the period.

Interest Expense, Net

Net interest expense was $7.8 million higher in the first six months of 2023 compared to the same period of 2022. The increase was primarily due to higher rates on short-term debt balances in 2023 versus 2022, specifically related to outstanding commercial paper borrowings. The increase was partially offset by higher interest income in 2023 compared to 2022.

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Other (Income) Expense, Net

Other (income) expense, net was $87.5 million in the first six months of 2023 versus expense of $30.1 million in the first six months of 2022. The increase in net expense was primarily due to higher write-downs on equity investments qualifying for tax credits in 2023 versus the first quarter of 2022 and higher non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

Income Taxes and Effective Tax Rate

Our effective income tax rate was 17.1% for the first six months of 2023 compared with 21.4% for the first six months of 2022. Relative to the 21% statutory rate, the 2023 effective tax rate was impacted by investment tax credits and employee share-based payments partially offset by state taxes and tax reserves. Relative to the 21% statutory rate, the 2022 effective tax rate was impacted by state taxes, tax reserves and unfavorable foreign rate differential, partially offset by investment tax credits and the benefit of employee share-based payments.

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

Net income increased $145.1 million, or 17.1%, while EPS-diluted increased $0.73, or 17.8%, in the first six months of 2023 compared to the same period of 2022. The increase in both net income and EPS-diluted was driven primarily by higher gross profit and lower income taxes, partially offset by higher SM&A expenses and higher other income and expenses. Our 2023 EPS-diluted also benefited from lower weighted-average shares outstanding as a result of share repurchases.

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SEGMENT RESULTS

The summary that follows provides a discussion of the results of operations of our three reportable segments: North America Confectionery, North America Salty Snacks and International. 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 Chief Operating Decision Maker 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												Six Months Ended
						July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
In millions of dollars
Net Sales:
North America Confectionery						$	1,993.1					$	1,909.1					$	4,445.2					$	4,126.2
North America Salty Snacks						272.4						256.3						542.4						482.4
International						224.8						207.2						490.3						430.2
Total						$	2,490.3					$	2,372.6					$	5,477.9					$	5,038.8
Segment Income:
North America Confectionery						$	657.1					$	618.9					$	1,544.9					$	1,400.7
North America Salty Snacks						43.8						37.4						90.5						58.7
International						41.1						30.7						96.2						72.7
Total segment income						742.0						687.0						1,731.6						1,532.1
Unallocated corporate expense (1)						186.6						188.9						363.7						339.1
Unallocated mark-to-market losses (gains) on commodity derivatives (2)						(6.8)						40.8						3.5						13.5
Costs associated with business realignment activities						1.5						0.7						3.8						2.0
Operating profit						560.7						456.6						1,360.6						1,177.5
Interest expense, net						36.7						33.4						74.3						66.6
Other (income) expense, net						84.5						19.7						87.5						30.1
Income before income taxes						$	439.5					$	403.5					$	1,198.8					$	1,080.8

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

North America Confectionery

The North America Confectionery segment is responsible for our chocolate and non-chocolate confectionery market position in the United States and Canada. This includes developing and growing 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. While a less significant component, 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 trademarks and products to third parties around the world. North America Confectionery results, which accounted for 80.0% and 80.5% of our net sales for the three months ended July 2, 2023 and July 3, 2022, respectively, were as follows:

						Three Months Ended																		Six Months Ended
						July 2, 2023						July 3, 2022						Percent Change						July 2, 2023						July 3, 2022						Percent Change
In millions of dollars
Net sales						$	1,993.1					$	1,909.1					4.4		%				$	4,445.2					$	4,126.2					7.7		%
Segment income						657.1						618.9						6.2		%				1,544.9						1,400.7						10.3		%
Segment margin						33.0		%				32.4		%										34.8		%				33.9		%

Results of Operations - Second Quarter 2023 vs. Second Quarter 2022

Net sales of our North America Confectionery segment increased $84.0 million, or 4.4%, in the second quarter of 2023 compared to the same period of 2022, reflecting a favorable price realization of 8.4% primarily due to list price increases on certain products across our portfolio. This increase was partially offset by a volume decrease of 3.6% due to a decrease in everyday core U.S. confection brands, and an unfavorable impact from foreign currency exchange rates of 0.4%.

Our North America Confectionery segment also includes licensing and owned retail. This includes our Hershey’s Chocolate World stores in the United States (3 locations), Niagara Falls (Ontario) and Singapore. Our net sales for licensing and owned retail increased approximately 3.7% during the second quarter of 2023 compared to the same period of 2022.

