HERSHEY,
Pa., Feb. 2, 2023 /PRNewswire/ -- The Hershey
Company (NYSE: HSY) today announced net sales and earnings for the
fourth quarter and full-year ended December 31, 2022.
"In 2022, the Hershey Company delivered one of its strongest
years in history despite record inflation, continued supply chain
disruptions and macroeconomic uncertainty for many consumers," said
Michele Buck, The Hershey Company
Chairman and Chief Executive Officer. "It took tremendous
hard work, perseverance, and agility from every one of our
employees and partners, and I couldn't be prouder of what we have
accomplished or more excited for what lies ahead. We expect
to deliver another year of strong sales and earnings growth in 2023
as we invest in our amazing portfolio of brands, additional
capacity and capabilities."
Fourth-Quarter 2022 Financial Results
Summary1
- Consolidated net sales of $2,652.3
million, an increase of 14.0%.
- Organic, constant currency net sales increased 10.7%.
- The impact of acquisitions on net sales was a 3.6-point
benefit2 while foreign currency exchange was a 0.3-point
headwind.
- Reported net income of $396.3
million, or $1.92 per
share-diluted, an increase of 18.5%.
- Adjusted earnings per share-diluted of $2.02, an increase of 19.5%.
|
1
All comparisons for the fourth quarter of 2022 are with respect
to the fourth quarter ended December 31, 2021.
|
2
Reflects the impact from the 2021 acquisitions of Pretzels Inc.
(Pretzels) and Dot's Pretzels, LLC (Dot's).
|
2022 Full-Year Financial Results
Summary3
- Consolidated net sales of $10,419.3
million, an increase of 16.1%.
- Organic, constant currency net sales increased 12.0%.
- The net impact of acquisitions on net sales was a 4.3-point
benefit4 while foreign currency exchange was a
0.2-point headwind.
- Reported net income of $1,644.8
million, or $7.96 per
share-diluted, an increase of 12.0%.
- Adjusted earnings per share-diluted of $8.52, an increase of 18.5%.
|
3
All comparisons for full-year 2022 are with respect to the
full-year ended December 31, 2021.
|
4
Reflects the impact from the 2021 acquisitions of Pretzels,
Dot's and Lily's Sweets, LLC (Lily's).
|
2023 Full-Year Financial Outlook Summary
The company expects net sales growth of 6% to 8% driven
primarily by net price realization as consumer demand remains
steady behind higher advertising levels and increased
capacity. Sales growth and gross margin expansion are
expected to more than offset increased brand, capability and
technology investments, as well as higher pension and interest
expenses, to drive projected reported earnings per share growth of
11% to 15% and adjusted earnings per share growth of 9% to 11%.
2023 Full-Year
Outlook
|
|
Total
Company
|
Net sales
growth
|
|
6% - 8%
|
Reported earnings per
share growth
|
|
11% - 15%
|
Adjusted earnings per
share growth
|
|
9% - 11%
|
The company also expects:
- A reported and adjusted effective tax rate in the range of 15%
to 16%;
- Other expense, which primarily reflects the write-down of
equity investments that qualify for a tax credit, of approximately
$190 million to $210 million;
- Interest expense of approximately $145
million to $155 million,
reflecting a higher interest rate environment; and
- Capital expenditures of approximately $800 million to $900
million, driven by core confection capacity expansion and
continued investments in a digital infrastructure including the
build and upgrade of a new ERP system across the enterprise.
