UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 2, 2022

OR

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

For the transition period from ______to_______

Commission file number 1-183

THE HERSHEY COMPANY

(Exact name of registrant as specified in its charter)

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

19 East Chocolate Avenue, Hershey, PA 17033

(Address of principal executive offices and Zip Code)

(717) 534-4200

(Registrant's telephone number, including area code)

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

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

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

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

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

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

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

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

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

Common Stock, one dollar par value—146,968,799 shares, as of October 30, 2022.

Class B Common Stock, one dollar par value—58,113,777 shares, as of October 30, 2022.

THE HERSHEY COMPANY

Quarterly Report on Form 10-Q

For the Period Ended October 2, 2022

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	2
Item 1. Financial Statements	2
Consolidated Statements of Income for the Three and Nine Months Ended October 2, 2022 and October 3, 2021	2
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 2, 2022 and October 3, 2021	3
Consolidated Balance Sheets as of October 2, 2022 and December 31, 2021	4
Consolidated Statements of Cash Flows for the Nine Months Ended October 2, 2022 and October 3, 2021	5
Consolidated Statement of Stockholders’ Equity for the Three and Nine Months Ended October 2, 2022 and October 3, 2021	6
Notes to Unaudited Consolidated Financial Statements	8
Note 1 - Summary of Significant Accounting Policies	8
Note 2 - Business Acquisitions and Divestiture	9
Note 3 - Goodwill and Intangible Assets	12
Note 4 - Short and Long-Term Debt	13
Note 5 - Derivative Instruments	14
Note 6 - Fair Value Measurements	17
Note 7 - Leases	19
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	24
Note 12 - Stock Compensation Plans	25
Note 13 - Segment Information	27
Note 14 - Treasury Stock Activity	30
Note 15 - Contingencies	30
Note 16 - Earnings Per Share	32
Note 17 - Other (Income) Expense, Net	34
Note 18 - Related Party Transactions	34
Note 19 - Supplemental Balance Sheet Information	35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3. Quantitative and Qualitative Disclosures About Market Risk	50
Item 4. Controls and Procedures	51
PART II. OTHER INFORMATION	52
Item 1. Legal Proceedings	52
Item 1A. Risk Factors	52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3. Defaults Upon Senior Securities	52
Item 4. Mine Safety Disclosures	52
Item 5. Other Information	52
Item 6. Exhibits	53
Signatures	54

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

 

	Three Months Ended				Nine Months Ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Net sales	$	2,728,153	$	2,359,839	$	7,766,956	$	6,645,209
Cost of sales	1,619,653		1,298,504		4,412,977		3,609,478
Gross profit	1,108,500		1,061,335		3,353,979		3,035,731
Selling, marketing and administrative expense	551,880		486,139		1,619,564		1,448,433
Business realignment costs	—		365		274		2,748
Operating profit	556,620		574,831		1,734,141		1,584,550
Interest expense, net	35,378		30,154		101,970		97,655
Other (income) expense, net	48,157		23,004		78,222		32,612
Income before income taxes	473,085		521,673		1,553,949		1,454,283
Provision for income taxes	73,598		76,746		305,428		311,255
Net income including noncontrolling interest	399,487		444,927		1,248,521		1,143,028
Less: Net gain attributable to noncontrolling interest	—		—		—		1,072
Net income attributable to The Hershey Company	$	399,487	$	444,927	$	1,248,521	$	1,141,956
Net income per share—basic:
Common stock	$	2.00	$	2.22	$	6.23	$	5.67
Class B common stock	$	1.82	$	2.01	$	5.67	$	5.16
Net income per share—diluted:
Common stock	$	1.94	$	2.14	$	6.04	$	5.49
Class B common stock	$	1.81	$	2.01	$	5.65	$	5.14
Dividends paid per share:
Common stock	$	1.036	$	0.901	$	2.838	$	2.509
Class B common stock	$	0.942	$	0.819	$	2.580	$	2.281

