HERSHEY,
Pa., Feb. 8, 2024 /PRNewswire/ -- The
Hershey Company (NYSE: HSY) today announced net sales and
earnings for the fourth quarter and full-year ended December 31, 2023.
"We continue to operate in a dynamic environment, but we are
encouraged by the resilience of seasonal traditions and the
consumer response to innovation within our categories," said
Michele Buck, The Hershey Company
President and Chief Executive Officer. "While historic cocoa prices
are expected to limit earnings growth this year, we believe our
strong marketing plans, innovation and brand investments will drive
top-line growth and meet consumers' evolving needs. We are
elevating our focus on productivity and transformation to
strengthen our business and deliver peer leading performance over
the long-term."
Fourth-Quarter 2023 Financial Results
Summary1
- Consolidated net sales of $2,657.1
million, an increase of 0.2%.
- Organic, constant currency net sales decreased 0.1%.
- Reported net income of $349.0
million, or $1.70 per
share-diluted, a decrease of 11.5%.
- Adjusted earnings per share-diluted of $2.02, flat with the prior year.
1
All comparisons for the fourth quarter of 2023 are with respect
to the fourth quarter ended December 31, 2022.
|
2023 Full-Year Financial Results
Summary2
- Consolidated net sales of $11,165.0
million, an increase of 7.2%.
- Organic, constant currency net sales increased 7.0%.
- Reported net income of $1,861.8
million, or $9.06 per
share-diluted, an increase of 13.8%.
- Adjusted earnings per share-diluted of $9.59, an increase of 12.6%.
2
All comparisons for full-year 2023 are with respect to the
full-year ended December 31, 2022.
|
2024 Full-Year Financial Outlook Summary
The company expects net sales growth of 2% to 3%, driven
primarily by net price realization, and reported earnings per share
to be relatively flat as higher cocoa and sugar costs as well as
one-time expenses related to the Q2 ERP implementation and planned
incremental cost savings initiatives are expected to more than
offset higher sales, price realization, productivity,
administrative efficiencies and a lower tax rate. The company
projects flat adjusted earnings per share when excluding one-time
costs associated with the ERP implementation and incremental cost
savings initiatives.
2024 Full-Year
Outlook
|
|
Total
Company
|
Net sales
growth
|
|
2% to 3%
|
Reported earnings per
share growth
|
|
~0%
|
Adjusted earnings per
share growth
|
|
~0%
|
The company also expects:
- A reported and adjusted effective tax rate of approximately
13%;
- Other expense, which primarily reflects the write-down of
equity investments that qualify for a tax credit, of approximately
$220 million to $230 million;
- Interest expense of approximately $165
million to $175 million,
reflecting a higher interest rate environment; and
- Capital expenditures of approximately $600 million to $650
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.
The Company is implementing efforts to increase agility, enhance
automation, and support a more efficient operating model to deliver
its long-term business and financial goals. These initiatives are
expected to generate on-going supply chain, manufacturing, and
operating expense savings, net of reinvestment, of $300 million by 2026, of which $100 million is expected to be realized in 2024.
The company expects to record pre-tax charges of $200 million to $250
million in connection with these efforts, of which
approximately $25 million is
estimated to be non-cash charges. In Year 1, pre-tax charges are
estimated to be $110 million. The
charges the Company expects to incur in connection with these
actions are preliminary estimates and are subject to a number of
assumptions and risks, and actual results may differ
materially.