Below is a reconciliation of projected 2023 and full-year 2022
and 2021 earnings per share-diluted calculated in accordance with
U.S. generally accepted accounting principles (GAAP) to non-GAAP
adjusted earnings per share-diluted:
|
2023
(Projected)
|
|
2022
|
|
2021
|
Reported EPS –
Diluted
|
$8.87 -
$9.12
|
|
$7.96
|
|
$7.11
|
Derivative
Mark-to-Market Losses (Gains)
|
—
|
|
0.38
|
|
(0.12)
|
Business Realignment
Activities
|
0.01
|
|
0.02
|
|
0.09
|
Acquisition and
Integration-Related Activities
|
0.45 - 0.53
|
|
0.24
|
|
0.16
|
Noncontrolling Interest
Share of Business Realignment Charges
|
—
|
|
—
|
|
0.03
|
Other Miscellaneous
Losses (Benefits)
|
—
|
|
0.07
|
|
(0.07)
|
Tax Effect of All
Adjustments Reflected Above
|
(0.12)
|
|
(0.15)
|
|
(0.01)
|
Adjusted EPS –
Diluted
|
$9.29 -
$9.46
|
|
$8.52
|
|
$7.19
|
2023 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.
Fourth 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
December 31, 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
|
9.7 %
|
|
(0.5) %
|
|
10.2 %
|
|
— %
|
|
10.2 %
|
|
9.1 %
|
|
1.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Salty
Snacks
|
71.4 %
|
|
— %
|
|
71.4 %
|
|
52.7 %
|
|
18.7 %
|
|
9.7 %
|
|
9.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
11.1 %
|
|
1.8 %
|
|
9.3 %
|
|
— %
|
|
9.3 %
|
|
0.4 %
|
|
8.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
14.0 %
|
|
(0.3) %
|
|
14.3 %
|
|
3.6 %
|
|
10.7 %
|
|
8.5 %
|
|
2.2 %
|
|
|
|
Twelve Months Ended
December 31, 2022
|
|
Percentage
Change as
Reported
|
|
Impact of
Foreign
Currency
Exchange
|
|
Percentage
Change on
Constant
Currency
Basis
|
|
Impact of
Acquisitions
and
Divestitures
|
|
Percentage
Change on
Organic
Constant
Currency
Basis
|
|
Organic
Price
|
|
Organic
Volume/Mix
|
North America
Confectionery
|
11.1 %
|
|
(0.2) %
|
|
11.3 %
|
|
0.4 %
|
|
10.9 %
|
|
8.1 %
|
|
2.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Salty
Snacks
|
85.3 %
|
|
— %
|
|
85.3 %
|
|
64.0 %
|
|
21.3 %
|
|
12.0 %
|
|
9.3 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
16.3 %
|
|
0.3 %
|
|
16.0 %
|
|
— %
|
|
16.0 %
|
|
4.1 %
|
|
11.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
16.1 %
|
|
(0.2) %
|
|
16.3 %
|
|
4.3 %
|
|
12.0 %
|
|
8.0 %
|
|
4.0
|
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.
Fourth-Quarter 2022 Results
Consolidated net sales increased 14.0% to $2,652.3 million in the fourth quarter of 2022,
including a 3.6-point benefit from the acquisition of Dot's and
Pretzels. Organic, constant currency net sales increased
10.7%, driven primarily by net price realization of 8.5
points. Consumer demand continued to grow across segments
driving an additional 2.2 points of volume gains.
Reported gross margin decreased 30 basis points to 43.2% in the
fourth quarter of 2022. This decrease was driven by
broad-based cost of goods inflation, including commodity
mark-to-market losses, higher manufacturing costs and labor
investments, and unfavorable portfolio mix, which was partially
offset by higher organic net sales growth. Adjusted gross
margin increased 20 basis points to 43.7% in the fourth quarter of
2022. Net price realization and volume gains drove gross
margin expansion, which was partially offset by raw material and
packaging inflation, higher labor costs, increased manufacturing
costs related to higher-than-anticipated demand, and unfavorable
portfolio mix.
Selling, marketing and administrative expenses increased 11.5%
in the fourth quarter of 2022 versus the prior-year period,
primarily driven by higher corporate expenses. Advertising
and related consumer marketing expenses increased by 3.3% in the
fourth quarter of 2022 versus the same period last year.