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 2

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	For the Three Months Ended												For the Nine Months Ended
	October 2, 2022						October 3, 2021						October 2, 2022						October 3, 2021
	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
Net income including noncontrolling interest					$	399,487					$	444,927					$	1,248,521					$	1,143,028
Other comprehensive income, net of tax:
Foreign currency translation adjustments:
Foreign currency translation (losses) gains during period	$	(13,511)	$	—	(13,511)		$	(11,571)	$	—	(11,571)		$	(15,851)	$	—	(15,851)		$	2,623	$	—	2,623
Reclassification to earnings due to the sale of businesses	—		—		—		—		—		—		—		—		—		5,210		—		5,210
Pension and post-retirement benefit plans:
Net actuarial (loss) gain and service cost	(27,909)		6,704		(21,205)		(8,793)		2,093		(6,700)		(66,720)		13,895		(52,825)		11,912		(2,835)		9,077
Reclassification to earnings	6,904		(1,657)		5,247		8,457		(671)		7,786		20,345		(4,883)		15,462		24,246		(4,739)		19,507
Cash flow hedges:
Gains (losses) on cash flow hedging derivatives	891		(706)		185		5,779		(2,153)		3,626		245		(1,343)		(1,098)		(2,200)		(2,312)		(4,512)
Reclassification to earnings	2,258		(643)		1,615		4,709		(119)		4,590		9,143		(1,666)		7,477		13,527		(501)		13,026
Total other comprehensive income, net of tax	$	(31,367)	$	3,698	(27,669)		$	(1,419)	$	(850)	(2,269)		$	(52,838)	$	6,003	(46,835)		$	55,318	$	(10,387)	44,931
Total comprehensive income including noncontrolling interest					$	371,818					$	442,658					$	1,201,686					$	1,187,959
Comprehensive (loss) income attributable to noncontrolling interest					—						(5)						—						6,321
Comprehensive income attributable to The Hershey Company					$	371,818					$	442,663					$	1,201,686					$	1,181,638

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 3

THE HERSHEY COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	October 2, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	327,741	$	329,266
Accounts receivable—trade, net	929,482		671,464
Inventories	1,184,385		988,511
Prepaid expenses and other	251,126		256,965
Total current assets	2,692,734		2,246,206
Property, plant and equipment, net	2,622,587		2,586,187
Goodwill	2,604,889		2,633,174
Other intangibles	1,985,099		2,037,588
Other non-current assets	888,406		868,203
Deferred income taxes	39,192		40,873
Total assets	$	10,832,907	$	10,412,231
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	915,299	$	692,338
Accrued liabilities	845,472		855,638
Accrued income taxes	81,771		3,070
Short-term debt	793,871		939,423
Current portion of long-term debt	752,201		2,844
Total current liabilities	3,388,614		2,493,313
Long-term debt	3,340,671		4,086,627
Other long-term liabilities	750,870		787,058
Deferred income taxes	269,672		288,004
Total liabilities	7,749,827		7,655,002
Stockholders’ equity:
The Hershey Company stockholders’ equity
Preferred stock, shares issued: none in 2022 and 2021	—		—
Common stock, shares issued: 163,439,248 at October 2, 2022 and 160,939,248 at December 31, 2021	163,439		160,939
Class B common stock, shares issued: 58,113,777 at October 2, 2022 and 60,613,777 at December 31, 2021	58,114		60,614
Additional paid-in capital	1,280,462		1,260,331
Retained earnings	3,401,198		2,719,936
Treasury—common stock shares, at cost: 16,484,611 at October 2, 2022 and 15,444,011 at December 31, 2021	(1,524,083)		(1,195,376)
Accumulated other comprehensive loss	(296,050)		(249,215)
Total stockholders’ equity	3,083,080		2,757,229
Total liabilities and stockholders’ equity	$	10,832,907	$	10,412,231

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 4

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended
	October 2, 2022		October 3, 2021
Operating Activities
Net income including noncontrolling interest	$	1,248,521	$	1,143,028
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	279,082		231,953
Stock-based compensation expense	50,640		51,009
Deferred income taxes	(9,751)		762
Write-down of equity investments	70,754		28,734
Other	92,632		77,548
Changes in assets and liabilities, net of business acquisitions and divestitures:
Accounts receivable—trade, net	(259,064)		(222,864)
Inventories	(201,425)		(38,864)
Prepaid expenses and other current assets	(40,565)		11,908
Accounts payable and accrued liabilities	248,230		76,446
Accrued income taxes	124,965		92,236
Contributions to pension and other benefit plans	(16,639)		(38,576)
Other assets and liabilities	(27,186)		(9,603)
Net cash provided by operating activities	1,560,194		1,403,717
Investing Activities
Capital additions (including software)	(359,993)		(347,450)
Equity investments in tax credit qualifying partnerships	(159,713)		(75,917)
Business acquisitions, net of cash and cash equivalents acquired	—		(419,501)
Other investing activities	9,730		3,129
Net cash used in investing activities	(509,976)		(839,739)
Financing Activities
Net (decrease) increase in short-term debt	(145,552)		339,981
Repayment of long-term debt and finance leases	(3,321)		(438,029)
Cash dividends paid	(567,989)		(505,194)
Repurchase of common stock	(355,271)		(457,946)
Proceeds from exercised stock options	30,824		39,499
Taxes withheld and paid on employee stock awards	(34,722)		(16,137)
Net cash used in financing activities	(1,076,031)		(1,037,826)
Effect of exchange rate changes on cash and cash equivalents	24,288		(6,057)
Decrease in cash and cash equivalents, including cash classified as held for sale	(1,525)		(479,905)
Less: Increase in cash and cash equivalents classified as held for sale	—		11,434
Net decrease in cash and cash equivalents	(1,525)		(468,471)
Cash and cash equivalents, beginning of period	329,266		1,143,987
Cash and cash equivalents, end of period	$	327,741	$	675,516
Supplemental Disclosure
Interest paid	$	90,787	$	92,397
Income taxes paid	190,724		199,735