Below is a reconciliation of projected 2024 and full-year 2023
and 2022 earnings per share-diluted calculated in accordance with
U.S. generally accepted accounting principles (GAAP) to non-GAAP
adjusted earnings per share-diluted:
|
2024
(Projected)
|
|
2023
|
|
2022
|
Reported EPS –
Diluted
|
$9.00 -
$9.11
|
|
$9.06
|
|
$7.96
|
Derivative
Mark-to-Market Losses
|
—
|
|
0.29
|
|
0.38
|
Business Realignment
Activities
|
0.50 - 0.56
|
|
0.01
|
|
0.02
|
Acquisition and
Integration-Related Activities
|
0.15 - 0.20
|
|
0.37
|
|
0.24
|
Other Miscellaneous
Losses
|
—
|
|
—
|
|
0.07
|
Tax Effect of All
Adjustments Reflected Above
|
(0.17)
|
|
(0.14)
|
|
(0.15)
|
Adjusted EPS –
Diluted
|
$9.59
|
|
$9.59
|
|
$8.52
|
2024 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 2023 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, 2023
|
|
Percentage
Change as
Reported
|
|
Impact of
Foreign
Currency
Exchange
|
|
Percentage
Change on
Constant
Currency
Basis
|
|
Organic
Price
|
|
Organic
Volume/Mix
|
North America
Confectionery
|
2.1 %
|
|
— %
|
|
2.1 %
|
|
7.2 %
|
|
(5.1) %
|
|
|
|
|
|
|
|
|
|
|
North America Salty
Snacks
|
(24.6) %
|
|
— %
|
|
(24.6) %
|
|
1.5 %
|
|
(26.1) %
|
|
|
|
|
|
|
|
|
|
|
International
|
12.7 %
|
|
4.4 %
|
|
8.3 %
|
|
6.0 %
|
|
2.3 %
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
0.2 %
|
|
0.3 %
|
|
(0.1) %
|
|
6.5 %
|
|
(6.6) %
|
|
|
Twelve Months Ended
December 31, 2023
|
|
Percentage
Change as
Reported
|
|
Impact of
Foreign
Currency
Exchange
|
|
Percentage
Change on
Constant
Currency
Basis
|
|
Organic
Price
|
|
Organic
Volume/Mix
|
North America
Confectionery
|
6.9 %
|
|
(0.2) %
|
|
7.1 %
|
|
9.0 %
|
|
(1.9) %
|
|
|
|
|
|
|
|
|
|
|
North America Salty
Snacks
|
6.1 %
|
|
— %
|
|
6.1 %
|
|
5.4 %
|
|
0.7 %
|
|
|
|
|
|
|
|
|
|
|
International
|
11.2 %
|
|
3.4 %
|
|
7.8 %
|
|
4.7 %
|
|
3.1 %
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
7.2 %
|
|
0.2 %
|
|
7.0 %
|
|
8.3 %
|
|
(1.3) %
|
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 2023 Results
Consolidated net sales increased 0.2% to $2,657.1 million in the fourth quarter of 2023.
Organic, constant currency net sales decreased 0.1%, as net price
realization of 6.5 points was offset by decreased volume and
planned inventory declines within North America Salty Snacks
related to the Q4 ERP implementation.
Reported gross margin decreased 90 basis points to 42.3% in the
fourth quarter of 2023, driven by derivative mark-to-market losses.
Adjusted gross margin increased 50 basis points to 44.2% in the
fourth quarter of 2023. Net price realization and supply chain
productivity more than offset higher cocoa and sugar costs, volume
deleverage and negative sales mix.
Selling, marketing and administrative expenses increased 6.9% in
the fourth quarter of 2023 versus the prior-year period, primarily
driven by capability investments, wage inflation and media
increases. Advertising and related consumer marketing expenses
increased by 5.8% in the fourth quarter of 2023 versus the same
period last year, driven by higher investment in the U.S. Selling,
marketing and administrative expenses, excluding advertising and
related consumer marketing, increased 7.3% versus the fourth
quarter of 2022, driven by capability and technology investments,
and wage and benefits inflation.
Fourth-quarter 2023 reported operating profit of $464.3 million decreased 11.8%, resulting in an
operating profit margin of 17.5%, a decrease of 240 basis points
versus the prior-year period. Adjusted operating profit of
$544.2 million decreased 2.0% versus
the fourth quarter of 2022, resulting in adjusted operating profit
margin of 20.5%, a decrease of 40 basis points. Profit decreases in
both reported and adjusted operating profit were driven by
increased brand and capability investment and higher wages, which
more than offset price realization and productivity.