Higher levels of advertising were driven by Reese's and
Jolly Rancher brands in response to incremental capacity,
which was partially offset by cost efficiencies related to new
media partners. Selling, marketing and administrative
expenses, excluding advertising and related consumer marketing,
increased 15.4% versus the fourth quarter of 2021. This
increase was driven by incremental capability and technology
investments, increased non-income tax reserves and favorable
benefit accrual in the prior-year period.
Fourth-quarter 2022 reported operating profit of $526.6 million increased 14.7%, resulting in an
operating profit margin of 19.9%, an increase of 20 basis points
versus the prior-year period. Adjusted operating profit of
$555.3 million increased 16.7% versus
the fourth quarter of 2021, resulting in adjusted operating profit
margin of 20.9%, an increase of 40 basis points. Profit
increases in both reported and adjusted operating profit were
driven by price realization gains, higher volume and operating cost
leverage. In addition, reported operating profit was
partially offset by derivative mark-to-market losses and higher
integration costs related to recent acquisitions.
The reported effective tax rate in the fourth quarter of 2022
was (9.1)% compared to 0.9% in the fourth quarter of 2021, a
decrease of 1,000 basis points. The adjusted effective tax
rate in the fourth quarter of 2022 was (6.5)% compared to 2.2% in
the fourth quarter of 2021, a decrease of 870 basis points.
Both the reported and adjusted effective tax rate decreases were
driven by higher renewable energy tax credits versus the prior-year
period.
The company's fourth-quarter 2022 results, as prepared in
accordance with GAAP, included items positively impacting
comparability of $28.7 million, or
$0.10 per share-diluted. For
the fourth quarter of 2021, items positively impacting
comparability totaled $20.8 million,
or $0.07 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
|
|
December 31,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
|
|
|
|
|
|
|
|
Derivative
Mark-to-Market Losses (Gains)
|
$
14.7
|
|
$
(0.2)
|
|
$
0.07
|
|
$
—
|
Business Realignment
Activities
|
2.0
|
|
2.8
|
|
0.01
|
|
—
|
Acquisition and
Integration-Related Activities
|
12.0
|
|
22.4
|
|
0.06
|
|
0.10
|
Noncontrolling Interest
Share of Business Realignment Charges
|
—
|
|
4.2
|
|
—
|
|
0.02
|
Other Miscellaneous
Benefits
|
—
|
|
(8.4)
|
|
—
|
|
(0.04)
|
Tax Effect of All
Adjustments Reflected Above
|
—
|
|
—
|
|
(0.04)
|
|
(0.01)
|
|
$
28.7
|
|
$
20.8
|
|
$
0.10
|
|
$
0.07
|
|
|
|
Pre-Tax
(millions)
|
|
Earnings Per
Share-Diluted
|
|
Twelve Months
Ended
|
|
Twelve Months
Ended
|
|
December 31,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
|
|
|
|
|
|
|
|
Derivative
Mark-to-Market Losses (Gains)
|
$
78.2
|
|
$
(24.4)
|
|
$
0.38
|
|
$
(0.12)
|
Business Realignment
Activities
|
4.4
|
|
16.6
|
|
0.02
|
|
0.09
|
Acquisition and
Integration-Related Activities
|
48.5
|
|
33.1
|
|
0.24
|
|
0.16
|
Noncontrolling Interest
Share of Business Realignment Charges
|
—
|
|
5.3
|
|
—
|
|
0.03
|
Other Miscellaneous
Losses (Benefits)
|
13.6
|
|
(15.1)
|
|
0.07
|
|
(0.07)
|
Tax Effect of All
Adjustments Reflected Above
|
—
|
|
—
|
|
(0.15)
|
|
(0.01)
|
|
$
144.6
|
|
$
15.5
|
|
$
0.56
|
|
$
0.08
|
The following are comments about segment performance for the
fourth quarter of 2022 versus the prior-year period. See 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 $2,174.8 million in the fourth quarter of 2022,
an increase of 9.7% versus the same period last year.