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 5

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended October 2, 2022 and October 3, 2021

(in thousands)

(unaudited)

	Preferred Stock		Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Common Stock		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
Balance, July 3, 2022	$	—	$	163,439	$	58,114	$	1,258,091	$	3,208,598	$	(1,528,121)	$	(268,381)	$	2,891,740
Net income									399,487						399,487
Other comprehensive loss													(27,669)		(27,669)
Dividends (including dividend equivalents):
Common Stock, $1.036 per share									(152,144)						(152,144)
Class B Common Stock, $0.942 per share									(54,743)						(54,743)
Stock-based compensation							18,132								18,132
Exercise of stock options and incentive-based transactions							4,239				4,038				8,277
Balance, October 2, 2022	$	—	$	163,439	$	58,114	$	1,280,462	$	3,401,198	$	(1,524,083)	$	(296,050)	$	3,083,080

	Preferred Stock		Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Common Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interests in Subsidiaries		Total Stockholders’ Equity
Balance, July 4, 2021	$	—	$	160,939	$	60,614	$	1,218,708	$	2,301,805	$	(1,180,881)	$	(296,136)	$	8,844	$	2,273,893
Net income									444,927						—		444,927
Other comprehensive loss													(2,264)		(5)		(2,269)
Dividends (including dividend equivalents):
Common Stock, $0.901 per share									(131,551)								(131,551)
Class B Common Stock, $0.819 per share									(49,643)								(49,643)
Stock-based compensation							18,903										18,903
Exercise of stock options and incentive-based transactions							2,401				4,072						6,473
Repurchase of common stock											(23,600)						(23,600)
Balance, October 3, 2021	$	—	$	160,939	$	60,614	$	1,240,012	$	2,565,538	$	(1,200,409)	$	(298,400)	$	8,839	$	2,537,133

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 6

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended October 2, 2022 and October 3, 2021

(in thousands)

(unaudited)

	Preferred Stock		Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Common Stock		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity
Balance, December 31, 2021	$	—	$	160,939	$	60,614	$	1,260,331	$	2,719,936	$	(1,195,376)	$	(249,215)	$	2,757,229
Net income									1,248,521						1,248,521
Other comprehensive income													(46,835)		(46,835)
Dividends (including dividend equivalents):
Common Stock, $2.838 per share									(414,869)						(414,869)
Class B Common Stock, $2.58 per share									(152,390)						(152,390)
Conversion of Class B Common Stock into Common Stock			2,500		(2,500)										—
Stock-based compensation							50,592								50,592
Exercise of stock options and incentive-based transactions							(30,461)				26,564				(3,897)
Repurchase of common stock											(355,271)				(355,271)
Balance, October 2, 2022	$	—	$	163,439	$	58,114	$	1,280,462	$	3,401,198	$	(1,524,083)	$	(296,050)	$	3,083,080

	Preferred Stock		Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Common Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interests in Subsidiaries		Total Stockholders’ Equity
Balance, December 31, 2020	$	—	$	160,939	$	60,614	$	1,191,200	$	1,928,673	$	(768,992)	$	(338,082)	$	3,531	$	2,237,883
Net income									1,141,956						1,072		1,143,028
Other comprehensive income													39,682		5,249		44,931
Dividends (including dividend equivalents):
Common Stock, $2.509 per share									(366,831)								(366,831)
Class B Common Stock, $2.281 per share									(138,260)								(138,260)
Stock-based compensation							51,979										51,979
Exercise of stock options and incentive-based transactions							(3,167)				26,529						23,362
Repurchase of common stock											(457,946)						(457,946)
Divestiture of noncontrolling interest															(1,013)		(1,013)
Balance, October 3, 2021	$	—	$	160,939	$	60,614	$	1,240,012	$	2,565,538	$	(1,200,409)	$	(298,400)	$	8,839	$	2,537,133

