HERSHEY,
Pa., Nov. 4, 2022 /PRNewswire/ -- The Hershey
Company (NYSE: HSY) today announced net sales and earnings for the
third quarter ended October 2, 2022,
and raised its full-year financial outlook.
"Third quarter results came in ahead of our expectations, as our
increased brand investments and improved supply chain helped
support resilient consumer demand and drove category growth across
all business segments," said Michele
Buck, The Hershey Company President and Chief Executive
Officer. "Marketplace share and gross margin trends improved
versus the second quarter, and we have strong momentum exiting the
year. Given our performance to date and visibility into the
fourth quarter, we are raising our net sales and earnings outlook
for the year."
Third-Quarter 2022 Financial Results
Summary1
- Consolidated net sales of $2,728.2
million, an increase of 15.6%.
- Organic, constant currency net sales increased 11.8%.
- The impact of acquisitions on net sales was a 4.1-point
benefit2 while foreign currency exchange was a 0.3-point
headwind.
- Reported net income of $399.5
million and $1.94 earnings per
share-diluted, a decrease of 9.3%.
- Adjusted earnings per share-diluted of $2.17, an increase of 3.3%.
1
|
All comparisons for
the third quarter of 2022 are with respect to the third quarter
ended October 3, 2021
|
2
|
Reflects the impact
from the 2021 acquisitions of Pretzels Inc. (Pretzels) and Dot's
Pretzels, LLC (Dot's)
|
2022 Full-Year Financial Outlook
The Hershey Company is increasing its net sales growth and
earnings-per-share outlook to reflect higher than anticipated
consumer demand and favorable price elasticities across
segments.
2022 Full-Year
Outlook
|
|
Prior
Guidance
|
|
Current
Guidance
|
Net sales
growth3
|
|
12% - 14%
|
|
14% - 15%
|
Reported earnings per
share growth
|
|
9% - 12%
|
|
11% - 13%
|
Adjusted earnings per
share growth
|
|
12% - 14%
|
|
14% - 15%
|
|
|
3
|
The impact of the
Pretzels, Dot's and Lily's Sweets, LLC (Lily's) acquisitions is
anticipated to be a 4- to 5-point benefit to net sales growth for
the full-year 2022.
|
The company is also updating guidance on the following:
- A reported and adjusted effective tax rate of approximately 14%
to 15%, a slight reduction versus the prior outlook, driven by
timing and value of renewable energy tax credits;
- Other expense, which primarily reflects the write-down of
equity investments that qualify for tax credits, of approximately
$205 million, higher than the
previous outlook to reflect an increased amount of renewable energy
tax credits;
- Interest expense of approximately $135
million to $140 million,
reflecting higher interest rates on commercial paper; and
- Capital expenditures of approximately $600 million.
Below is a reconciliation of projected 2022 and full-year 2021
earnings per share-diluted calculated in accordance with U.S.
generally accepted accounting principles (GAAP) to non-GAAP
adjusted earnings per share-diluted:
|
2022
(Projected)
|
|
2021
|
Reported EPS –
Diluted
|
$7.93 –
$8.06
|
|
$7.11
|
Derivative
mark-to-market gains
|
—
|
|
(0.12)
|
Business realignment
activities
|
0.02 – 0.04
|
|
0.09
|
Acquisition-related
activities
|
0.21 – 0.25
|
|
0.16
|
Noncontrolling interest
share of business realignment and impairment charges
|
—
|
|
0.03
|
Other miscellaneous
losses (benefits)
|
0.07
|
|
(0.07)
|
Tax effect of all
adjustments reflected above
|
(0.09)
|
|
(0.01)
|
Adjusted EPS –
Diluted
|
$8.20 -
$8.27
|
|
$7.19
|
2022 projected earnings per share-diluted, as presented
above, does not include the impact of mark-to-market gains and
losses on our commodity derivative contracts that are reflected
within corporate unallocated expense in segment results until the
related inventory is sold since we are not able to forecast the
impact of the market changes.
