Hershey 10-Q 2024-03-31

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 March 31, 2024

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—147,615,686 shares, as of April 26, 2024.

Class B Common Stock, one dollar par value—54,613,514 shares, as of April 26, 2024.

THE HERSHEY COMPANY

Quarterly Report on Form 10-Q

For the Period Ended March 31, 2024

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION						2
Item 1. Financial Statements						2
Consolidated Statements of Income for the Three Months Ended March 31, 2024 and April 2, 2023						2
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and April 2, 2023						3
Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023						4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and April 2, 2023						5
Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and April 2, 2023						6
Notes to Unaudited Consolidated Financial Statements						7
Note 1 - Summary of Significant Accounting Policies						7
Note 2 - Business Acquisitions						8
Note 3 - Goodwill and Intangible Assets						8
Note 4 - Short and Long-Term Debt						9
Note 5 - Derivative Instruments						10
Note 6 - Fair Value Measurements						13
Note 7 - Leases						14
Note 8 - Investments in Unconsolidated Affiliates						16
Note 9 - Business Realignment Activities						16
Note 10 - Income Taxes						18
Note 11 - Pension and Other Post-Retirement Benefit Plans						19
Note 12 - Stock Compensation Plans						19
Note 13 - Segment Information						22
Note 14 - Treasury Stock Activity						25
Note 15 - Contingencies						26
Note 16 - Earnings Per Share						27
Note 17 - Other (Income) Expense, Net						28
Note 18 - Supplemental Balance Sheet Information						29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						31
Item 3. Quantitative and Qualitative Disclosures About Market Risk						40
Item 4. Controls and Procedures						42
PART II. OTHER INFORMATION						43
Item 1. Legal Proceedings						43
Item 1A. Risk Factors						43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						45
Item 3. Defaults Upon Senior Securities						45
Item 4. Mine Safety Disclosures						45
Item 5. Other Information						45
Item 6. Exhibits						46
Signatures						47

Table of Contents			The Hershey Company | Q1 2024 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
																		March 31, 2024						April 2, 2023
Net sales																		$	3,252,749					$	2,987,614
Cost of sales																		1,576,668						1,605,292
Gross profit																		1,676,081						1,382,322
Selling, marketing and administrative expense																		617,981						581,587
Business realignment costs																		—						811
Operating profit																		1,058,100						799,924
Interest expense, net																		39,822						37,685
Other (income) expense, net																		32,020						2,983
Income before income taxes																		986,258						759,256
Provision for income taxes																		188,805						172,071
Net income																		$	797,453					$	587,185
Net income per share—basic:
Common stock																		$	4.00					$	2.94
Class B common stock																		$	3.64					$	2.67
Net income per share—diluted:
Common stock																		$	3.89					$	2.85
Class B common stock																		$	3.63					$	2.66
Dividends paid per share:
Common stock																		$	1.370					$	1.036
Class B common stock																		$	1.245					$	0.942

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents			The Hershey Company | Q1 2024 Form 10-Q | Page 2

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

												For the Three Months Ended
																		March 31, 2024																		April 2, 2023
																																										Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount						Pre-Tax Amount						Tax (Expense) Benefit						After-Tax Amount
Net income																																																						$	797,453																	$	587,185
Other comprehensive income, net of tax:
Foreign currency translation adjustments:
Foreign currency translation gains (losses) during period																																										$	(4,998)					$	—					(4,998)						$	8,940					$	—					8,940
Pension and post-retirement benefit plans:
Net actuarial gain (loss) and service cost																																										(48)						7						(41)						19						2						21
Reclassification to earnings																																										2,541						(609)						1,932						3,227						(774)						2,453
Cash flow hedges:
Gains (los

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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. This MD&A should be read in conjunction with our Unaudited Consolidated Financial Statements and accompanying notes included in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 (“this Quarterly Report on Form 10-Q”). 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 2023 Annual Report on Form 10-K, as updated by Part II, Item 1A in this Quarterly Report on Form 10-Q, 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 90 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.