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 7

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements provided in this report include the accounts of The Hershey Company (the “Company,” “Hershey,” “we” or “us”) and our majority-owned subsidiaries and entities in which we have a controlling financial interest after the elimination of intercompany accounts and transactions. We have a controlling financial interest if we own a majority of the outstanding voting common stock and minority shareholders do not have substantive participating rights, we have significant control through contractual or economic interests in which we are the primary beneficiary or we have the power to direct the activities that most significantly impact the entity’s economic performance. We use the equity method of accounting when we have a 20% to 50% interest in other companies and exercise significant influence. Other investments that are not controlled, and over which we do not have the ability to exercise significant influence, are accounted for under the cost method. Both equity and cost method investments are included as Other non-current assets in the Consolidated Balance Sheets.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not contain certain information and disclosures required by GAAP for comprehensive financial statements. The financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in our opinion, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods.

Operating results for the quarter ended October 2, 2022 may not be indicative of the results that may be expected for the year ending December 31, 2022 because of seasonal effects on our business. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Annual Report on Form 10-K”), which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.

COVID-19

On March 11, 2020, the World Health Organization designated coronavirus disease 2019 (“COVID-19”) as a global pandemic. We continue to actively monitor COVID-19 and its potential impact on our operations and financial results. Employee health and safety remains our first priority while we continue our efforts to support community food supplies. Since the onset of COVID-19, there has been minimal disruption to our supply chain network, and all our manufacturing plants are currently open. However, beginning in 2021 and throughout 2022, ongoing strong demand for consumer goods and the effects of COVID-19 mitigation strategies have led to broad-based supply chain disruptions across the U.S. and globally, including inflation on many consumer products, labor shortages and demand outpacing supply. We continue to work closely with our business units, contract manufacturers, distributors, contractors and other external business partners to minimize the potential impact on our business.

The ultimate impact that COVID-19 will have on our consolidated financial statements remains uncertain and ultimately will be dictated by the length and severity of the pandemic, including broad-based supply chain disruptions, rising levels of inflation, the spread of COVID-19 variants or resurgences, as well as the economic recovery and actions taken in response by local, state and national governments around the world, including the distribution of vaccinations. We will continue to evaluate the nature and extent of these potential and evolving impacts to our business and consolidated financial statements.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 8

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

rates. Entities may apply this ASU upon issuance through December 31, 2022 on a prospective basis. We early adopted the provisions of this ASU in the first quarter of 2022. Adoption of the new standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) rather than adjust them to fair value at the acquisition date. ASU 2021-08 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods. This ASU should be applied prospectively to business combinations occurring on or after the date of adoption. Evaluation of this new standard is dependent on multiple circumstances including the timing and complexity of completed business combinations. As a result, we intend to adopt the provisions of this ASU in the first quarter of 2023.

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

Disclosure of Supplier Finance Program Obligations. This ASU requires a buyer in a supplier finance program to disclose qualitative and quantitative information about the program including the program’s nature, activity during the period, changes from period to period and potential magnitude. ASU 2022-04 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods. A rollforward of obligations during the annual period, including the amount of obligations confirmed and obligations subsequently paid, is effective for annual periods beginning after December 15, 2023 with early adoption permitted. This ASU should be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on rollforward information, which should be applied prospectively. Adoption of the new standard is not expected to have a material impact on our consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.

2. BUSINESS ACQUISITIONS AND DIVESTITURE

2021 Activity

Pretzels Inc.

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

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 9

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The acquisition has been accounted for as a business combination and, accordingly, Pretzels has been included within the North America Salty Snacks segment from the date of acquisition. The purchase consideration was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

	Initial Allocation (1)		Adjustments		Final Allocation
Goodwill	$	165,301	$	890	$	166,191
Other intangible assets	32,100		(6,000)		26,100
Current assets acquired	30,717		118		30,835
Property, plant and equipment, net	96,099		4,617		100,716
Other non-current assets, primarily operating lease ROU assets	111,787		—		111,787
Deferred income taxes	541		232		773
Current liabilities assumed	(22,713)		—		(22,713)
Other long-term liabilities, primarily operating lease liabilities	(109,355)		—		(109,355)
Net assets acquired	$	304,477	$	(143)	$	304,334

(1) As reported in the Company’s 2021 Annual Report on Form 10-K.

