SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

Our organizational structure is designed to ensure continued focus on North America, coupled with an emphasis on profitable growth in our focus international markets. Our business is primarily organized around geographic regions, which enables us to build processes for repeatable success in our global markets. As a result, we have defined our operating segments on a geographic basis, as this aligns with how our Chief Operating Decision Maker (“CODM”) manages our business, including resource allocation and performance assessment. Our North America business, which generates approximately 91% of our consolidated revenue, is our only reportable segment. None of our other operating segments meet the quantitative thresholds to qualify as reportable segments; therefore, these operating segments are combined and disclosed below as International and Other.

•North America - This segment is responsible for our traditional chocolate and non-chocolate confectionery market position, as well as our grocery and growing snacks market positions, in the United States and Canada. This includes developing and growing our business in chocolate and non-chocolate confectionery, pantry, food service and other snacking product lines.

•International and Other - International and Other is a combination of all other operating segments that are not individually material, including those geographic regions where we operate outside of North America. We currently have operations and manufacture product in China, Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Asia, Latin America, Middle East, Europe, Africa and other regions. This segment also includes our global retail operations, including Hershey's Chocolate World stores in Hershey, Pennsylvania, New York City, Las Vegas, Niagara Falls (Ontario) and Singapore, as well as operations associated with licensing the use of certain of the Company's trademarks and products to third parties around the world.

For segment reporting purposes, we use “segment income” to evaluate segment performance and allocate resources. Segment income excludes unallocated general corporate administrative expenses, unallocated mark-to-market gains and losses on commodity derivatives, business realignment and impairment charges, acquisition-related costs and other unusual gains or losses that are not part of our measurement of segment performance. These items of our operating income are managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM as well the measure of segment performance used for incentive compensation purposes.

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

Certain manufacturing, warehousing, distribution and other activities supporting our global operations are integrated to maximize efficiency and productivity. As a result, assets and capital expenditures are not managed on a segment basis and are not included in the information reported to the CODM for the purpose of evaluating performance or allocating resources. We disclose depreciation and amortization that is generated by segment-specific assets, since these amounts are included within the measure of segment income reported to the CODM.

Our segment net sales and earnings were as follows:

For the years ended December 31,	2020		2019		2018
Net sales:
North America	$	7,416,697	$	7,081,764	$	6,901,607
International and Other	733,022		904,488		889,462
Total	$	8,149,719	$	7,986,252	$	7,791,069
Segment income:
North America	$	2,321,823	$	2,125,861	$	2,020,082
International and Other	28,592		95,702		73,762
Total segment income	2,350,415		2,221,563		2,093,844
Unallocated corporate expense (1)	520,632		532,539		528,887
Unallocated mark-to-market losses (gains) on commodity derivatives	6,429		(28,651)		(168,263)
Long-lived and intangible asset impairment charges (see Note 6)	9,143		112,485		57,729
Costs associated with business realignment activities (see Note 9)	31,513		9,238		51,827
Operating profit	1,782,698		1,595,952		1,623,664
Interest expense, net (see Note 4)	149,374		144,125		138,837
Other (income) expense, net (see Note 17)	138,327		71,043		74,766
Income before income taxes	$	1,494,997	$	1,380,784	$	1,410,061

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

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

For the years ended December 31,	2020		2019		2018
Net gains on mark-to-market valuation of commodity derivative positions recognized in income	$	(6,593)	$	(35,488)	$	(69,379)
Net gains (losses) on commodity derivative positions reclassified from unallocated to segment income	13,022		6,837		(98,884)
Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative losses (gains)	$	6,429	$	(28,651)	$	(168,263)

As of December 31, 2020, the cumulative amount of mark-to-market gains on commodity derivatives that have been recognized in our consolidated cost of sales and not yet allocated to reportable segments was $62,537. Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pretax gains on commodity derivatives of $40,766 to segment operating results in the next twelve months.

Depreciation and amortization expense included within segment income presented above is as follows:

For the years ended December 31,	2020		2019		2018
North America	$	222,153	$	220,513	$	205,340
International and Other	28,693		29,289		35,656
Corporate (1)	44,061		41,742		54,148
Total	$	294,907	$	291,544	$	295,144

(1)Corporate includes non-cash asset-related accelerated depreciation and amortization related to business realignment activities, as discussed in Note 9. Such amounts are not included within our measure of segment income.

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

For the years ended December 31,	2020		2019		2018
Net sales:
United States	$	7,042,804	$	6,722,617	$	6,535,675
Other	1,106,915		1,263,635		1,255,394
Total	$	8,149,719	$	7,986,252	$	7,791,069
Long-lived assets:
United States	$	1,836,114	$	1,717,606	$	1,668,186
Other	449,141		435,533		462,108
Total	$	2,285,255	$	2,153,139	$	2,130,294

The majority of our products are confectionery or confectionery-based and include chocolate and non-chocolate confectionery products, gum and mint refreshment products, spreads, snack bites and mixes, as well as pantry items such as baking ingredients, toppings and sundae syrups. Our snacks portfolio includes ready-to-eat popcorn, baked and trans fat free snacks, protein bars and other better-for-you snacks. Additional information regarding our net sales disaggregated by product line is as follows:

For the year ended December 31,	2020		2019		2018
Net sales:
Confectionery and confectionery-based portfolio	$	7,628,926	$	7,553,954	$	7,453,364
Snacks portfolio	520,793		432,298		337,705
Total	$	8,149,719	$	7,986,252	$	7,791,069