Table of Contents			The Hershey Company | Q1 2024 Form 10-Q | Page 31

TRENDS AFFECTING OUR BUSINESS

Throughout the first quarter of 2024, the U.S. consumer continued to drive momentum within the economy; however, we expect some moderation in consumer spending throughout the remainder of 2024 as cost fatigue and labor markets restrict income growth and constrain consumer spending power and purchasing behaviors. Net sales and net income increased during the three months ended March 31, 2024, as we continued to experience a dynamic macroeconomic environment, including price volatility related to select commodities, resulting in corresponding incremental costs and gross margin pressures. Despite specific actions taken to mitigate these gross margin pressures, higher prices for direct materials used to manufacture our products were, and continue to be, the primary incremental cost to our business (see Consolidated Results of Operations included in this MD&A). We utilize many exchange traded commodities for our business that are subject to price volatility, specifically cocoa products, which experienced a market price increase of approximately 140% since the beginning of the year (see Part I, Item 3 - Quantitative and Qualitative Disclosures about Market Risk included in this Quarterly Report on Form 10-Q). We continue to monitor and use our risk management strategy where possible to hedge commodity prices in order to mitigate corresponding increases in our raw materials and energy costs (see Part II, Item 1A - Risk Factors included in this Quarterly Report on Form 10-Q).

Furthermore, certain geopolitical events, specifically the conflict between Russia and Ukraine, have increased global economic and political uncertainty. For the three months ended March 31, 2024, 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 March 31, 2024, 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 the fluctuating macroeconomic environment, including price volatility for our commodities, the possibility of a recession, changes in consumer shopping and consumption behavior, and changes in geopolitical events, including the ongoing 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.

Table of Contents			The Hershey Company | Q1 2024 Form 10-Q | Page 32

CONSOLIDATED RESULTS OF OPERATIONS

																		Three Months Ended
																								March 31, 2024						April 2, 2023						Percent Change
In millions of dollars except per share amounts
Net sales																								$	3,252.7					$	2,987.6					8.9		%
Cost of sales																								1,576.6						1,605.3						(1.8)		%
Gross profit																								1,676.1						1,382.3						21.3		%
Gross margin																								51.5		%				46.3		%
Selling, marketing & administrative (“SM&A”) expenses																								618.0						581.6						6.3		%
SM&A expense as a percent of net sales																								19.0		%				19.5		%
Business realignment activities																								—						0.8						(100.0)		%
Operating profit																								1,058.1						799.9						32.3		%
Operating profit margin																								32.5		%				26.8		%
Interest expense, net																								39.8						37.7						5.7		%
Other (income) expense, net																								32.0						2.9						973.4		%
Provision for income taxes																								188.8						172.1						9.7		%
Effective income tax rate																								19.1%						22.7%
Net income																								$	797.5					$	587.2					35.8		%
Net income per share—diluted																								$	3.89					$	2.85					36.5		%
NOTE: Percentage changes may not compute directly as shown due to rounding of amounts presented above.
NM = not meaningful

Results of Operations - First Quarter 2024 vs. First Quarter 2023

Net Sales

Net sales were $3,252.7 million in the first quarter of 2024 compared to $2,987.6 million in the same period of 2023, an increase of $265.1 million, or 8.9%. The net sales increase reflects a favorable price realization of 5.2% driven by higher list prices primarily within our North America Confectionery and North America Salty Snacks segments. The net sales increase was further driven by a volume increase of 3.4% primarily due to an increase in everyday core U.S. confection, as a result of accelerated shipments in anticipation of our enterprise resource planning (“ERP”) system implementation, which was completed in the beginning of the second quarter of 2024, as well as an increase in salty snack brands. Foreign currency exchange rates resulted in a 0.3% impact.