The reported effective tax rate in the fourth quarter of 2023
was (9.2)% compared to (9.1)% in the fourth quarter of 2022, a
decrease of 10 basis points. The adjusted effective tax rate in the
fourth quarter of 2023 was (3.8)% compared to (6.5)% in the fourth
quarter of 2022, an increase of 270 basis points. The adjusted
effective tax rate increase was driven by lower renewable energy
tax credits versus the prior-year period.
The company's fourth-quarter 2023 results, as prepared in
accordance with GAAP, included items positively impacting
comparability of $79.9 million, or
$0.32 per share-diluted. For the
fourth quarter of 2022, items positively impacting comparability
totaled $28.7 million, or
$0.10 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,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
|
|
|
|
|
|
|
|
Derivative
Mark-to-Market Losses
|
$
53.7
|
|
$
14.7
|
|
$
0.26
|
|
$
0.07
|
Business Realignment
Activities
|
—
|
|
2.0
|
|
—
|
|
0.01
|
Acquisition and
Integration-Related Activities
|
26.2
|
|
12.0
|
|
0.13
|
|
0.06
|
Tax Effect of All
Adjustments Reflected Above
|
—
|
|
—
|
|
(0.07)
|
|
(0.04)
|
|
$
79.9
|
|
$
28.7
|
|
$
0.32
|
|
$
0.10
|
|
|
Pre-Tax
(millions)
|
|
Earnings Per
Share-Diluted
|
|
Twelve Months
Ended
|
|
Twelve Months
Ended
|
|
December 31,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
|
|
|
|
|
|
|
|
Derivative
Mark-to-Market Losses
|
$
58.9
|
|
$
78.2
|
|
$
0.29
|
|
$
0.38
|
Business Realignment
Activities
|
3.4
|
|
4.4
|
|
0.01
|
|
0.02
|
Acquisition and
Integration-Related Activities
|
75.9
|
|
48.5
|
|
0.37
|
|
0.24
|
Other Miscellaneous
Losses
|
—
|
|
13.6
|
|
—
|
|
0.07
|
Tax Effect of All
Adjustments Reflected Above
|
—
|
|
—
|
|
(0.14)
|
|
(0.15)
|
|
$
138.2
|
|
$
144.6
|
|
$
0.53
|
|
$
0.56
|
The following are comments about segment performance for the
fourth quarter of 2023 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 $2,220.2 million in the fourth quarter of 2023,
an increase of 2.1% versus the same period last year. Organic,
constant currency net sales increased 2.1%, as 7.2-points of net
price realization was partially offset by volume declines related
to price elasticity in everyday candy.
Hershey's U.S. candy, mint and
gum (CMG) retail takeaway for the twelve-week period ended
December 31, 2023 in the
multi-outlet combined plus convenience store channels (MULO+C)
increased 3.6%. Hershey's CMG
share declined by 38 basis points as seasonal and refreshment share
gains were offset by declines in everyday chocolate and sweets
share. Organic net sales growth trailed retail takeaway due to the
timing of seasonal shipments versus sell-through.
North America Confectionery segment income was $724.6 million in the fourth quarter of 2023,
reflecting an increase of 3.0% versus the prior-year period. This
resulted in segment margin of 32.6%, an increase of 30 basis
points. Gains were driven by net sales growth and gross margin
expansion, which more than offset higher brand and capability
investment.
North America Salty Snacks
Hershey's North America Salty
Snacks segment net sales were $205.2
million in the fourth quarter of 2023, a decrease of 24.6%
versus the same period last year. Volume decreased 26.1%,
reflecting an approximate 16-point headwind from planned inventory
declines related to our ERP implementation in October 2023. Excluding this inventory impact,
volume declined high-single-digits due to category softness within
the ready-to-eat popcorn category.
Hershey's U.S. salty snack
retail takeaway in MULO+C declined 7.0% in the 12-week period ended
December 31, 2023. SkinnyPop
ready-to-eat popcorn retail sales declined 12.9%, reflecting
continued softness in the popcorn category and planned reductions
in advertising and merchandising in the period following the
October ERP upgrade, resulting in a category share decline of 135
basis points in the fourth quarter. Dot's Homestyle Pretzels
retail sales increased 6.8%, resulting in a 44-basis point pretzel
category share gain.
