HERSHEY, Pa., July 29, 2021 /PRNewswire/ -- The Hershey
Company (NYSE: HSY) today announced net sales and earnings for the
second quarter ended July 4, 2021,
and updated its full-year financial outlook.
"Our business continued to excel in the second quarter with
robust recovery in away-from-home consumption and international
markets and sustained elevated at-home consumption," said
Michele Buck, The Hershey Company
President and Chief Executive Officer. "This strong consumer
demand, coupled with our executional excellence, healthy balance
sheet and relentless focus on delivering against our strategic
initiatives in the quarter enabled us to support and expand our
portfolio, invest in our people and deliver strong shareholder
returns. As trends continue to fluctuate, we are confident in
our ability to adapt with our consumers and retailers and continue
meeting their needs in the future."
Second-Quarter 2021 Financial Results
Summary1
- Consolidated net sales of $1,989.4
million, an increase of 16.5%.
- Organic, constant currency net sales increased 15.5%.
- Foreign currency exchange was a 1.0 point benefit to net
sales.
- Reported net income of $301.2
million, or $1.45 per
share-diluted, an increase of 12.4%.
- Adjusted earnings per share-diluted of $1.47, an increase of 12.2%.
1 All comparisons for the
second quarter of 2021 are with respect to the
second quarter ended June 28, 2020
2021 Full-Year Financial Outlook
The company is updating its 2021 net sales and earnings outlook
to reflect the strength of its performance in the second quarter
and the acquisition of Lily's Sweets, LLC ("Lily's"):
- Full-year net sales growth is now expected to be in the range
of 6% to 8%, an increase from the previously communicated range of
4% to 6%. This increase is driven by stronger than anticipated
recovery in the company's away-from-home business and international
markets, as well as the acquisition of Lily's.
-
- The net impact of acquisitions and divestitures is anticipated
to be a 0.7 point benefit.
- Full-year reported earnings per share are now expected to be in
the range of $6.59 to $6.85, an increase of 8% to 12% from $6.11 in fiscal 2020. This slight decrease versus
the previously communicated range of 9% to 12% is due to
incremental costs to execute and integrate the Lily's
acquisition.
- Full-year adjusted earnings per share are still expected to be
in the $6.79 to $6.92 range, unchanged from the previously
communicated 8% to 10% increase from $6.29 in fiscal 2020. Increased profit from
higher sales is expected to be offset primarily by incremental tax
reserves incurred in the second quarter in connection with an
adverse ruling in a non-U.S. tax litigation matter, as well as
higher supply chain costs associated with servicing higher
volume.
The company also expects:
- A reported and adjusted effective tax rate in the range of 17
to 18%,
- Other expense of approximately $120 to $130
million,
- Interest expense of approximately $130
million, and
- Capital expenditures of approximately $550 million, driven by key initiatives including
the company's ongoing ERP transformation and supply chain
initiatives.
Below is a reconciliation of projected 2021 and full-year 2020
earnings per share-diluted calculated in accordance with U.S.
generally accepted accounting principles (GAAP) to non-GAAP
adjusted earnings per share-diluted:
|
2021
(Projected)
|
|
2020
|
Reported EPS –
Diluted
|
$6.59 –
$6.85
|
|
$6.11
|
Derivative
Mark-to-Market Losses
|
—
|
|
0.03
|
Business Realignment
Activities
|
0.07 –
0.20
|
|
0.15
|
Acquisition-Related
Costs
|
0.04 –
0.06
|
|
0.03
|
Long-Lived Asset
Impairment Charges
|
—
|
|
0.04
|
Pension Settlement
Charges Relating to Company-Directed Initiatives
|
—
|
|
0.02
|
Noncontrolling
Interest Share of Business Realignment and Impairment
Charges
|
0.01
|
|
(0.02)
|
Other Miscellaneous
Benefits
|
(0.03)
|
|
(0.01)
|
Tax Effect of All
Adjustments Reflected Above
|
(0.02 –
0.04)
|
|
(0.06)
|
Adjusted EPS –
Diluted
|
$6.79 –
$6.92
|
|
$6.29
|
2021 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 will be 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.
Second-Quarter 2021 Results
Consolidated net sales
were $1,989.4 million in the second
quarter of 2021 versus $1,707.3
million in the year ago period, an increase of 16.5%.
Robust recovery in away-from-home consumption and in the company's
international markets, as well as continued strength in take-home
consumption, resulted in volume gains of 14.5 points. Foreign
exchange and net price realization each contributed an additional
1.0 point benefit.