Key U.S. Marketplace Metrics

For the first quarter of 2024, our total U.S. retail takeaway increased 7.0% in the expanded multi-outlet combined plus convenience store channels (Circana MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway increased 8.1% and experienced a CMG market share increase of 6 basis points. Our Salty consumer takeaway declined 4.1% in the first quarter of 2024 and experienced a Salty market share decline of 16 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 Circana, 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 | Q1 2024 Form 10-Q | Page 33

Cost of Sales and Gross Margin

Cost of sales were $1,576.6 million in the first quarter 2024 compared to $1,605.3 million in the same period 2023, a decrease of $28.7 million, or 1.8%. The decrease was driven by an incremental $208.4 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases (See Part I, Item 3 - Quantitative and Qualitative Disclosures About Market Risk included in this Quarterly Report on Form 10-Q for more information). The decrease was further driven by $57.7 million of favorable supply chain productivity. The decreases were partially offset by $237.4 million driven by higher commodity costs, primarily driven by cocoa, unfavorable mix and higher supply chain costs.

Gross margin was 51.5% in the first quarter of 2024 compared to 46.3% in the same period of 2023, an increase of 520 basis points. The increase was driven by favorable activity on our mark-to-market impact from commodity derivative instruments, favorable price realization, volume increases, and favorable supply chain productivity. The increase was partially offset by unfavorable commodity costs, higher supply chain costs, including higher labor costs, and unfavorable mix.

SM&A Expenses

SM&A expenses were $618.0 million in the first quarter of 2024 compared to $581.6 million in the same period of 2023, an increase of $36.4 million, or 6.3%. Total advertising and related consumer marketing expenses increased 12.0% driven primarily by increases across all segments. SM&A expenses, excluding advertising and related consumer marketing, increased approximately 3.3% in the first quarter of 2024 driven by higher investments in capabilities and technology and higher compensation costs across segments.

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. During the first quarter of 2024, we recorded no business realignment costs versus costs of $0.8 million in the first quarter of 2023. The costs in 2023 related to the International Optimization Program, which completed in 2023. The International Optimization Program was focused on optimizing our China operating model to improve our operational efficiency and provide for a strong, sustainable and simplified base going forward. In February 2024, the Board of Directors approved the Advancing Agility & Automation (“AAA”) Initiative, focused on leveraging new technology to improve supply chain and manufacturing-related spend, and optimize selling, general and administrative expenses. 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 $1,058.1 million in the first quarter of 2024 compared to $799.9 million in the same period of 2023, an increase of $258.2 million, or 32.3%. The increase was predominantly due to higher gross profit, partially offset by higher SM&A expenses, as noted above. Operating profit margin increased to 32.5% in 2024 from 26.8% in 2023 driven by the same factors noted above that resulted in higher gross margin for the period.

Interest Expense, Net

Net interest expense was $39.8 million in the first quarter of 2024 compared to $37.7 million in the same period of 2023, an increase of $2.1 million, or 5.7%. The increase was primarily due to higher rates on long-term debt balances in 2024 versus 2023, specifically related to the $350 million 4.25% Notes and $400 million 4.50% Notes issued in May 2023. The increase was partially offset by higher interest income.

Other (Income) Expense, Net

Other (income) expense, net was $32.0 million in the first quarter of 2024 versus net expense of $2.9 million in the first quarter of 2023, an increase of $29.1 million, or 973.4%. The increase in net expense was primarily driven by an increase of $31.4 million of higher write-downs on equity investments qualifying for tax credits in 2024 versus the first quarter of 2023, partially offset by a decrease of $2.6 million of non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

Table of Contents			The Hershey Company | Q1 2024 Form 10-Q | Page 34

Income Taxes and Effective Tax Rate

The effective income tax rate was 19.1% for the first quarter of 2024 compared with 22.7% for the first quarter of 2023. Relative to the 21% statutory rate, the 2024 effective tax rate was primarily impacted by investment tax credits partially offset by state taxes. Relative to the 21% statutory rate, the 2023 effective tax rate was impacted by state taxes, partially offset by employee share-based payments.