Third Quarter 2022 Components of Net Sales Growth
A reconciliation between reported net sales growth rates and
organic constant currency net sales growth rates, along with the
contribution from net price realization and volume, is provided
below:
|
Three Months Ended
October 2, 2022
|
|
Percentage
Change as
Reported
|
|
Impact
of
Foreign
Currency
Exchange
|
|
Percentage
Change on
Constant
Currency
Basis
|
|
Impact
of
Acquisitions
|
|
Percentage
Change on
Organic
Constant
Currency
Basis
|
|
Organic
Price
|
|
Organic
Volume/Mix
|
|
North America
Confectionery
|
10.4 %
|
|
(0.3) %
|
|
10.7 %
|
|
— %
|
|
10.7 %
|
|
7.7 %
|
|
3.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Salty
Snacks
|
86.9 %
|
|
— %
|
|
86.9 %
|
|
65.5 %
|
|
21.4 %
|
|
12.5 %
|
|
9.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
15.4 %
|
|
(1.2) %
|
|
16.6 %
|
|
— %
|
|
16.6 %
|
|
4.4 %
|
|
12.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
15.6 %
|
|
(0.3) %
|
|
15.9 %
|
|
4.1 %
|
|
11.8 %
|
|
7.7 %
|
|
4.1 %
|
|
The company presents certain percentage changes in net sales on
a constant currency basis, which excludes the impact of foreign
currency exchange. To present this information for historical
periods, current period net sales for entities reporting in
currencies other than the U.S. dollar are translated into U.S.
dollars at the average monthly exchange rates in effect during the
corresponding period of the prior fiscal year, rather than at the
actual average monthly exchange rates in effect during the current
period of the current fiscal year. As a result, the foreign
currency impact is equal to the current year results in local
currencies multiplied by the change in the average foreign currency
exchange rate between the current fiscal period and the
corresponding period of the prior fiscal year.
Third-Quarter 2022 Consolidated Results
Consolidated net sales increased 15.6% to $2,728.2 million in the third quarter of 2022,
including a 4.1-point benefit from the acquisitions of Pretzels and
Dot's. Organic, constant currency sales increased
11.8%. List price increases along with strong consumer demand
and favorable price elasticities drove balanced growth across
segments.
Reported gross margin was 40.6% in the third quarter of 2022,
compared to 45.0% in the third quarter of 2021, a decrease of 440
basis points. Adjusted gross margin was 42.5% in the third
quarter of 2022, a decrease of 180 basis points compared to the
third quarter of 2021. Raw material, packaging and logistics
inflation, labor investments, and higher supply chain costs from
sustained consumer demand contributed to these declines, as well as
an unfavorable mix from recent acquisitions. These headwinds
were partially offset by net price realization and volume
gains. Derivative mark-to-market losses further contributed
to the decline in reported gross margin.
Selling, marketing and administrative expenses increased 13.5%
in the third quarter of 2022 versus the third quarter of 2021,
primarily driven by higher corporate expenses and
acquisition-related costs. Higher corporate expenses were
driven by incremental capability and technology investments, higher
incentive compensation and broad-based marketplace inflation.
Advertising and related consumer marketing expenses increased 5.4%
in the third quarter of 2022 versus the same period last
year. Higher levels of advertising in response to improved
supportability of confectionery brands and increased investment in
salty snacks brands were partially offset by cost efficiencies
related to new media partners. Selling, marketing and
administrative expenses, excluding advertising and related consumer
marketing, increased 17.8% versus the third quarter of 2021.
This increase was driven by acquisition-related costs, including
amortization, integration and operating expenses, as well as
people, capability and technology investments.
Third-quarter 2022 reported operating profit was $556.6 million, a decrease of 3.2%, resulting in
an operating profit margin of 20.4%, a decrease of 400 basis
points. These declines were driven by the previously
mentioned gross margin declines, including derivative
mark-to-market losses, and higher corporate and operating expenses,
including acquisition-related integration costs. Adjusted
operating profit of $615.3 million
increased 9.3% versus the third quarter of 2021 as pricing, volume
and cost leverage more than offset inflation, elevated supply chain
costs, acquisition-related costs and brand, capabilities, and
people investments. Despite higher adjusted operating profit,
adjusted operating profit margin decreased by 130 basis points to
22.6%, as inflation and investment outpaced sales growth.