Organic, constant currency net sales increased 10.2% primarily
driven by net price realization, along with modest volume gains
from strong consumer demand.
Hershey's U.S. candy, mint and
gum (CMG) retail takeaway for the twelve-week period ended
January 1, 2023 in the
multi-outlet combined plus convenience store channels (MULO+C)
increased 10.7%. Unit pricing was the primary driver of
retail sales growth, while consumer demand remained resilient with
volumes declining modestly. Growth was strong across
segments, with chocolate retail sales growth of 10.6%, sweets
retail sales growth of 12.8% and refreshment retail sales growth of
10.8%. Strong consumer engagement for the Halloween and
Holiday seasons also contributed to this growth. CMG share
declined by 54 basis points due to category mix headwinds and
capacity constraints on seasonal products.
North America Confectionery segment income was $703.5 million in the fourth quarter of 2022,
reflecting an increase of 12.9% versus the prior-year period.
This resulted in segment margin of 32.3%, an increase of 90 basis
points. Net price realization, volume gains and media cost
efficiencies more than offset broad-based inflation, increased
manufacturing and labor costs, and higher levels of brand and
capability investments to drive segment income and margin expansion
in the fourth quarter.
North America Salty Snacks
Hershey's North America Salty
Snacks segment net sales were $272.0
million in the fourth quarter of 2022, an increase of 71.4%
versus the same period last year. Sales from the acquisitions
of Dot's and Pretzels were a 52.7-point benefit. Organic,
constant currency net sales growth was 18.7% with nearly equal
contribution from volume gains and net price realization.
Hershey's U.S. salty snack
retail takeaway in MULO+C increased 19.2% in the 12-week period
ended January 1, 2023, resulting in a
salty snack share gain of 10 basis points in the period.
SkinnyPop products retail sales increased 19.7%, gaining 130
basis points of ready-to-eat popcorn share in the fourth
quarter. Consumer demand and unit velocities for the
SkinnyPop brand grew through incremental consumer occasions,
while unit pricing also contributed to retail growth.
Pirate's Booty products declined 3.0% due to lower
promotional levels as the company seeks to reduce supply chain
complexity and improve profitability. Dot's Homestyle
Pretzels brand reported strong retail sales growth of 32.3% as
the brand continued to gain distribution and acquire new buyers in
the fourth quarter. This growth significantly outpaced the
category, driving 130 basis points of pretzel share
gain.
The North America Salty Snacks segment income was $56.7 million in the fourth quarter of 2022,
reflecting an increase of 187.5% versus the prior-year
period. This resulted in a segment margin of 20.8%, an
increase of 840 basis points versus the prior-year period.
Profit and margin expansion were driven by volume, price
realization and acquisitions, along with lower levels of
advertising versus the prior-year period, which more than offset
inflation, unfavorable mix and acquisition-related costs.
International
Fourth-quarter 2022 net sales for Hershey's International segment increased
11.1% versus the same period last year to $205.6 million. Organic, constant currency
net sales increased 9.3% driven by strong consumer demand across
geographies, along with modest net price
realization.
The International segment reported a $0.1
million loss in the fourth quarter of 2022, reflecting a
63.2% increase versus the prior year period, resulting in segment
margin of (0.1)%, an increase of 10 basis points. Volume
gains and net price realization more than offset broad-based
inflation and incremental capability and technology investments, to
drive the profit increase and margin expansion in the fourth
quarter.
Unallocated Corporate Expense
Hershey's unallocated corporate
expense in the fourth quarter of 2022 was $204.7 million, an increase of $37.9 million, or 22.7% versus the same period of
2021. This increase was driven by higher technology costs
related to building a digital infrastructure, including the
company's ERP system and related amortization, incremental
capability investments, increased non-income tax reserve and a
favorable benefit accrual in the prior-year period.