Net Income and Earnings Per Share-diluted

Net income was $797.5 million in the first quarter of 2024 compared to $587.2 million in the same period of 2023, an increase of $210.3 million, or 35.8%. EPS-diluted was $3.89 in the first quarter of 2024 compared to $2.85 in the first quarter of 2023, an increase of $1.04, or 36.5%. The increase in both net income and EPS-diluted was driven primarily by higher gross profit, partially offset by higher SM&A expenses, higher other income and expenses and higher income taxes. Our 2024 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 | Q1 2024 Form 10-Q | Page 35

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
																		March 31, 2024						April 2, 2023
In millions of dollars
Net Sales:
North America Confectionery																		$	2,707.3					$	2,452.2
North America Salty Snacks																		275.1						270.0
International																		270.3						265.4
Total																		$	3,252.7					$	2,987.6
Segment Income:
North America Confectionery																		$	948.2					$	887.8
North America Salty Snacks																		38.7						46.8
International																		42.8						55.0
Total segment income																		1,029.7						989.6
Unallocated corporate expense (1)																		172.9						177.1
Unallocated mark-to-market losses on commodity derivatives (2)																		(218.0)						10.2
(Benefits) costs associated with business realignment activities																		16.7						2.3
Operating profit																		1,058.1						800.0
Interest expense, net																		39.8						37.7
Other (income) expense, net																		32.0						3.0
Income before income taxes																		$	986.3					$	759.3

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

(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 83.2% and 82.1% of our net sales for the three months ended March 31, 2024 and April 2, 2023, respectively, were as follows:

																		Three Months Ended
																								March 31, 2024						April 2, 2023						Percent Change
In millions of dollars
Net sales																								$	2,707.3					$	2,452.2					10.4		%
Segment income																								948.2						887.8						6.8		%
Segment margin																								35.0		%				36.2		%

Results of Operations - First Quarter 2024 vs. First Quarter 2023

Net sales of our North America Confectionery segment were $2,707.3 million in the first quarter of 2024 compared to $2,452.2 million in the same period of 2023, an increase of $255.1 million, or 10.4%. The increase reflected a favorable price realization of 5.9% primarily due to list price increases on certain products across our portfolio. The increase was further driven by a volume increase of 4.5% driven primarily by an increase in everyday core U.S. confection, as a result of accelerated shipments in anticipation of our ERP system implementation, which was completed in the beginning of the second quarter of 2024.

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 11.0% during the first quarter of 2024 compared to the same period of 2023.

Our North America Confectionery segment income was $948.2 million in the first quarter of 2024 compared to $887.8 million in the same period of 2023, an increase of $60.4 million, or 6.8%. The increase was primarily due to favorable price realization and volume increases, partially offset by higher commodity costs, higher supply chain inflation costs, including higher labor costs, and 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 8.5% and 9.0% of our net sales for the three months ended March 31, 2024 and April 2, 2023, respectively, were as follows:

																		Three Months Ended
																								March 31, 2024						April 2, 2023						Percent Change
In millions of dollars
Net sales																								$	275.1					$	270.0					1.9		%
Segment income																								38.7						46.8						(17.3)		%
Segment margin																								14.1		%				17.3		%

Results of Operations - First Quarter 2024 vs. First Quarter 2023

Net sales of our North America Salty Snacks segment were $275.1 million in the first quarter of 2024 compared to $270.0 million in the same period of 2023, an increase of $5.1 million, or 1.9%. The increase reflected a favorable price realization of 1.7%, due to list price increases on certain products across our portfolio, primarily Dot’s Homestyle Pretzels, and a volume increase of 0.2%, primarily due to Dot’s Homestyle Pretzels, substantially offset by volume declines in SkinnyPop snacks.

Our North America Salty Snacks segment income was $38.7 million in the first quarter of 2024 compared to $46.8 million in the same period of 2023, a decrease of $8.1 million, or 17.3%. The decrease was primarily due to increased commodity costs, higher supply chain costs and increased advertising and related consumer marketing costs, partially offset by favorable price realization.