The reported effective tax rate in the third quarter of 2022 was
15.6%, an increase of 90 basis points versus the third quarter of
2021. The adjusted effective tax rate was 15.9%, an increase
of 120 basis points versus the third quarter of 2021. Both
the reported and adjusted effective tax rate increase were driven
by higher utilization of capital losses in the prior-year period,
as well as the timing of renewable energy tax credits.
The company's third-quarter 2022 results, as prepared in
accordance with GAAP, included items positively impacting
comparability of $58.7 million, or
$0.23 per share-diluted. For
the third quarter of 2021, items negatively impacting comparability
totaled $11.9 million, or
$0.04 per share-diluted.
The following table presents a summary of items impacting
comparability in each period (see Appendix I for additional
information):
|
Pre-Tax
(millions)
|
|
Earnings Per
Share-Diluted
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
October 2,
2022
|
|
October 3,
2021
|
|
October 2,
2022
|
|
October 3,
2021
|
|
|
|
|
|
|
|
|
Derivative
mark-to-market losses (gains)
|
$
50.1
|
|
$
(18.5)
|
|
$
0.24
|
|
$
(0.09)
|
Business realignment
activities
|
0.4
|
|
3.4
|
|
—
|
|
0.02
|
Acquisition-related
activities
|
8.2
|
|
3.2
|
|
0.04
|
|
0.02
|
Tax effect of all
adjustments reflected above
|
—
|
|
—
|
|
(0.05)
|
|
0.01
|
|
$
58.7
|
|
$
(11.9)
|
|
$
0.23
|
|
$
(0.04)
|
Segment performance for the third quarter of 2022 versus the
prior-year period are detailed below. See the schedule on
components of net sales growth and the schedule of supplementary
information within this press release for additional information on
segment net sales and profit.
North America Confectionery
Hershey's North America
Confectionery segment net sales were $2,235.6 million in the third quarter of 2022, an
increase of 10.4% versus the same period last year. Organic,
constant currency net sales increased 10.7%. Net price
realization was driven by mid to high single digit list price
increases across the confectionery portfolio. Earlier
seasonal shipments versus the prior-year period and continued
replenishment of distributor inventory levels offset modest
declines in consumer demand to drive volume growth in the third
quarter.
Hershey's U.S. candy, mint and
gum (CMG) retail takeaway for the 12-week period ended October 2, 2022 in the multi-outlet plus
convenience store channels (MULO+C) increased 12.2%, resulting in
category market share gain of 23 basis points in the period.
Consumer demand for Hershey's
products remained strong aided by improved supportability and
higher levels of advertising in the 12-week period. Retail
sales of Hershey's chocolate
products increased 12.6%, driving chocolate share gains of over 100
basis points. This strength was driven by sustained on-the-go
and at-home usage occasions, instant consumables' retail sales
growth of 11.2% and take-home retail sales growth of 13.6%.
Within refreshment, Hershey's gum
products increased 14.8%, driven by less mask-wearing, while retail
trends for Icebreaker's mints continued to improve from
supply chain challenges earlier this year. Hershey's share of CMG remains up 111 basis
points versus pre-pandemic
levels.
The North America Confectionery segment reported segment income
of $706.8 million in the third
quarter of 2022, reflecting an increase of 7.8% versus the
prior-year period as pricing and volume gains offset inflation,
incremental investments in labor and higher brand and capabilities
investments, to drive segment income growth in the third
quarter. Inflation and investment outpaced sales growth,
resulting in segment margin of 31.6% in the third quarter, a
decrease of 80 basis points.
North America Salty Snacks
Hershey's North America Salty
Snacks segment net sales were $275.0
million in the third quarter of 2022, an increase of 86.9%
versus the same period last year. Sales from the acquisitions
of Dot's and Pretzels were a 65.5-point benefit. Organic,
constant currency net sales growth was 21.4% driven by volume gains
from strong consumer demand and net price realization.
Hershey's U.S. salty snack
retail takeaway, including Dot's, in MULO+C increased 22.4% in the
12-week period ended October 2, 2022
driven by robust consumer demand. Hershey's salty snacks growth outpaced the
category resulting in 10 basis points of share gain in the 12-week
period. SkinnyPop brand retail sales increased
18.0%, resulting in ready-to-eat popcorn share gain of 120 basis
points in the 12-week period. Pirate's Booty products
also continued to perform well with retail sales growth of
14.4%. Both SkinnyPop and Pirate's Booty brands
benefited from a strong back-to-school season with higher
promotional activity in the third quarter, with multi-packs retail
sales growth of 24.8% versus the prior-year period. Dot's
Homestyle Pretzels retail sales grew 34.2%, driven by increased
distribution, new buyers and higher frequency among existing
households. This growth significantly outpaced category
growth, resulting in a 200 basis points share gain of the pretzel
category.