The purchase price allocation presented above has been finalized as of the third quarter of 2022. The measurement period adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed, specifically, post-closing adjustments to the working capital acquired including certain holdbacks.

Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired (including the identifiable intangible assets). A portion of goodwill derived from this acquisition is deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Pretzels’ products.

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

Dot's Pretzels, LLC

On December 13, 2021, we completed the acquisition of Dot’s Pretzels, LLC (“Dot’s”), previously a privately held company that produces and sells pretzels and other snack food products to retailers and distributors in the United States, with Dot’s Homestyle Pretzels snacks as its primary product. Dot’s is the fastest-growing scale brand in the pretzel category and complements Hershey’s snacks portfolio. The cash consideration paid for Dot’s totaled $891,169 and consisted of cash on hand and short-term borrowings. Acquisition-related costs for the Dot’s acquisition were immaterial.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 10

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The acquisition has been accounted for as a business combination and, accordingly, Dot’s has been included within the North America Salty Snacks segment from the date of acquisition. The purchase consideration was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

	Initial Allocation (1)		Adjustments		Final Allocation
Goodwill	$	303,345	$	(18,918)	$	284,427
Other intangible assets	526,300		16,800		543,100
Current assets acquired	51,121		—		51,121
Property, plant and equipment, net	39,256		1,010		40,266
Other non-current assets	2,201		—		2,201
Other liabilities assumed, primarily current liabilities	(28,057)		(1,889)		(29,946)
Net assets acquired	$	894,166	$	(2,997)	$	891,169

(1) As reported in the Company’s 2021 Annual Report on Form 10-K.

The purchase price allocation presented above has been finalized as of the third quarter of 2022. The measurement period adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed, specifically, the refinement of certain assumptions in the value of customer relationships based on an analysis of historical customer-specific data and post-closing adjustments to the working capital acquired including certain holdbacks.

Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired (including the identifiable intangible assets). The goodwill derived from this acquisition is deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Dot’s products.

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

Lily's Sweets, LLC

On June 25, 2021, we completed the acquisition of Lily’s Sweets, LLC (“Lily’s”), previously a privately held company that sells a line of sugar-free and low-sugar confectionery foods to retailers and distributors in the United States and Canada. Lily’s products include dark and milk chocolate style bars, baking chips, peanut butter cups and other confection products that complement Hershey’s confectionery and confectionery-based portfolio. The cash consideration paid for Lily’s totaled $422,210 and the Company may be required to pay additional cash consideration if certain defined targets related to net sales and gross margin were exceeded during the period from the closing date through December 31, 2021. As of the acquisition date, the estimated fair value of the contingent consideration obligation was classified as a liability of $5,000 and was determined using a scenario-based analysis on forecasted future results. Based on financial results through December 31, 2021, the fair value was reduced during the fourth quarter of 2021 to $1,250, with the adjustment to fair value recorded in the selling, marketing and administrative (“SM&A”) expense caption within the Consolidated Statements of Income. We paid this contingent consideration during the second quarter of 2022. Acquisition-related costs for the Lily’s acquisition were immaterial.

Table of Contents The Hershey Company | Q3 2022 Form 10-Q | Page 11

THE HERSHEY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

The acquisition has been accounted for as a business combination and, accordingly, Lily’s has been included within the North America Confectionery segment from the date of acquisition. The purchase consideration, inclusive of the acquisition date fair value of the contingent consideration, was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:

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

The purchase price allocation presented above has been finalized as of the fourth quarter of 2021 and includes an immaterial amount of measurement period adjustments. The measurement period adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed.

Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired (including the identifiable intangible assets). The majority of goodwill derived from this acquisition is deductible for tax purposes and reflects the value of leveraging our brand building expertise, supply chain capabilities and retail relationships to accelerate growth and access to the portfolio of Lily’s products.

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

Lotte Shanghai Foods Co., Ltd.

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd., which was previously included within the International segment results in our consolidated financial statements. Total proceeds from the divestiture and the impact on our consolidated financial statements were immaterial and were recorded in the SM&A expense caption within the Consolidated Statements of Income.

3. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill by reportable segment for the nine months ended October 2, 2022 are as follows:

	North America Confectionery		North America Salty Snacks		International		Total
Balance at December 31, 2021	$	2,026,006	$	589,798	$	17,370	$	2,633,174
Measurement period adjustments (see Note 2)	—		(18,028)		—		(18,028)