Our North America Confectionery segment income increased $38.2 million, or 6.2%, in the second quarter of 2023 compared to the same period of 2022, primarily due to favorable price realization, partially offset by volume declines, higher supply chain inflation costs, including higher logistics and labor costs, as well as unfavorable product mix.

Results of Operations - First Six Months 2023 vs. First Six Months 2022

Net sales of our North America Confectionery segment increased $319.0 million or 7.7% in the first six months of 2023 compared to the same period of 2022, reflecting a favorable price realization of 8.9% due to list price increases on certain products across our portfolio. The increase was offset by a volume decrease of 0.8% primarily driven by a decrease in everyday core U.S. confection brands, and an unfavorable impact from foreign currency exchange rates of 0.4%.

Our North America Confectionery segment also includes licensing and owned retail. This includes our Hershey’s Chocolate World stores in the United States (3 locations), Niagara Falls (Ontario) and Singapore. Our net sales for licensing and owned retail increased approximately 23.2% during the first six months of 2023 compared to the same period of 2022.

Our North America Confectionery segment income increased $144.2 million or 10.3% in the first six months of 2023 compared to the same period of 2022, primarily due to favorable price realization, partially offset by volume declines, higher supply chain inflation costs, including higher logistics and labor costs, as well as unfavorable product mix.

North America Salty Snacks

The North America Salty Snacks segment is responsible for our grocery and snacks market positions, including our salty snacking products. North America Salty Snacks results, which accounted for 10.9% and 10.8% of our net sales for the three months ended July 2, 2023 and July 3, 2022, respectively, were as follows:

						Three Months Ended																		Six Months Ended
						July 2, 2023						July 3, 2022						Percent Change						July 2, 2023						July 3, 2022						Percent Change
In millions of dollars
Net sales						$	272.4					$	256.3					6.3		%				$	542.4					$	482.4					12.4		%
Segment income						43.8						37.4						17.1		%				90.5						58.7						54.2		%
Segment margin						16.1		%				14.6		%										16.7		%				12.2		%

Results of Operations - Second Quarter 2023 vs. Second Quarter 2022

Net sales of our North America Salty Snacks segment increased $16.1 million, or 6.3%, in the second quarter of 2023 compared to the same period of 2022. This increase reflects a favorable price realization of 6.6%, due to list price increases on certain products across our portfolio, primarily SkinnyPop and Dot’s Homestyle Pretzels snacks, partially offset by a volume decrease of 0.3%.

Our North America Salty Snacks segment income increased $6.4 million, or 17.1%, in the second quarter of 2023 compared to the same period of 2022, primarily due to favorable price realization, volume increases on certain products, and favorable product mix, partially offset by increased advertising and related consumer marketing costs.

Results of Operations - First Six Months 2023 vs. First Six Months 2022

Net sales of our North America Salty Snacks segment increased $60 million, or 12.4%, in the first six months of 2023 compared to the same period of 2022, reflecting a favorable price realization of 8.6%, due to list price increases on certain products across our portfolio, and a volume increase of 3.8% primarily related to SkinnyPop and Dot’s Homestyle Pretzels snacks.

Our North America Salty Snacks segment income increased $31.8 million, or 54.2%, in the first six months of 2023 compared to the same period of 2022, due to favorable price realization, volume increases and favorable product mix, partially offset by increased advertising and related consumer marketing costs.

International

The International segment includes all other countries where we currently manufacture, import, market, sell or distribute chocolate and non-chocolate confectionery and other products. We currently, have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Latin America, as well as Europe, Asia, the Middle East and Africa (“AMEA”) and other regions. International results, which accounted for 9.0% and 8.7% of our net sales for the three months ended July 2, 2023 and July 3, 2022, respectively, were as follows:

						Three Months Ended																		Six Months Ended
						July 2, 2023						July 3, 2022						Percent Change						July 2, 2023						July 3, 2022						Percent Change
In millions of dollars
Net sales						$	224.8					$	207.2					8.5		%				$	490.3					$	430.2					14.0		%
Segment income						41.1						30.7						34.0		%				96.2						72.7						32.3		%
Segment margin						18.3		%				14.8		%										19.6		%				16.9		%

Results of Operations - Second Quarter 2023 vs. Second Quarter 2022

Net sales of our International segment increased $17.6 million, or 8.5%, in the second quarter of 2023 compared to the same period of 2022, reflecting a favorable price realization of 3.4%, a volume increase of 2.8%, primarily attributable to solid marketplace growth across the segment, and a favorable impact from foreign currency exchange rates of 2.3%, primarily driven by Mexico. The net sales increase was primarily driven by Mexico and Brazil & Latin America (“LATAM”), where net sales increased by 22.6% and 12.7%, respectively.