North America Salty Snacks segment income increased 50.3% to
$44.5 million in the third quarter of
2022, compared to $29.6 million in
the third quarter of 2021. Profit increases were driven by
volume, price realization and acquisitions, which were partially
offset by higher supply chain costs, unfavorable mix,
acquisition-related costs and increased advertising spend.
The costs and investment outpaced sales growth in the third
quarter, resulting in segment margin of 16.2%, a decrease of 390
basis points.
International
Third-quarter 2022 net sales for Hershey's International segment increased
15.4% versus the same period last year to $217.6 million. Organic, constant currency
net sales increased 16.6% driven by higher volumes from strong
consumer demand and net price realization.
The International segment reported a $35.4 million profit in the third quarter of
2022, reflecting an increase of $15.8
million versus the prior-year period. Sales volume
growth and net price realization more than offset inflation to
deliver a segment margin of 16.3%, an increase of 590 basis points
versus the prior-year period.
Unallocated Corporate Expense
Hershey's unallocated corporate
expense in the third quarter of 2022 was $171.4 million, an increase of $29.6 million, or 20.9%, versus the same period
of 2021. This increase was driven by capabilities and
technology investments, including the upgrade of the company's ERP
system and related amortization; and higher incentive, compensation
and benefit cost.
Live Webcast
At approximately 7 a.m. (Eastern
time) today, Hershey will
post a pre-recorded management discussion of its third-quarter 2022
results and business update to its website at
www.thehersheycompany.com/investors. In addition, at
8:30 a.m. (Eastern time) today, the
company will host a live question and answer session with investors
and financial analysts. Details to access this call are
available on the company's website.
Note: In this release, for the third-quarter 2022,
Hershey references income measures
that are not in accordance with GAAP because they exclude certain
items impacting comparability, including gains and losses
associated with mark-to-market commodity derivatives, business
realignment activities, acquisition-related activities, and other
miscellaneous losses and benefits. The company refers to
these income measures as "adjusted" or "non-GAAP" financial
measures throughout this release. These non-GAAP financial
measures are used in evaluating results of operations for internal
purposes and are not intended to replace the presentation of
financial results in accordance with GAAP. Rather, the
company believes exclusion of such items provides additional
information to investors to facilitate the comparison of past and
present operations. A reconciliation of the non-GAAP
financial measures referenced in this release to their nearest
comparable GAAP financial measures as presented in the Consolidated
Statements of Income is provided below.
Reconciliation of
Certain Non-GAAP Financial Measures
|
Consolidated
results
|
Three Months
Ended
|
In thousands except
per share data
|
October 2,
2022
|
|
October 3,
2021
|
Reported gross
profit
|
$
1,108,500
|
|
$
1,061,335
|
Derivative
mark-to-market losses (gains)
|
50,065
|
|
(18,468)
|
Business realignment
activities
|
(1)
|
|
213
|
Acquisition-related
activities
|
65
|
|
2,678
|
Non-GAAP gross
profit
|
$
1,158,629
|
|
$
1,045,758
|
|
|
|
|
Reported operating
profit
|
$
556,620
|
|
$
574,831
|
Derivative
mark-to-market losses (gains)
|
50,065
|
|
(18,468)
|
Business realignment
activities
|
393
|
|
3,397
|
Acquisition-related
activities
|
8,215
|
|
3,190
|
Non-GAAP operating
profit
|
$
615,293
|
|
$
562,950
|
|
|
|
|
Reported provision for
income taxes
|
$
73,598
|
|
$
76,746
|
Derivative
mark-to-market losses (gains)*
|
9,045
|
|
(3,456)
|
Business realignment
activities*
|
80
|
|
890
|
Acquisition-related
activities*
|
1,970
|
|
760
|
Non-GAAP provision for
income taxes
|
$
84,693
|
|
$
74,940
|
|
|
|
|
Reported net
income
|
$
399,487
|
|
$
444,927
|
Derivative
mark-to-market losses (gains)
|
41,020
|
|
(15,012)
|
Business realignment
activities
|
313
|
|
2,507
|
Acquisition-related
activities
|
6,245
|
|
2,430
|
Non-GAAP net
income
|
$
447,065
|
|
$
434,852
|
|
|
|
|
Reported EPS -
Diluted
|
$
1.94
|
|
$
2.14
|
Derivative
mark-to-market losses (gains)
|
0.24
|
|
(0.09)
|
Business realignment
activities
|
—
|
|
0.02
|
Acquisition-related
activities
|
0.04
|
|
0.02
|
Tax effect of all
adjustments reflected above**
|
(0.05)
|
|
0.01
|
Non-GAAP EPS -
Diluted
|
$
2.17
|
|
$
2.10
|
*
|
The tax effect for each
adjustment is determined by calculating the tax impact of the
adjustment on the company's quarterly effective tax rate, unless
the nature of the item and/or the tax jurisdiction in which the
item has been recorded requires application of a specific tax rate
or tax treatment, in which case the tax effect of such item is
estimated by applying such specific tax rate or tax
treatment.