North America Salty Snacks segment income was $10.4 million in the fourth quarter of 2023,
reflecting a decrease of 81.7% versus the prior-year period. This
resulted in a segment margin of 5.1%, a decrease of 1,570 basis
points versus the prior-year period. Profit and margin contraction
were driven by volume deleverage, increased commodity costs, and
higher brand and capability investments, which more than offset
lower manufacturing costs and higher productivity.
International
Fourth-quarter 2023 net sales for Hershey's International segment increased
12.7% versus the same period last year to $231.7 million. Organic, constant currency net
sales increased 8.3% driven by price realization and 2.3-points of
volume growth. The volume improvement reflects double-digit growth
in Latin America, World Travel
Retail, and Europe, and
high-single-digit growth in India.
This more than offset the impact of the discontinuation of a dairy
beverage product line in Mexico in
the second quarter of 2023.
International segment income was $20.4
million in the fourth quarter of 2023, a $20.5 million increase versus the prior year
period driven by sales growth and gross margin expansion. This
resulted in a segment margin of 8.8%, an increase of 890 basis
points versus the prior year period.
Unallocated Corporate Expense
Hershey's unallocated corporate
expense in the fourth quarter of 2023 was $211.3 million, an increase of $6.5 million, or 3.2% versus the same period of
2022. This increase was driven by capability and technology
investments, including the upgrade of the Company's ERP system and
related amortization, as well as higher employee wages, partially
offset by lapping a non-income tax reserve in the prior-year
period.
Live Webcast
At approximately 7 a.m. (Eastern
time) today, Hershey will
post a pre-recorded management discussion of its fourth-quarter and
full-year 2023 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 2023, 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,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
Reported gross
profit
|
$
1,123,142
|
|
$
1,144,806
|
|
$
4,997,816
|
|
$
4,498,785
|
Derivative
mark-to-market losses
|
53,723
|
|
15,258
|
|
58,937
|
|
78,782
|
Business realignment
activities
|
—
|
|
—
|
|
527
|
|
3
|
Acquisition and
integration-related
activities
|
(2,256)
|
|
—
|
|
(1,702)
|
|
4,041
|
Non-GAAP gross
profit
|
$
1,174,609
|
|
$
1,160,064
|
|
$
5,055,578
|
|
$
4,581,611
|
|
|
|
|
|
|
|
|
Reported operating
profit
|
$
464,329
|
|
$
526,646
|
|
$
2,560,867
|
|
$
2,260,787
|
Derivative
mark-to-market losses
|
53,723
|
|
14,658
|
|
58,937
|
|
78,182
|
Business realignment
activities
|
—
|
|
2,044
|
|
3,440
|
|
4,417
|
Acquisition and
integration-related
activities
|
26,163
|
|
12,001
|
|
75,853
|
|
48,482
|
Other miscellaneous
losses
|
—
|
|
—
|
|
—
|
|
13,568
|
Non-GAAP operating
profit
|
$
544,215
|
|
$
555,349
|
|
$
2,699,097
|
|
$
2,405,436
|
|
|
|
|
|
|
|
|
Reported (benefit)
provision for income
taxes
|
$
(29,367)
|
|
$
(33,174)
|
|
$
310,077
|
|
$
272,254
|
Derivative
mark-to-market losses*
|
7,931
|
|
4,521
|
|
10,190
|
|
13,508
|
Business realignment
activities*
|
—
|
|
567
|
|
777
|
|
1,119
|
Acquisition and
integration-related
activities*
|
6,328
|
|
2,804
|
|
18,256