Our International segment generated income of $41.1 million in the second quarter of 2023 compared to $30.7 million in the second quarter of 2022, driven primarily by favorable price realization, volume increases and favorable product mix, partially offset by supply chain costs.

Results of Operations - First Six Months 2023 vs. First Six Months 2022

Net sales of our International segment increased $60.1 million, or 14.0%, in the first six months of 2023 compared to the same period of 2022, reflecting a volume increase of 7.8%, primarily attributable to solid marketplace growth across the segment, a favorable price realization of 4.3% and a favorable impact from foreign currency exchange rates of 1.9%, primarily driven by Mexico. The net sales increase was primarily driven by LATAM and Mexico, where net sales increased by 25.8% and 20.3%, respectively.

Our International segment generated income of $96.2 million in the first six months of 2023 compared to $72.7 million in the first six months of 2022, driven primarily by favorable price realization, volume increases and favorable product mix, partially offset by supply chain costs.

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

In the second quarter of 2023, unallocated corporate expense totaled $186.6 million, as compared to $188.9 million in the second quarter of 2022. The decrease was primarily driven by a loss recognized in the prior year on the sale of non-operating assets, partially offset by an increase in acquisition and integration related costs, as well as investments in capabilities and technology and higher compensation costs.

In the first six months of 2023, unallocated corporate expense totaled $363.7 million, as compared to $339.1 million in the first six months of 2022. The increase is primarily driven by higher acquisition and integration related costs, as well as incremental investments in capabilities and technology and higher compensation costs, partially offset by a loss recognized in the prior year on the sale of non-operating assets.

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 July 2, 2023, our cash and cash equivalents totaled $446.2 million, a decrease of $17.7 million compared to the 2022 year-end balance. We believe we have sufficient liquidity to satisfy our cash needs, including our new unsecured revolving credit facility which allows the Company to borrow up to $1.35 billion with the option to increase borrowings by an additional $500 million with the consent of the lenders. Additional details regarding the net uses of cash are outlined in the following discussion.

Approximately 85% of the balance of our cash and cash equivalents at July 2, 2023 was held by subsidiaries domiciled outside of the United States. A majority of this balance is distributable to the United States without material tax implications, such as withholding tax. We intend to continue to reinvest the remainder of the earnings outside of the United States for which there would be a material tax implication to distributing for the foreseeable future and, therefore, have not recognized additional tax expense on these earnings. We believe that our existing sources of liquidity are adequate to meet anticipated funding needs at comparable risk-based interest rates for the foreseeable future. Acquisition spending and/or share repurchases could potentially increase our debt. Operating cash flow and access to capital markets are expected to satisfy our various short- and long-term cash flow requirements, including acquisitions and capital expenditures.

Cash Flow Summary

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

						Six Months Ended
In millions of dollars						July 2, 2023						July 3, 2022
Net cash provided by (used in):
Operating activities						$	1,049.8					$	1,113.8
Investing activities						(516.0)						(351.0)
Financing activities						(506.7)						(755.4)
Effect of exchange rate changes on cash and cash equivalents						(44.8)						3.1
Net change in cash and cash equivalents						$	(17.7)					$	10.5

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Operating activities

We generated cash of $1,049.8 million from operating activities in the first six months of 2023, an decrease of $64.0 million compared to $1,113.8 million in the same period of 2022. This decrease in net cash provided by operating activities was mainly driven by the following factors:

• In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, consumed cash of $265.7 million in 2023, compared to $77.5 million in 2022. This $188.2 million fluctuation was mainly driven by the timing of vendor and supplier payments.

• Timing of income tax payments contributed to a decrease in operating cash of $3.7 million in 2023, compared to an increase of $51.9 million in 2022. This $55.6 million fluctuation was primarily due to the variance in actual tax expense for 2023 relative to the timing of quarterly estimated tax payments. We paid cash of $229.1 million for income taxes during 2023 compared to $172.9 million in the same period of 2022.

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

◦Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, a write-down of equity investments and other charges) resulted in $167.0 million of higher cash flow in 2023 relative to 2022.