Live Webcast
At approximately 7:00 a.m. (Eastern
time) today, Hershey will
post a pre-recorded management discussion of its fourth-quarter and
full-year 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 fourth-quarter of
and full-year 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 and
integration-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
|
|
Twelve Months
Ended
|
In thousands except
per share data
|
December 31,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
Reported gross
profit
|
$
1,144,806
|
|
$
1,012,867
|
|
$
4,498,785
|
|
$
4,048,598
|
Derivative
mark-to-market losses (gains)
|
15,258
|
|
(239)
|
|
78,782
|
|
(24,376)
|
Business realignment
activities
|
—
|
|
(30)
|
|
3
|
|
5,220
|
Acquisition and
integration-related activities
|
—
|
|
—
|
|
4,041
|
|
2,678
|
Non-GAAP gross
profit
|
$
1,160,064
|
|
$
1,012,598
|
|
$
4,581,611
|
|
$
4,032,120
|
|
|
|
|
|
|
|
|
Reported operating
profit
|
$
526,646
|
|
$
459,172
|
|
$
2,260,787
|
|
$
2,043,722
|
Derivative
mark-to-market losses (gains)
|
14,658
|
|
(239)
|
|
78,182
|
|
(24,376)
|
Business realignment
activities
|
2,044
|
|
2,806
|
|
4,417
|
|
16,599
|
Acquisition and
integration-related activities
|
12,001
|
|
22,444
|
|
48,482
|
|
33,142
|
Other miscellaneous
losses (benefits)
|
—
|
|
(8,469)
|
|
13,568
|
|
(15,209)
|
Non-GAAP operating
profit
|
$
555,349
|
|
$
475,714
|
|
$
2,405,436
|
|
$
2,053,878
|
|
|
|
|
|
|
|
|
Reported provision
(benefit) for income taxes
|
$
(33,174)
|
|
$
3,150
|
|
$
272,254
|
|
$
314,405
|
Derivative
mark-to-market losses (gains)*
|
4,521
|
|
(1,018)
|
|
13,508
|
|
(9,176)
|
Business realignment
activities*
|
567
|
|
650
|
|
1,119
|
|
3,138
|
Acquisition and
integration-related activities*
|
2,804
|
|
5,136
|
|
11,525
|
|
7,683
|
Other miscellaneous
losses (benefits)*
|
—
|
|
—
|
|
3,256
|
|
(1,474)
|
Non-GAAP provision
(benefit) for income taxes
|
$
(25,282)
|
|
$
7,918
|
|
$
301,662
|
|
$
314,576
|
|
|
|
|
|
|
|
|
Reported net
income
|
$
396,296
|
|
$
335,556
|
|
$
1,644,817
|
|
$
1,477,512
|
Derivative
mark-to-market losses (gains)
|
10,137
|
|
779
|
|
64,674
|
|
(15,200)
|
Business realignment
activities
|
1,477
|
|
2,156
|
|
3,298
|
|
13,461
|
Acquisition and
integration-related activities
|
9,197
|
|
17,308
|
|
36,957
|
|
25,459
|
Noncontrolling interest
share of business realignment and impairment charges
|
—
|
|
4,235
|
|
—
|
|
5,313
|
Other miscellaneous
losses (benefits)
|
—
|
|
(8,469)
|
|
10,312
|
|
(13,735)
|
Non-GAAP net
income
|
$
417,107
|
|
$
351,565
|
|
$
1,760,058
|
|
$
1,492,810
|
|
Reconciliation of
Certain Non-GAAP Financial Measures
|
Consolidated
results
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December 31,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
Reported EPS -
Diluted
|
$
1.92
|
|
$
1.62
|
|
$
7.96
|
|
$
7.11
|
Derivative
mark-to-market losses (gains)
|
0.07
|
|
—
|
|
0.38
|
|
(0.12)
|
Business realignment
activities
|
0.01
|
|
—
|