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 8.3% and 8.9% of our net sales for the three months ended March 31, 2024 and April 2, 2023, respectively, were as follows:

																		Three Months Ended
																								March 31, 2024						April 2, 2023						Percent Change
In millions of dollars
Net sales																								$	270.3					$	265.4					1.8		%
Segment income																								42.8						55.0						(22.2)		%
Segment margin																								15.8		%				20.7		%

Results of Operations - First Quarter 2024 vs. First Quarter 2023

Net sales of our International segment were $270.3 million in the first quarter of 2024 compared to $265.4 million in the same period of 2023, an increase $4.9 million, or 1.8%. The increase was due to favorable price realization of 3.5%, and a favorable impact from foreign currency exchange rates of 3.1%, primarily driven by Mexico. The increase was partially offset by volume declines of 4.8% primarily driven by Mexico.

Our International segment generated income of $42.8 million in the first quarter of 2024 compared to $55.0 million in the first quarter of 2023, a decrease of $12.2 million, or 22.2%, driven primarily by volume declines, increased commodity costs, and unfavorable product mix, partially offset by favorable price realization.

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 first quarter of 2024, unallocated corporate expense totaled $172.9 million, as compared to $177.1 million in the first quarter of 2023, a decrease of $4.2 million, or 2.4%. The decrease was primarily driven by lower acquisition and integration related costs, partially offset by higher compensation costs and higher 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 March 31, 2024, our cash and cash equivalents totaled $520.4 million, an increase of $118.5 million compared to the 2023 year-end balance. Additional detail regarding the net uses of cash are outlined in the following discussion. Additionally, at March 31, 2024, we had outstanding short- and long-term debt totaling $5.4 billion, of which $305.4 million was classified as the current portion of long-term debt. Of the $305.4 million, $300 million of 2.050% Notes are due upon maturity on November 15, 2024. We believe we can satisfy these debt obligations with cash generated from our operation, issuing new debt, and/or by borrowing on our unsecured credit facility.

Approximately 55% of the balance of our cash and cash equivalents at March 31, 2024 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:

						Three Months Ended
In millions of dollars						March 31, 2024						April 2, 2023
Net cash provided by (used in):
Operating activities						$	569.2					$	755.4
Investing activities						(227.6)						(188.3)
Financing activities						(221.7)						(552.2)
Effect of exchange rate changes on cash and cash equivalents						(1.4)						(18.4)
Net change in cash and cash equivalents						$	118.5					$	(3.5)

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Operating activities

We generated cash of $569.2 million from operating activities in the first three months of 2024, a decrease of $186.2 million compared to $755.4 million in the same period of 2023. This decrease 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, a write-down of equity investments, unrealized gains and losses on derivative contracts and other charges) resulted in $31.5 million of lower cash flow in 2024 relative to 2023.

• In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, consumed cash of $237.7 million in 2024, compared to $128.2 million in 2023. This $109.5 million fluctuation was mainly driven by an increase in cash used by accounts receivable due to an increase in sales of everyday core U.S. confection brands and salty snack brands and the timing of vendor and supplier payments.

• Timing of income tax payments contributed to an increase in operating cash of $147.5 million in 2024, compared to an increase of $174.2 million in 2023. This $26.7 million fluctuation was primarily due to the variance in actual tax expense for 2024 relative to the timing of quarterly estimated tax payments. We paid cash of $31.3 million for income taxes during 2024 compared to $12.3 million in the same period of 2023.

Investing activities

We used cash of $227.6 million for investing activities in the first three months of 2024, an increase of $39.3 million compared to $188.3 million in the same period of 2023. 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 $213.3 million in the first three months of 2024 compared to $176.1 million in the same period of 2023. Expenditures increased due to progress on capacity expansion projects and our ERP system implementation. We expect 2024 capital expenditures, including capitalized software, to approximate $600 million to $650 million. The decrease in our 2024 capital expenditures is largely driven by the wind down of our key strategic initiatives, including completion of the upgrade of a new ERP system across the enterprise in 2024. We intend to use our existing cash and internally generated funds to meet our 2024 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 $13.9 million in the first three months of 2024, compared to $12.3 million in the same period of 2023.

*•*Other investing activities. In 2024 and 2023, our other investing activities were minimal.