|
|
11,525
|
Other miscellaneous
losses*
|
—
|
|
—
|
|
—
|
|
3,256
|
Non-GAAP (benefit)
provision for income
taxes
|
$
(15,108)
|
|
$
(25,282)
|
|
$
339,300
|
|
$
301,662
|
|
|
|
|
|
|
|
|
Reported net
income
|
$
349,042
|
|
$
396,296
|
|
$
1,861,787
|
|
$
1,644,817
|
Derivative
mark-to-market losses
|
45,792
|
|
10,137
|
|
48,747
|
|
64,674
|
Business realignment
activities
|
—
|
|
1,477
|
|
2,663
|
|
3,298
|
Acquisition and
integration-related
activities
|
19,835
|
|
9,197
|
|
57,597
|
|
36,957
|
Other miscellaneous
losses
|
—
|
|
—
|
|
—
|
|
10,312
|
Non-GAAP net
income
|
$
414,669
|
|
$
417,107
|
|
$
1,970,794
|
|
$
1,760,058
|
Reconciliation of
Certain Non-GAAP Financial Measures
|
Consolidated
results
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December 31,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
Reported EPS -
Diluted
|
$
1.70
|
|
$
1.92
|
|
$
9.06
|
|
$
7.96
|
Derivative
mark-to-market losses
|
0.26
|
|
0.07
|
|
0.29
|
|
0.38
|
Business realignment
activities
|
—
|
|
0.01
|
|
0.01
|
|
0.02
|
Acquisition and
integration-related
activities
|
0.13
|
|
0.06
|
|
0.37
|
|
0.24
|
Other miscellaneous
losses
|
—
|
|
—
|
|
—
|
|
0.07
|
Tax effect of all
adjustments reflected
above**
|
(0.07)
|
|
(0.04)
|
|
(0.14)
|
|
(0.15)
|
Non-GAAP EPS -
Diluted
|
$
2.02
|
|
$
2.02
|
|
$
9.59
|
|
$
8.52
|
|
|
|
|
|
|
|
|
* 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,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
As reported gross
margin
|
42.3 %
|
|
43.2 %
|
|
44.8 %
|
|
43.2 %
|
Non-GAAP gross margin
(1)
|
44.2 %
|
|
43.7 %
|
|
45.3 %
|
|
44.0 %
|
|
|
|
|
|
|
|
|
As reported operating
profit margin
|
17.5 %
|
|
19.9 %
|
|
22.9 %
|
|
21.7 %
|
Non-GAAP operating
profit margin (2)
|
20.5 %
|
|
20.9 %
|
|
24.2 %
|
|
23.1 %
|
|
|
|
|
|
|
|
|
As reported effective
tax rate
|
(9.2) %
|
|
(9.1) %
|
|
14.3 %
|
|
14.2 %
|
Non-GAAP effective tax
rate (3)
|
(3.8) %
|
|
(6.5) %
|
|
14.7 %
|
|
14.6 %
|
|
|
(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 2023 business realignment charges related
primarily to other third-party costs related to this program, as
well as severance and employee benefit costs. For the three-month
period of 2023 there were no business realignment activities.
During the three- and 12-month periods of 2022, business
realignment charges related primarily to other third-party costs
related to this program, as well as severance and employee benefit
costs. This program was completed in 2023.
Acquisition and Integration-Related Activities: During the
three- and 12-month periods of 2023, we incurred costs related to
the acquisition of two manufacturing plants from Weaver Popcorn
Manufacturing, Inc., the integration of the 2021 acquisitions of
Dot's Pretzels, LLC ("Dot's") and Pretzels Inc. ("Pretzels") into
our North America Salty Snacks segment and costs related to
building and upgrading our new ERP system for implementation across
our North America Salty Snacks segment in the fourth quarter of
2023. During the three- and 12-month periods of 2022, we incurred
costs related to the integration of the 2021 acquisitions of Lily's
Sweets, LLC, Dot's and Pretzels.
Other Miscellaneous Losses: In 2022, we recorded a loss on the
sale of non-operating assets located in Pennsylvania.