Investing activities

We used cash of $516.0 million for investing activities in the first six months of 2023, an increase of $165.0 million compared to $351.0 million in the same period of 2022. 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 our ERP system implementation, capacity expansion, innovation and cost savings, were $330.5 million in the first six months of 2023 compared to $241.0 million in the same period of 2022. Expenditures increased due to progress on capacity expansion projects and our ERP system implementation. We expect 2023 capital expenditures, including capitalized software, to approximate $800 million to $850 million. The increase in our 2023 capital expenditures is largely driven by our key strategic initiatives, including core confection capacity expansion and continued investments in a digital infrastructure including the build and upgrade of a new ERP system across the enterprise. We intend to use our existing cash and internally generated funds to meet our 2023 capital requirements.

• 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 $19.1 million in the first six months of 2023, compared to $116.2 million in the same period of 2022.

• Business Acquisition. In May 2023, we acquired Weaver for an initial cash purchase price of $165.8 million. Further details regarding our business acquisition activity is provided in Note 2 to the Unaudited Consolidated Financial Statements. In 2022, we had no acquisition activity.

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

Financing activities

We used cash of $506.7 million for financing activities in the first six months of 2023, a decrease of $248.7 million compared to $755.4 million in the same period of 2022. This decrease 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 six months of 2023, we generated cash of $170.0 million predominately through the issuance of short-term commercial paper, as well as an increase in short-term foreign bank borrowings. During the first six months of 2022, we used cash of $24.5 million to reduce a portion of our short-term commercial paper borrowings originally used to fund our 2021 acquisitions of Dot’s and Pretzels, partially offset by an increase in short-term foreign bank borrowings.

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• Long-term debt borrowings and repayments. During the first six months of 2023, we issued $350 million of 4.250% Notes due in May 2028 and $400 million of 4.500% Notes due in May 2033 (the “2023 Notes”). Proceeds from the issuance of the 2023 Notes, net of discounts and issuance costs, totaled $744,092. Additionally, in May 2023 we repaid $250 million of 2.625% Notes and $500 million of 3.375% Notes due upon their maturity During the first six months of 2022, long-term debt borrowings and repayments were minimal.

• Dividend payments. Total dividend payments to holders of our Common Stock and Class B Common Stock were $413.5 million during the first six months of 2023, an increase of $52.5 million compared to $361.0 million in the same period of 2022. Details regarding our 2023 cash dividends paid to stockholders are as follows:

						Quarter Ended
In millions of dollars except per share amounts						April 2, 2023						July 2, 2023
Dividends paid per share – Common stock						$	1.036					$	1.036
Dividends paid per share – Class B common stock						$	0.942					$	0.942
Total cash dividends paid						$	207.4					$	206.1
Declaration date						January 31, 2023						April 25, 2023
Record date						February 17, 2023						May 19, 2023
Payment date						March 15, 2023						June 15, 2023

*•*Share repurchases. We repurchase shares of Common Stock to offset the dilutive impact of treasury shares issued under our equity compensation plans. The value of these share repurchases in a given period varies based on the volume of stock options exercised and our market price. In addition, we periodically repurchase shares of Common Stock pursuant to Board-authorized programs intended to drive additional stockholder value. Details regarding our share repurchases are as follows:

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

In July 2018, our Board of Directors approved a $500 million share repurchase authorization. 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 July 2, 2023, approximately $370 million remained available for repurchases under our May 2021 share repurchase authorization. The share repurchase program does not have an expiration date. We expect 2023 share repurchases to be in line with our traditional buyback strategy.

*•*Proceeds from exercised stock options and employee tax withholding. During the first six months of 2023, we received $22.0 million from employee exercises of stock options and paid $33.0 million of employee taxes withheld from share-based awards. During the first six months of 2022, we received $21.8 million from employee exercises of stock options and paid $33.9 million of employee taxes withheld from share-based awards. Variances are driven primarily by the number of shares exercised and the share price at the date of grant.

Recent Accounting Pronouncements

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

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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 Quarterly Report on Form 10-Q. 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 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;

• Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, stockholders and other stakeholders on climate change issues, could negatively affect our business and operations;

• 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, including impacts on our business arising from the conflict between Russia and Ukraine, could negatively impact our financial results;

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• 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 2022 Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2023 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.