Reported gross margin was 46.5% in the second quarter of 2021,
compared to 46.4% in the second quarter of 2020, an increase of 10
basis points. This increase was driven by higher derivative
mark-to-market commodity gains. Adjusted gross margin
was 46.4% in the second quarter of 2021, in line with the prior
year period. Volume growth, lower COVID-19 related costs and
productivity initiatives offset increased supply chain costs
related to servicing elevated demand, higher labor costs and
packaging inflation.
Selling, marketing and administrative expenses increased 14.3%
in the second quarter of 2021 versus the second quarter of 2020,
primarily driven by increases in corporate expenses. Advertising
and related consumer marketing expenses increased 9.9% in the
second quarter of 2021 versus the same period last year driven by
reactivation of key sponsorships in the North America segment along with increased
investment in core brands in the International & Other
segment. Selling, marketing and administrative expenses,
excluding advertising and related consumer marketing, increased
16.6% versus the second quarter of 2020. This increase was
driven by higher incentive compensation accruals and elevated
capability investments and medical claims, against lower 2020
levels due to COVID-19.
Second-quarter 2021 reported operating profit of $456.7 million increased 19.1% versus the second
quarter of 2020, resulting in an operating profit margin of 23.0%,
an increase of 50 basis points. Adjusted operating profit of
$459.5 million increased 19.0% versus
the second quarter of 2020, resulting in an adjusted operating
profit margin of 23.1%, an increase of 50 basis points. The
increases in both reported and adjusted operating profit were
driven by higher volumes.
The reported effective tax rate in the second quarter of 2021
was 28.0%, an increase of 820 basis points versus the second
quarter of 2020. The adjusted effective tax rate in the
second quarter of 2021 was 27.4%, an increase of 800 basis points
versus the second quarter of 2020. Both the reported and
adjusted effective tax rate increases were driven primarily by
incremental tax reserves incurred in connection with an adverse
ruling in a non-U.S. tax litigation matter, as well as lower tax
credits versus the year ago period.
The company's second-quarter 2021 results, as prepared in
accordance with GAAP, included items positively impacting
comparability of $2.8 million, or
$0.02 per share-diluted. For
the second quarter of 2020, items positively impacting
comparability totaled $3.8 million,
or $0.02 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
|
|
July 4,
2021
|
|
June 28,
2020
|
|
July 4,
2021
|
|
June 28,
2020
|
|
|
|
|
|
|
|
|
Derivative
Mark-to-Market (Gains) Losses
|
$
|
(3.4)
|
|
|
$
|
0.5
|
|
|
$
|
(0.02)
|
|
|
$
|
—
|
|
Business Realignment
Activities
|
3.5
|
|
|
1.3
|
|
|
0.03
|
|
|
0.01
|
|
Acquisition-Related
Activities
|
7.3
|
|
|
(0.6)
|
|
|
0.04
|
|
|
—
|
|
Pension Settlement
Charges Relating to Company-
Directed Initiatives
|
—
|
|
|
1.9
|
|
|
—
|
|
|
0.01
|
|
Long-Lived Asset
Impairment Charges
|
—
|
|
|
1.6
|
|
|
—
|
|
|
—
|
|
Noncontrolling
Interest Share of Business
Realignment and Impairment Charges
|
—
|
|
|
(0.9)
|
|
|
—
|
|
|
(0.01)
|
|
Other Miscellaneous
Benefits
|
(4.6)
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
Tax effect of all
adjustments reflected above
|
—
|
|
|
—
|
|
|
(0.01)
|
|
|
0.01
|
|
|
$
|
2.8
|
|
|
$
|
3.8
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
The following are comments about segment performance for the
second quarter of 2021 versus the year-ago period. See the schedule
of supplementary information within this press release for
additional information on segment net sales and profit.
North America (U.S. and
Canada)
Hershey's North
America segment net sales were $1,779.2 million in the second quarter of 2021,
an increase of 12.3% versus the same period last year. Volume
gains contributed 11.8 points to net sales growth driven by strong
recovery in the away-from-home consumption as well as continued
elevated at-home consumption. Foreign currency exchange was a
0.7-point benefit. Net price realization and divestitures
were each a 0.1 point headwind2.
Total Hershey U.S. retail takeaway, excluding Lily's, for the
twelve-week period ending July 18,
20213 in the expanded multi-outlet combined plus
convenience store channels (IRI MULO
+ C-Stores) increased 6.5% versus the prior-year period.