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, 2022 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, 2023 and December 31,
2022
|
(unaudited) (in
thousands except percentages and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December 31,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$ 2,657,111
|
|
$ 2,652,338
|
|
$
11,164,992
|
|
$
10,419,294
|
Cost of
sales
|
|
1,533,969
|
|
1,507,532
|
|
6,167,176
|
|
5,920,509
|
Gross profit
|
|
|
1,123,142
|
|
1,144,806
|
|
4,997,816
|
|
4,498,785
|
|
|
|
|
|
|
|
|
Selling, marketing and
administrative expense
|
658,813
|
|
616,445
|
|
2,436,508
|
|
2,236,009
|
Business realignment
costs
|
—
|
|
1,715
|
|
441
|
|
1,989
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
464,329
|
|
526,646
|
|
2,560,867
|
|
2,260,787
|
Interest expense,
net
|
|
37,684
|
|
35,587
|
|
151,785
|
|
137,557
|
Other (income) expense,
net
|
|
106,970
|
|
127,937
|
|
237,218
|
|
206,159
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
319,675
|
|
363,122
|
|
2,171,864
|
|
1,917,071
|
(Benefit) provision for
income taxes
|
|
(29,367)
|
|
(33,174)
|
|
310,077
|
|
272,254
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to The Hershey Company
|
$
349,042
|
|
$
396,296
|
|
$ 1,861,787
|
|
$ 1,644,817
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
- Basic
|
- Common
|
$
1.75
|
|
$
1.98
|
|
$
9.31
|
|
$
8.22
|
|
- Diluted
|
- Common
|
$
1.70
|
|
$
1.92
|
|
$
9.06
|
|
$
7.96
|
|
- Basic
|
- Class B
|
$
1.59
|
|
$
1.80
|
|
$
8.52
|
|
$
7.47
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
- Basic
|
- Common
|
150,083
|
|
147,173
|
|
149,499
|
|
146,713
|
|
- Diluted
|
- Common
|
205,357
|
|
206,291
|
|
205,547
|
|
206,575
|
|
- Basic
|
- Class B
|
54,614
|
|
58,114
|
|
55,239
|
|
58,822
|
|
|
|
|
|
|
|
|
|
|
Key margins:
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
42.3 %
|
|
43.2 %
|
|
44.8 %
|
|
43.2 %
|
Operating profit
margin
|
|
17.5 %
|
|
19.9 %
|
|
22.9 %
|
|
21.7 %
|
Net margin
|
|
13.1 %
|
|
14.9 %
|
|
16.7 %
|
|
15.8 %
|
The Hershey
Company
|
Supplementary
Information – Segment Results
|
for the periods
ended December 31, 2023 and December 31,
2022
|
(unaudited) (in
thousands except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
December 31,
2023
|
|
December 31,
2022
|
|
%
Change
|
|
December 31,
2023
|
|
December 31,
2022
|
|
%
Change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$
2,220,248
|
|
$
2,174,785
|
|
2.1 %
|
|
$
9,123,139
|
|
$
8,536,480
|
|
6.9 %
|
North America Salty Snacks
|
|
205,157
|
|
271,962
|
|
(24.6) %
|
|
1,092,689
|
|
1,029,405
|
|
6.1 %
|
International
|
|
231,706
|
|
205,591
|
|
12.7 %
|
|
949,164
|
|
853,409
|
|
11.2 %
|
Total
|
|
$
2,657,111
|
|
$
2,652,338
|
|
0.2 %
|
|
$ 11,164,992
|
|
$ 10,419,294
|
|
7.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$
724,647
|
|
$
703,502
|
|
3.0 %
|
|
$
3,117,044
|
|
$
2,811,066
|
|
10.9 %
|
North America Salty Snacks
|
|
10,399
|
|
56,685
|
|
(81.7) %
|
|
158,333
|
|
159,935
|
|
(1.0) %
|
International
|
|
20,421
|
|
(131)
|
|
NM
|
|
148,259
|
|
107,927
|
|
37.4 %
|
Total segment
income
|
|
755,467
|
|
760,056
|
|
(0.6) %
|
|
3,423,636
|
|
3,078,928
|
|
11.2 %
|
Unallocated corporate
expense (1)
|
|