Financing activities

We used cash of $221.7 million for financing activities in the first three months of 2024, a decrease of $330.5 million compared to $552.2 million in the same period of 2023. 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 three months of 2024, we generated cash of $569.9 million predominately through the issuance of short-term commercial paper, as well as an increase in short-term foreign bank borrowings. During the first three months of 2023, we used cash of $90.7 million to reduce a portion of our short-term commercial paper borrowings , partially offset by an increase in short-term foreign bank borrowings.

• Long-term debt borrowings and repayments. During the first three months of 2024 and 2023, long-term debt borrowings and repayments were minimal.

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• Dividend payments. Total dividend payments to holders of our Common Stock and Class B Common Stock were $273.4 million during the first three months of 2024, an increase of $66.0 million compared to $207.4 million in the same period of 2023. Details regarding our 2024 cash dividends paid to stockholders are as follows:

						Quarter Ended
In millions of dollars except per share amounts						March 31, 2024
Dividends paid per share – Common stock						$	1.370
Dividends paid per share – Class B common stock						$	1.245
Total cash dividends paid						$	273.4
Declaration date						February 7, 2024
Record date						February 20, 2024
Payment date						March 15, 2024

*•*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:

						Three Months Ended
In millions						March 31, 2024						April 2, 2023
Milton Hershey School Trust repurchase (1)						$	—					$	239.9
Shares repurchased in the open market under pre-approved share repurchase programs (2)						400.0						—
Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation						$	94.2					$	—
Cash used for total share repurchases (excluding excise tax)						$	494.2					$	239.9
Total shares repurchased under pre-approved share repurchase programs						2.0						1.0

(1) 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.

(2) In July 2018, our Board of Directors approved a $500 million share repurchase authorization to repurchase shares of our Common Stock. 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. In May 2021, our Board of Directors approved an additional $500 million share repurchase authorization, which was completed as of March 31, 2024. In December 2023, our Board of Directors approved an additional $500 million share repurchase authorization. This program commenced after the existing May 2021 authorization was completed and is to be utilized at management’s discretion. As a result of the share repurchase authorization, approximately $470 million remains available for repurchases under our December 2023 share repurchase authorization. We are authorized to purchase our outstanding shares in open market and privately negotiated transactions. The program has no expiration date and acquired shares of Common Stock will be held as treasury shares. Purchases under approved share repurchase authorizations are in addition to our practice of buying back shares sufficient to offset those issued under incentive compensation plans.

*•*Proceeds from exercised stock options and employee tax withholding. During the first three months of 2024, we received $4.1 million from employee exercises of stock options and paid $26.4 million of employee taxes withheld from share-based awards. During the first three months of 2023, we received $15.2 million from employee exercises of stock options and paid $28.3 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.

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Recent Accounting Pronouncements

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

Critical Accounting Estimates

For information regarding the Company’s critical accounting estimates, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Annual Report on Form 10-K. There have been no material changes to the Company’s critical accounting estimates since December 31, 2023.

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 human capital 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 and our ability to successfully hedge against volatility in raw material pricing, 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;

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• 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 ongoing conflict between Russia and Ukraine, could negatively impact our financial results;

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

• Complications with the design, implementation or usage of our new enterprise resource planning system, including the ability to support post-implementation efforts and maintain enhancements, new features or modifications, could adversely impact our business and operations; and

• Such other matters as discussed in our 2023 Annual Report on Form 10-K 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.

Interest Rate Risk

The total amount of short-term debt, net of cash, amounted to net debt of $769.2 million and net debt of $317.9 million, at March 31, 2024 and December 31, 2023, respectively. A hypothetical 100 basis point increase in interest rates applied to this variable-rate short-term debt as of March 31, 2024 would have changed interest expense by approximately $1.9 million for the first three months of 2024 and $3.1 million for 2023.

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 March 31, 2024 and December 31, 2023 by approximately $162 million and $203 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.

Foreign Currency Exchange Rate Risk

We are exposed to currency fluctuations related to manufacturing or selling products in currencies other than the U.S. dollar. We may enter into foreign currency forward exchange contracts to reduce fluctuations in our long or short currency positions relating primarily to purchase commitments or forecasted purchases for equipment, raw materials and finished goods denominated in foreign currencies.