|
0.02
|
|
0.09
|
Acquisition and
integration-related activities
|
0.06
|
|
0.10
|
|
0.24
|
|
0.16
|
Noncontrolling interest
share of business realignment and impairment charges
|
—
|
|
0.02
|
|
—
|
|
0.03
|
Other miscellaneous
losses (benefits)
|
—
|
|
(0.04)
|
|
0.07
|
|
(0.07)
|
Tax effect of all
adjustments reflected above**
|
(0.04)
|
|
(0.01)
|
|
(0.15)
|
|
(0.01)
|
Non-GAAP EPS -
Diluted
|
$
2.02
|
|
$
1.69
|
|
$
8.52
|
|
$
7.19
|
|
|
|
|
|
|
|
|
* 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
|
|
Twelve Months
Ended
|
|
December 31,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
As reported gross
margin
|
43.2 %
|
|
43.5 %
|
|
43.2 %
|
|
45.1 %
|
Non-GAAP gross margin
(1)
|
43.7 %
|
|
43.5 %
|
|
44.0 %
|
|
44.9 %
|
|
|
|
|
|
|
|
|
As reported operating
profit margin
|
19.9 %
|
|
19.7 %
|
|
21.7 %
|
|
22.8 %
|
Non-GAAP operating
profit margin (2)
|
20.9 %
|
|
20.5 %
|
|
23.1 %
|
|
22.9 %
|
|
|
|
|
|
|
|
|
As reported effective
tax rate
|
(9.1) %
|
|
0.9 %
|
|
14.2 %
|
|
17.5 %
|
Non-GAAP effective tax
rate (3)
|
(6.5) %
|
|
2.2 %
|
|
14.6 %
|
|
17.4 %
|
|
|
(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 three- and 12-month periods 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 and Integration-Related Activities: During the
three- and 12-month periods of 2022, we incurred costs related to
the integration of the 2021 acquisitions of Lily's, Dot's and
Pretzels. During the three- and 12-month periods of 2021, we
incurred costs to effectuate the acquisitions of Lily's, Dot's and
Pretzels, as well as costs related to the integration of
Lily's.
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): In 2022, we
recorded a loss on the sale of non-operating assets located in
Pennsylvania. In 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: 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 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 with respect to inflation, rising interest
rates, slower growth or recession, and other events beyond our
control such as the 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 and
that of our customers and partners (including our suppliers); 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 in our other filings
with the U.S. Securities and Exchange Commission. The company
undertakes no duty to update any forward-looking statement to
conform the statement to actual results or changes in the company's
expectations.
The Hershey
Company
|
Consolidated
Statements of Income
|
for the periods
ended December 31, 2022 and December 31,
2021
|
(unaudited) (in
thousands except percentages and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December 31,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$ 2,652,338
|
|
$ 2,326,128
|
|
$
10,419,294
|
|
$ 8,971,337
|
Cost of
sales
|
|
1,507,532
|
|
1,313,261
|
|
5,920,509
|
|
4,922,739
|
Gross profit
|
|
|
1,144,806
|
|
1,012,867
|
|
4,498,785
|
|
4,048,598
|
|
|
|
|
|
|