|
**
|
Adjustments reported
above are reported on a pre-tax basis before the tax effect
described in the reconciliation above for Non-GAAP provision for
income taxes.
|
In the assessment of our results, we review and discuss the
following financial metrics that are derived from the reported and
non-GAAP financial measures presented above:
|
Three Months
Ended
|
|
October 2,
2022
|
|
October 3,
2021
|
As reported gross
margin
|
40.6 %
|
|
45.0 %
|
Non-GAAP gross margin
(1)
|
42.5 %
|
|
44.3 %
|
|
|
|
|
As reported operating
profit margin
|
20.4 %
|
|
24.4 %
|
Non-GAAP operating
profit margin (2)
|
22.6 %
|
|
23.9 %
|
|
|
|
|
As reported effective
tax rate
|
15.6 %
|
|
14.7 %
|
Non-GAAP effective tax
rate (3)
|
15.9 %
|
|
14.7 %
|
(1)
|
Calculated as non-GAAP
gross profit as a percentage of net sales for each period
presented.
|
(2)
|
Calculated as non-GAAP
operating profit as a percentage of net sales for each period
presented.
|
(3)
|
Calculated as non-GAAP
provision for income taxes as a percentage of non-GAAP income
before taxes (calculated as non-GAAP operating profit minus
non-GAAP interest expense, net plus or minus non-GAAP other
(income) expense, net).
|
Appendix I
Details of the charges included in GAAP results, as summarized
in the press release (above), are as follows:
Derivative mark-to-market losses (gains): The
mark-to-market losses (gains) on commodity derivatives are recorded
as unallocated and excluded from adjusted results until such time
as the related inventory is sold, at which time the corresponding
losses (gains) are reclassified from unallocated to segment
income. Since we often purchase commodity contracts to price
inventory requirements in future years, we make this adjustment to
facilitate the year-over-year comparison of cost of sales on a
basis that matches the derivative gains and losses with the
underlying economic exposure being hedged for the period.
Business realignment activities: We periodically undertake
restructuring and cost reduction activities as part of ongoing
efforts to enhance long-term profitability. During the fourth
quarter of 2020, we commenced the International Optimization
Program to streamline resources and investments in select
international markets, including the optimization of our
China operating model to improve
efficiencies and provide a more sustainable and simplified base
going forward. During the third quarter of 2022 and 2021, business
realignment charges related primarily to other third-party costs
related to this program, as well as severance and employee benefit
costs.
Acquisition-related activities: During the third quarter
of 2022, we incurred costs related to the integration of the 2021
acquisitions of Lily's, Dot's and Pretzels. During the third
quarter of 2021, we incurred costs to effectuate the Lily's
acquisition.
Noncontrolling interest share of business realignment and
impairment charges: Certain of the business realignment and
impairment charges recorded related to the divestiture of Lotte
Shanghai Foods Co., Ltd. ("LSFC"), a joint venture in which we
previously owned a 50% controlling interest. Therefore, we
have also adjusted for the portion of these charges included within
the income (loss) attributed to the noncontrolling interest.