211,253
|
|
204,707
|
|
3.2 %
|
|
724,537
|
|
673,492
|
|
7.6 %
|
Mark-to-market
adjustment for
commodity derivatives (2)
|
|
53,722
|
|
14,658
|
|
NM
|
|
58,939
|
|
78,182
|
|
(24.6) %
|
Costs associated with
business
realignment initiatives
|
|
—
|
|
2,044
|
|
(100.0) %
|
|
3,440
|
|
4,417
|
|
(22.1) %
|
Acquisition and
integration-related activities
|
|
26,163
|
|
12,001
|
|
118.0 %
|
|
75,853
|
|
48,482
|
|
56.5 %
|
Other miscellaneous
losses
|
|
—
|
|
—
|
|
NM
|
|
—
|
|
13,568
|
|
(100.0) %
|
Operating
profit
|
|
464,329
|
|
526,646
|
|
(11.8) %
|
|
2,560,867
|
|
2,260,787
|
|
13.3 %
|
Interest expense,
net
|
|
37,684
|
|
35,587
|
|
5.9 %
|
|
151,785
|
|
137,557
|
|
10.3 %
|
Other (income) expense,
net
|
|
106,970
|
|
127,937
|
|
(16.4) %
|
|
237,218
|
|
206,159
|
|
15.1 %
|
Income before income
taxes
|
|
$
319,675
|
|
$
363,122
|
|
(12.0) %
|
|
$
2,171,864
|
|
$
1,917,071
|
|
13.3 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes centrally-managed (a) corporate functional costs relating
to legal, treasury, finance, and human resources, (b) expenses
associated with the oversight and administration of our global
operations, including warehousing, distribution and manufacturing,
information systems and global shared services, (c) non-cash
stock-based compensation expense, 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,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
Segment income (loss)
as a percent of net sales:
|
|
|
|
|
|
|
|
|
North America
Confectionery
|
|
32.6 %
|
|
32.3 %
|
|
34.2 %
|
|
32.9 %
|
North America Salty
Snacks
|
|
5.1 %
|
|
20.8 %
|
|
14.5 %
|
|
15.5 %
|
International
|
|
8.8 %
|
|
(0.1) %
|
|
15.6 %
|
|
12.6 %
|
The Hershey
Company
|
Consolidated Balance
Sheets
|
as of
December 31, 2023 and December 31, 2022
|
(in thousands of
dollars)
|
|
|
|
|
Assets
|
December 31,
2023
|
|
December 31,
2022
|
|
(unaudited)
|
|
|
Cash and cash
equivalents
|
$
401,902
|
|
$
463,889
|
Accounts receivable -
trade, net
|
823,617
|
|
711,203
|
Inventories
|
1,340,996
|
|
1,173,119
|
Prepaid expenses and
other
|
345,588
|
|
272,195
|
|
|
|
|
Total current
assets
|
2,912,103
|
|
2,620,406
|
|
|
|
|
Property, plant and
equipment, net
|
3,309,678
|
|
2,769,702
|
Goodwill
|
2,696,050
|
|
2,606,956
|
Other
intangibles
|
1,879,229
|
|
1,966,269
|
Other non-current
assets
|
1,061,427
|
|
944,989
|
Deferred income
taxes
|
44,454
|
|
40,498
|
|
|
|
|
Total assets
|
$
11,902,941
|
|
$
10,948,820
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Accounts
payable
|
$
1,086,183
|
|
$
970,558
|
Accrued
liabilities
|
867,815
|
|
832,518
|
Accrued income
taxes
|
29,457
|
|
6,710
|
Short-term
debt
|
719,839
|
|
693,790
|
Current portion of
long-term debt
|
305,058
|
|
753,578
|
|
|
|
|
Total current
liabilities
|
3,008,352
|
|
3,257,154
|
|
|
|
|
Long-term
debt
|
3,789,132
|
|
3,343,977
|
Other long-term
liabilities
|
660,673
|
|
719,742
|
Deferred income
taxes
|
345,698
|
|
328,403
|
|
|
|
|
Total
liabilities
|
7,803,855
|
|
7,649,276
|
|
|
|
|
Total stockholders'
equity
|
4,099,086
|
|
3,299,544
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
11,902,941
|
|
$
10,948,820
|
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SOURCE The Hershey Company