|
|
Selling, marketing and
administrative expense
|
616,445
|
|
552,918
|
|
2,236,009
|
|
2,001,351
|
Business realignment
costs
|
1,715
|
|
777
|
|
1,989
|
|
3,525
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
526,646
|
|
459,172
|
|
2,260,787
|
|
2,043,722
|
Interest expense,
net
|
|
35,587
|
|
29,762
|
|
137,557
|
|
127,417
|
Other (income) expense,
net
|
|
127,937
|
|
86,469
|
|
206,159
|
|
119,081
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
363,122
|
|
342,941
|
|
1,917,071
|
|
1,797,224
|
(Benefit) provision for
income taxes
|
|
(33,174)
|
|
3,150
|
|
272,254
|
|
314,405
|
|
|
|
|
|
|
|
|
|
|
Net income including
noncontrolling interest
|
396,296
|
|
339,791
|
|
1,644,817
|
|
1,482,819
|
|
|
|
|
|
|
|
|
|
|
Less: Net gain (loss)
attributable to noncontrolling interest
|
—
|
|
4,235
|
|
—
|
|
5,307
|
Net income attributable
to The Hershey Company
|
$
396,296
|
|
$
335,556
|
|
$ 1,644,817
|
|
$ 1,477,512
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
- Basic
|
- Common
|
$
1.98
|
|
$
1.67
|
|
$
8.22
|
|
$
7.34
|
|
- Diluted
|
- Common
|
$
1.92
|
|
$
1.62
|
|
$
7.96
|
|
$
7.11
|
|
- Basic
|
- Class B
|
$
1.80
|
|
$
1.52
|
|
$
7.47
|
|
$
6.68
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
- Basic
|
- Common
|
147,173
|
|
145,687
|
|
146,713
|
|
146,120
|
|
- Diluted
|
- Common
|
206,291
|
|
207,447
|
|
206,575
|
|
207,758
|
|
- Basic
|
- Class B
|
58,114
|
|
60,614
|
|
58,822
|
|
60,614
|
|
|
|
|
|
|
|
|
Key margins:
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
43.2 %
|
|
43.5 %
|
|
43.2 %
|
|
45.1 %
|
Operating profit
margin
|
|
19.9 %
|
|
19.7 %
|
|
21.7 %
|
|
22.8 %
|
Net margin
|
|
14.9 %
|
|
14.4 %
|
|
15.8 %
|
|
16.5 %
|
The Hershey
Company
|
Supplementary
Information – Segment Results
|
for the periods
ended December 31, 2022 and December 31,
2021
|
(unaudited) (in
thousands except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
December 31,
2022
|
|
December 31,
2021
|
|
%
Change
|
|
December 31,
2022
|
|
December 31,
2021
|
|
%
Change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$
2,174,785
|
|
$
1,982,385
|
|
9.7 %
|
|
$
8,536,480
|
|
$
7,682,416
|
|
11.1 %
|
North America Salty Snacks
|
|
271,962
|
|
158,695
|
|
71.4 %
|
|
1,029,405
|
|
555,424
|
|
85.3 %
|
International
|
|
205,591
|
|
185,048
|
|
11.1 %
|
|
853,409
|
|
733,497
|
|
16.3 %
|
Total
|
|
$
2,652,338
|
|
$
2,326,128
|
|
14.0 %
|
|
$ 10,419,294
|
|
$
8,971,337
|
|
16.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$
703,502
|
|
$
623,181
|
|
12.9 %
|
|
$
2,811,066
|
|
$
2,475,873
|
|
13.5 %
|
North America Salty Snacks
|
|
56,685
|
|
19,719
|
|
187.5 %
|
|
159,935
|
|
100,777
|
|
58.7 %
|
International
|
|
(131)
|
|
(356)
|
|
(63.2) %
|
|
107,927
|
|
74,170
|
|
45.5 %
|
Total segment
income
|
|
760,056
|
|
642,544
|
|
18.3 %
|
|
3,078,928
|
|
2,650,820
|
|
16.2 %
|
Unallocated corporate
expense (1)
|
|
204,707
|
|
166,830
|
|
22.7 %
|
|
673,492
|
|
596,942
|
|