The fair value of foreign currency forward exchange contracts represents the difference between the contracted and current market foreign currency exchange rates at the end of the period. We estimate the fair value of foreign currency forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences. 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 $19.2 million as of March 31, 2024 and $20.2 million as of December 31, 2023, generally offset by a reduction in foreign exchange associated with our transactional activities.

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Commodities—Price Risk Management and Derivative Contracts

We use futures and options contracts and other commodity derivative instruments in combination with forward purchasing of cocoa products, sugar, corn products, certain dairy products, wheat products, natural gas and diesel fuel primarily to mitigate price volatility and provide visibility to future costs within our supply chain. Significant changes impacting our commodity price risk management since our 2023 Annual Report on Form 10-K are described below.

Cocoa Products

During the first quarter of 2024, the average cocoa futures contract price was $2.60 per pound, with a trading range of $1.99 to $3.35 per pound, based on the Intercontinental Exchange futures contract. This average cocoa futures contract price represents an increase of approximately 74% compared to the 2023 annual average of $1.49 per pound. The production forecast for the 2023 – 2024 season is down significantly in Ghana and Ivory Coast, and has continued to deteriorate due to a combination of adverse weather and crop disease, leading to lower than expected outputs and a reduction in global cocoa bean inventory. Further, during April 2024, we continued to experience rising market prices for cocoa futures, which may have an impact on our financial condition and results of operations.

Our costs for cocoa products will not necessarily reflect market price fluctuations because of our forward purchasing and hedging practices (including amount and duration thereof), premiums and discounts reflective of varying delivery times, and supply and demand for our specific varieties and grades of cocoa liquor, cocoa butter and cocoa powder. We generally hedge commodity price risks for 3- to 24-month periods. As a result, the average market prices are not necessarily indicative of our average costs.

Commodity Sensitivity Analysis

Our open commodity derivative contracts had a notional value of $206.3 million as of March 31, 2024 and $94.9 million as of December 31, 2023. At the end of the first quarter of 2024, 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 $10.5 million, generally offset by a reduction in the cost of the underlying commodity purchases.

For additional information about our market risks, see Item 7A under Part II of our 2023 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 March 31, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2024.

Changes in Internal Controls Over Financial Reporting

As of March 31, 2024, we were in the process of our multi-year implementation of a new global enterprise resource planning (“ERP”) system, which replaces 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. During the third quarter of 2022, we completed the implementation of one operating segment that is included in our International segment. In July 2023, we completed the transition to our new consolidated financial reporting book of record. During, October 2023, we completed the implementation of our new ERP system in the North America Salty Snacks segment. We updated our internal controls to reflect changes to the financial reporting business processes impacted by the implementation. There have been no changes to the Company’s internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We completed the implementation of our new ERP system in the North America Confectionery segment and select operating segments included in our International segment in April 2024. The implementation of the new ERP system results in material changes to our internal controls over financial reporting. The Company has updated the internal controls as appropriate and will continue to monitor the impact of the implementation on our financial reporting business processes.

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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.

The following risk factors relating to increases in and adequate supplies of raw materials, and our multi-year implementation of a new global enterprise resource planning (“ERP”) system, should be read in conjunction with the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” of our 2023 Annual Report on Form 10-K (the "2023 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. The developments described in these risk factors have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our 2023 Form 10-K, and such risk factors are further qualified by the information described in this Quarterly Report on Form 10-Q, including in the risk factors below.

Risk Related to the Industry in Which We Operate

Increases in raw material and energy costs, along with the availability of adequate supplies of raw materials and our ability to successfully hedge against volatility in raw material pricing, could affect future financial results.

We use many different commodities for our business, including cocoa products, sugar, corn products, dairy products, wheat products, peanuts, almonds, natural gas and diesel fuel.