Other miscellaneous losses (benefits): During 2022, we
recorded a loss on the sale of non-operating assets located in
Pennsylvania. During 2021, we recorded a gain on the
divestiture of LSFC, as well as a gain on a receivable previously
deemed uncollectible.
Tax effect of all adjustments: This line item reflects the
aggregate tax effect of all pre-tax adjustments reflected in the
preceding line items of the applicable table. The tax effect
for each adjustment is determined by calculating the tax impact of
the adjustment on the company's quarterly effective tax rate,
unless the nature of the item and/or the tax jurisdiction in which
the item has been recorded requires application of a specific tax
rate or tax treatment, in which case the tax effect of such item is
estimated by applying such specific tax rate or tax treatment.
Safe Harbor Statement
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
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. These
statements are made based upon current expectations that are
subject to risk and uncertainty. Because actual results may differ
materially from those contained in the forward-looking statements,
you should not place undue reliance on the forward-looking
statements when deciding whether to buy, sell or hold the company's
securities. Factors that could cause results to differ materially
include, but are not limited to: risks related to the impact of the
COVID-19 global pandemic on our business, suppliers, distributors,
consumers, customers, and employees; the scope and duration of the
pandemic; government actions and restrictive measures implemented
in response to the pandemic, including the distribution of
vaccinations and continuation of social distancing guidelines and
stay at home orders; disruptions or inefficiencies in our supply
chain due to the loss or disruption of essential manufacturing or
supply elements or other factors; issues or concerns related to the
quality and safety of our products, ingredients or packaging, human
and workplace rights, and other environmental, social or governance
matters; changes in raw material and other costs, along with the
availability of adequate supplies of raw materials; the company's
ability to successfully execute business continuity plans to
address the COVID-19 pandemic and resulting changes in consumer
preferences and the broader economic and operating environment;
selling price increases, including volume declines associated with
pricing elasticity; market demand for our new and existing
products; increased marketplace competition; failure to
successfully execute and integrate acquisitions, divestitures and
joint ventures; changes in governmental laws and regulations,
including taxes; political, economic, and/or financial market
conditions, including impacts on the business arising from the
conflict between Russia and
Ukraine; risks and uncertainties
related to our international operations; disruptions, failures or
security breaches of our information technology infrastructure; our
ability to hire, engage and retain a talented global workforce, our
ability to realize expected cost savings and operating efficiencies
associated with strategic initiatives or restructuring programs;
complications with the design or implementation of our new
enterprise resource planning system; and such other matters as
discussed in our Annual Report on Form 10-K for the year
ended December 31, 2021 and from time to time our other
filings with the U.S. Securities and Exchange Commission. The
company undertakes no obligation to publicly update or revise any
forward-looking statements to reflect actual results, changes in
expectations or events or circumstances.
The Hershey
Company
|
Consolidated
Statements of Income
|
for the periods
ended October 2, 2022 and October 3, 2021
|
(unaudited) (in
thousands except percentages and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
$
2.00
|
|
$
2.22
|
|
$
6.23
|
|
$
5.67