12.8 %
|
Mark-to-market
adjustment for commodity derivatives (2)
|
|
14,658
|
|
(239)
|
|
NM
|
|
78,182
|
|
(24,376)
|
|
NM
|
Costs associated with
business realignment initiatives
|
|
2,044
|
|
2,806
|
|
(27.2) %
|
|
4,417
|
|
16,599
|
|
(73.4) %
|
Acquisition and
integration-related activities
|
|
12,001
|
|
22,444
|
|
(46.5) %
|
|
48,482
|
|
33,142
|
|
46.3 %
|
Other miscellaneous
benefits
|
|
—
|
|
(8,469)
|
|
(100.0) %
|
|
13,568
|
|
(15,209)
|
|
(189.2) %
|
Operating
profit
|
|
526,646
|
|
459,172
|
|
14.7 %
|
|
2,260,787
|
|
2,043,722
|
|
10.6 %
|
Interest expense,
net
|
|
35,587
|
|
29,762
|
|
19.6 %
|
|
137,557
|
|
127,417
|
|
8.0 %
|
Other (income) expense,
net
|
|
127,937
|
|
86,469
|
|
48.0 %
|
|
206,159
|
|
119,081
|
|
73.1 %
|
Income before income
taxes
|
|
$
363,122
|
|
$
342,941
|
|
5.9 %
|
|
$
1,917,071
|
|
$
1,797,224
|
|
6.7 %
|
|
|
(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
|
|
Twelve Months
Ended
|
|
|
|
December 31,
2022
|
|
December 31,
2021
|
|
December 31,
2022
|
|
December 31,
2021
|
Segment income (loss)
as a percent of net sales:
|
|
|
|
|
|
|
|
|
North America
Confectionery
|
|
32.3 %
|
|
31.4 %
|
|
32.9 %
|
|
32.2 %
|
North America Salty
Snacks
|
|
20.8 %
|
|
12.4 %
|
|
15.5 %
|
|
18.1 %
|
International
|
|
(0.1) %
|
|
(0.2) %
|
|
12.6 %
|
|
10.1 %
|
The Hershey
Company
|
Consolidated Balance
Sheets
|
as of
December 31, 2022 and December 31, 2021
|
(in thousands of
dollars)
|
|
|
|
|
Assets
|
December 31,
2022
|
|
December 31,
2021
|
|
(unaudited)
|
|
|
Cash and cash
equivalents
|
$
463,889
|
|
$
329,266
|
Accounts receivable -
trade, net
|
711,203
|
|
671,464
|
Inventories
|
1,173,119
|
|
988,511
|
Prepaid expenses and
other
|
272,195
|
|
256,965
|
|
|
|
|
Total current
assets
|
2,620,406
|
|
2,246,206
|
|
|
|
|
Property, plant and
equipment, net
|
2,769,702
|
|
2,586,187
|
Goodwill
|
2,606,956
|
|
2,633,174
|
Other
intangibles
|
1,966,269
|
|
2,037,588
|
Other non-current
assets
|
944,989
|
|
868,203
|
Deferred income
taxes
|
40,498
|
|
40,873
|
|
|
|
|
Total assets
|
$
10,948,820
|
|
$
10,412,231
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Accounts
payable
|
$
970,558
|
|
$
692,338
|
Accrued
liabilities
|
832,518
|
|
855,638
|
Accrued income
taxes
|
6,710
|
|
3,070
|
Short-term
debt
|
693,790
|
|
939,423
|
Current portion of
long-term debt
|
753,578
|
|
2,844
|
|
|
|
|
Total current
liabilities
|
3,257,154
|
|
2,493,313
|
|
|
|
|
Long-term
debt
|
3,343,977
|
|
4,086,627
|
Other long-term
liabilities
|
719,742
|
|
787,058
|
Deferred income
taxes
|
328,403
|
|
288,004
|
|
|
|
|
Total
liabilities
|
7,649,276
|
|
7,655,002
|
|
|
|
|
Total stockholders'
equity
|
3,299,544
|
|
2,757,229
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
10,948,820
|
|
$
10,412,231
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/hershey-reports-fourth-quarter-and-full-year-2022-financial-results-provides-2023-outlook-301736709.html
SOURCE The Hershey Company