Commodities are subject to price volatility and changes in supply caused by numerous factors, including:

• Commodity market fluctuations;

• Currency exchange rates;

• Imbalances between supply and demand;

• Rising levels of inflation and interest rates related to domestic and global economic conditions or supply chain issues;

• The effects of climate change, extreme weather or agricultural diseases on crop yield and quality;

• Speculative influences;

• Trade agreements among producing and consuming nations;

• Supplier compliance with commitments;

• Import/export requirements for raw materials and finished goods;

• Political unrest in producing countries;

• Introduction of living income premiums or similar requirements;

• Changes in governmental agricultural programs and energy policies; and

• Other events beyond our control such as the impacts on the business or supply chain arising from the ongoing conflict between Russia and Ukraine.

Although we use forward contracts and commodity futures and options contracts to hedge commodity prices where possible, commodity price increases ultimately result in corresponding increases in our raw material and energy costs. For example, our cost of sales during the first quarter of 2024 compared to the same period of 2023 experienced an incremental $208.4 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases, more than offsetting higher commodity costs. During the first quarter of 2024, market prices for the majority of our exchange traded commodities increased, including cocoa and sugar futures which have increased approximately 140% and 10%, respectively, since the beginning of the year. Further, we continued to experience rising market prices for cocoa futures during April 2024 due to a combination of adverse weather and crop disease, leading to lower than expected outputs and a reduction in global cocoa bean inventory.

We continue to monitor and use our risk management strategy where possible to hedge commodity prices in order to mitigate corresponding increases in our raw materials and energy costs, however, if we are unable to offset cost increases for major raw materials and energy, there could be a negative impact on our financial condition and results of operations.

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Risks Related to Digital Transformation, Cybersecurity and Data Privacy

Complications with the design, implementation or usage of our new enterprise resource planning system, including the ability to support post-implementation efforts and maintain enhancements, new features or modifications, could adversely impact our business and operations.

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 ERP system; specifically, in April 2024, we operationalized the final phase of our project by implementing our new ERP system in the North America Confectionery segment and select operating segments included in our International segment. This ERP system replaces our legacy operating and financial systems and 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 ERP system implementation process has required, and will continue to require, the investment of significant personnel and financial resources as we support post-implementation efforts and system functionality. We may not be able to successfully support post-implementation efforts without experiencing delays, increased costs and other difficulties. Any disruptions or difficulties in using our ERP system could result in harm to our business, including our ability to forecast, manufacture or facilitate the shipment of our product, record net sales and collect our outstanding receivables. If we are unable to successfully manage post-implementation efforts related to our new ERP system as planned, our financial positions, results of operations and cash flows could be negatively impacted. Additionally, if the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be further delayed.

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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 March 31, 2024.

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)
January 1 through January 28						—						$	—					—						$	870,073
January 29 through February 25						483,033						$	194.39					—						$	870,073
February 26 through March 31						—						$	197.80					2,022,064						$	470,073
Total						483,033						$	—					2,022,064

(1) During the three months ended March 31, 2024, 483,033 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.

(2) In May 2021, our Board of Directors approved a $500 million share repurchase authorization, which was completed as of March 31, 2024. In December 2023, our Board of Directors approved an additional $500 million share repurchase authorization. This program commenced after the existing May 2021 authorization was completed and is to be utilized at management’s discretion. As a result of the share repurchase authorization, approximately $470 million remains available for repurchases under our December 2023 share repurchase authorization. We are authorized to purchase our outstanding shares in open market and privately negotiated transactions. The program has no expiration date and acquired shares of Common Stock will be held as treasury shares. Purchases under approved share repurchase authorizations are in addition to our practice of buying back shares sufficient to offset those issued under incentive compensation plans.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

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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.

During the three months ended March 31, 2024, no directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any other Rule 10b5-1 trading arrangements or “non-Rule 10b5–1 trading arrangements” (as defined by S-K Item 408(c)).

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.
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 March 31, 2024, 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:			May 3, 2024						/s/ Steven E. Voskuil
									Steven E. Voskuil
									Senior Vice President, Chief Financial Officer
									(Principal Financial Officer)
Date:			May 3, 2024						/s/ Jennifer L. McCalman
									Jennifer L. McCalman
									Vice President, Chief Accounting Officer
									(Principal Accounting Officer)

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