|
|
- Diluted
|
- Common
|
$
1.94
|
|
$
2.14
|
|
$
6.04
|
|
$
5.49
|
|
- Basic
|
- Class B
|
$
1.82
|
|
$
2.01
|
|
$
5.67
|
|
$
5.16
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
- Basic
|
- Common
|
147,169
|
|
145,665
|
|
146,557
|
|
146,259
|
|
- Diluted
|
- Common
|
206,274
|
|
207,426
|
|
206,667
|
|
207,857
|
|
- Basic
|
- Class B
|
58,114
|
|
60,614
|
|
59,058
|
|
60,614
|
|
|
|
|
|
|
|
|
|
|
Key margins:
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
40.6 %
|
|
45.0 %
|
|
43.2 %
|
|
45.7 %
|
Operating profit
margin
|
|
20.4 %
|
|
24.4 %
|
|
22.3 %
|
|
23.8 %
|
Net margin
|
|
14.6 %
|
|
18.9 %
|
|
16.1 %
|
|
17.2 %
|
The Hershey
Company
|
Supplementary
Information – Segment Results
|
for the periods
ended October 2, 2022 and October 3, 2021
|
(unaudited) (in
thousands except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
October 2,
2022
|
|
October
3,
2021
|
|
%
Change
|
|
October
2,
2022
|
|
October
3,
2021
|
|
%
Change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$
2,235,550
|
|
$
2,024,243
|
|
10.4 %
|
|
$
6,361,695
|
|
$
5,700,031
|
|
11.6 %
|
North America Salty Snacks
|
|
275,024
|
|
147,108
|
|
86.9 %
|
|
757,443
|
|
396,729
|
|
90.9 %
|
International
|
|
217,579
|
|
188,488
|
|
15.4 %
|
|
647,818
|
|
548,449
|
|
18.1 %
|
Total
|
|
$
2,728,153
|
|
$
2,359,839
|
|
15.6 %
|
|
$
7,766,956
|
|
$
6,645,209
|
|
16.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$ 706,815
|
|
$ 655,599
|
|
7.8 %
|
|
$
2,107,564
|
|
$
1,852,692
|
|
13.8 %
|
North America Salty Snacks
|
|
44,516
|
|
29,639
|
|
50.3 %
|
|
103,250
|
|
81,058
|
|
27.3 %
|
International
|
|
35,379
|
|
19,550
|
|
80.7 %
|
|
108,058
|
|
74,526
|
|
45.1 %
|
Total segment
income
|
|
786,710
|
|
704,788
|
|
11.6 %
|
|
2,318,872
|
|
2,008,276
|
|
15.5 %
|
Unallocated corporate
expense (1)
|
|
171,417
|
|
141,838
|
|
20.9 %
|
|
468,785
|
|
430,112
|
|
9.0 %
|
Unallocated
mark-to-market losses (gains) on commodity derivatives
(2)
|
|
50,065
|
|
(18,468)
|
|
NM
|
|
63,524
|
|
(24,137)
|
|
NM
|
Costs associated with
business realignment initiatives
|
|
393
|
|
3,397
|
|
(88.4) %
|
|
2,373
|
|
13,793
|
|
(82.8) %
|
Acquisition-related
activities
|
|
8,215
|
|
3,190
|
|
157.5 %
|
|
36,481
|
|
10,698
|
|
241.0 %
|
Other miscellaneous
losses (benefits)
|
|
—
|
|
—
|
|
NM
|
|
13,568
|
|
(2,155)
|
|
NM
|
Operating
profit
|
|
556,620
|
|
574,831
|
|
(3.2) %
|
|
1,734,141
|
|
1,584,550
|
|
9.4 %
|
Interest expense,
net
|
|
35,378
|
|
30,154
|
|
17.3 %
|
|
101,970
|
|
97,655
|
|
4.4 %
|
Other (income) expense,
net
|
|
48,157
|
|
23,004
|
|
109.3 %
|
|
78,222
|
|
32,612
|
|
139.9 %
|
Income before income
taxes
|
|
$ 473,085
|
|
$ 521,673
|
|
(9.3) %
|
|
$
1,553,949
|
|
$
1,454,283
|
|
6.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 and (d) other gains or losses that are not
integral to segment performance.
|
(2)
|
Net (gains) losses on
mark-to-market valuation of commodity derivative positions
recognized in unallocated derivative losses (gains).
|
NM - not
meaningful
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
October 2,
2022
|
|
October 3,
2021
|
|
October 2,
2022
|
|
October 3,
2021
|
Segment income as a
percent of net sales:
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
31.6 %
|
|
32.4 %
|
|
33.1 %
|
|
32.5 %
|
North America Salty Snacks
|
|
16.2 %
|
|
20.1 %
|
|
13.6 %
|
|
20.4 %
|
International
|
|
16.3 %
|
|
10.4 %
|
|
16.7 %
|
|
13.6 %
|
The Hershey
Company
|
Consolidated Balance
Sheets
|
as of
October 2, 2022 and December 31, 2021
|
(in thousands of
dollars)
|
|
|
|
|
Assets
|
October 2,
2022
|
|
December 31,
2021
|
|
(unaudited)
|
|
|
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
|
|
|
|
|
|
|
|
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
|
|
|
|
|
Total stockholders'
equity
|
3,083,080
|
|
2,757,229
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
10,832,907
|
|
$
10,412,231
|
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SOURCE The Hershey Company