The total amount of short-term debt, net of cash, amounted to net debt of $413.6 million and net debt of $230.0 million, at July 2, 2023 and December 31, 2022, respectively. A hypothetical 100 basis point increase in interest rates applied to this variable-rate short-term debt as of July 2, 2023 would have changed interest expense by approximately $1.4 million for the first six months of 2023 and $4.5 million for 2022.

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 July 2, 2023 and December 31, 2022 by approximately $199 million and $187 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 $19.7 million as of July 2, 2023 and $18.4 million as of December 31, 2022, generally offset by a reduction in foreign exchange associated with our transactional activities.

Our open commodity derivative contracts had a notional value of $185.3 million as of July 2, 2023 and $243.0 million as of December 31, 2022. At the end of the second quarter of 2023, 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 $19.4 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 2022 Annual Report on Form 10-K.

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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 July 2, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of July 2, 2023.

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. During the third quarter of 2022, we completed the implementation of our new ERP system for one operating segment which is included in our International segment. The portion of the transition to the new ERP system which we have completed to date did not result in significant changes in our internal control over financial reporting. However, as 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 July 2, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

Information on legal proceedings is included in Note 15 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 2022 Annual Report on Form 10-K 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

There were no purchases of our Common Stock during the three months ended July 2, 2023.

During the three months ended July 2, 2023, no shares of Common Stock were purchased in open market transactions in connection with our standing authorization to buy back shares sufficient to offset those issued under incentive compensation plans, which authorization does not have a dollar or share limit and is not included in our share repurchase authorizations described in the following paragraph.

In May 2021, our Board of Directors approved a $500 million share repurchase authorization. As of July 2, 2023 approximately $370 million remains available for repurchase under the May 2021 share repurchase authorization. The share repurchase program does not have an expiration date.

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Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Director and Executive Officer Trading

A portion of our directors’ and officers’ compensation is in the form of equity awards and, from time to time, they may engage in open-market transactions with respect to their Company securities for diversification or other personal reasons. All such transactions in Company securities by directors and officers must comply with the Company’s Insider Trading Policy, which requires that transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables directors and officers to prearrange transactions in the Company’s securities in a manner that avoids concerns about initiating transactions while in possession of material nonpublic information.

The following table describes the contracts, instructions or written plans for the purchase or sale of securities adopted by our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended July 2, 2023, that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). No other Rule 10b5-1 trading arrangements or “non-Rule 10b5–1 trading arrangements” (as defined by S-K Item 408(c)) were entered into or terminated by our directors or officers during such period.

Name and Title						Date of Adoption of 10b5-1 Plan						Duration of 10b5-1 Plan**(1)**						Aggregate Number of Securities to be Sold or Purchased
Jason R. Reiman Senior Vice President, Chief Supply Chain Officer						5/4/2023						12/29/2023						Sell 500 shares Exercise & sell 3,485 stock options Gift 289 shares
Kristin J. Riggs President, Salty Snacks						5/3/2023						5/1/2024						Gift 915 shares Sell 2,745 shares
Christopher M. Scalia Senior Vice President, Chief Human Resources Officer						5/26/2023						5/30/2024						Sell 4,091 shares
James Turoff Senior Vice President, General Counsel and Secretary						5/12/2023						8/31/2023						Gift 332 shares
Steven E. Voskuil Senior Vice President, Chief Financial Officer						5/23/2023						7/31/2024						Sell 18,000 shares

(1) The plan duration is until the date listed in this column or such earlier date upon the completion of all trades under the plan (or the expiration of the orders relating to such trades without execution) or the occurrence of such other termination events as specified in the plan.

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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.
4.1						Form of Global Note representing the Company’s 4.250% Notes due May 4, 2028, is incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 4, 2023.
4.2						Form of Global Note representing the Company’s 4.500% Notes due May 4, 2028, is incorporated by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed May 4, 2023.
10.1						Five Year Credit Agreement dated as of April 26, 2023, is incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 26, 2023.
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						Inline 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						Inline XBRL Taxonomy Extension Schema
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase
104						The cover page from the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2023, formatted in Inline XBRL and contained in Exhibit 101.
*						Filed herewith
**						Furnished herewith

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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:			July 27, 2023						/s/ Steven E. Voskuil
									Steven E. Voskuil
									Senior Vice President, Chief Financial Officer
									(Principal Financial Officer)
Date:			July 27, 2023						/s/ Jennifer L. McCalman
									Jennifer L. McCalman
									Vice President, Chief Accounting Officer
									(Principal Accounting Officer)

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