Retail takeaway lagged net sales growth in the second quarter due
to strong growth in non-measured channels, as well as increases in
retailer and distributor inventory levels. Hershey's U.S. candy, mint and gum (CMG)
retail takeaway increased 6.5%, driven by continued strength in
everyday take-home chocolate, along with recovery of certain parts
of the portfolio negatively impacted by COVID-19 including instant
consumables and refreshment products. Hershey's chocolate instant consumables and
refreshment products increased 5.6% and 26.7%, respectively, as
mobility and convenience store trips returned to pre-pandemic
levels and social distancing and mask wearing declined as more of
the U.S. population became vaccinated. Despite growth across
all segments of confection, Hershey's CMG share declined by approximately
105 basis points in the latest 12 weeks, primarily a result of the
company's significant share gains in the year ago period. On
a two-year basis, Hershey gained
135 basis points of CMG share in the latest period.
Hershey's salty snacks sales
increased 25.6% in the last twelve weeks driven by strong velocity
gains in both Skinny Pop and Pirate's Booty. Skinny Pop
gained 275 basis points of ready-to-eat popcorn share in the latest
period, and 200 basis points of share on a two-year basis.
This strength was slightly offset by declines in Hershey's baking and syrup products.
Sales of Hershey's baking
decreased 17.9% in the latest period, as consumers baked less than
the prior year period as mobility increased, though takeaway is
still positive on a two-year basis.
Gross margin decreased 50 basis points in the second quarter
driven by higher supply chain costs due to both increased demand
and inflation, which were partially offset by manufacturing
leverage and lower COVID-19 costs versus the prior year
period. North America
advertising and related consumer marketing expenses increased 8.4%
in the second quarter of 2021 versus the same period last year
driven by a slight increase in support on core brands and the
sponsorship of NCAA March Madness and the Olympics that were
canceled in the prior year due to COVID-19. Sales strength
was partially offset by gross margin headwinds and increased
operating expenses, resulting in a segment income increase of 13.7%
to $565.9 million in the second
quarter of 2021, compared to $497.6
million in the second quarter of 2020.
2 Reflects the 2020 divestitures of KRAVE
Pure Foods, Inc. (Krave) and the Scharffen Berger and Dagoba
brands
3 Includes candy, mint, gum, salty snacks, and
grocery items
International and Other
Second-quarter 2021 net sales
for Hershey's International and
Other segment increased 70.2% versus the same period last year to
$210.2 million. Excluding a 5.7
point benefit from foreign currency exchange rates, constant
currency net sales increased 64.5%. Volume and price
realization were a 49.5 point and 15.0 point benefit,
respectively.
The International and Other segment reported a $42.2 million profit in the second quarter of
2021, reflecting an increase of $46.1
million versus the prior year period. Profit increases
were driven by volume gains, net price realization and continued
prudent cost management.
Unallocated Corporate Expense
Hershey's unallocated corporate expense in the
second quarter of 2021 was $148.6
million, an increase of $41.1
million, or 38.2% versus the same period of 2020. This
increase was driven by higher incentive compensation accruals and
elevated capability investments and medical claims against deflated
2020 levels due to COVID-19.
Live Webcast
At approximately 7
a.m. (Eastern time) today, Hershey will post a pre-recorded management
discussion of its second-quarter 2021 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 second-quarter 2021,
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 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
|
July 4,
2021
|
|
June 28,
2020
|
Reported gross
profit
|
$
|
925,445
|
|
|
$
|
792,552
|
|
Derivative
mark-to-market (gains) losses
|
(3,385)
|
|
|
487
|
|
Business realignment
activities
|
1,042
|
|
|
—
|
|
Non-GAAP gross
profit
|
$
|
923,102
|
|
|
$
|
793,039
|
|
|
|
|
|
Reported operating
profit
|
$
|
456,675
|
|
|
$
|
383,373
|
|
Derivative
mark-to-market (gains) losses
|
(3,385)
|
|
|
487
|
|
Business realignment
activities
|
3,469
|
|
|
1,275
|
|
Acquisition-related
activities
|
7,337
|
|
|
(612)
|
|
Long-lived asset
impairment charges
|
—
|
|
|
1,600
|
|
Other miscellaneous
benefits
|
(4,585)
|
|
|
—
|
|
Non-GAAP operating
profit
|
$
|
459,511
|
|
|
$
|
386,123
|
|
|
|
|
|
Reported provision
for income taxes
|
$
|
117,186
|
|
|
$
|
66,035
|
|
Derivative
mark-to-market (gains) losses*
|
(2,383)
|
|
|
(902)
|
|
Business realignment
activities*
|
404
|
|
|
268
|
|
Acquisition-related
activities*
|
1,746
|
|
|
(141)
|
|
Pension settlement
charges relating to Company-directed initiatives*
|
—
|
|
|
460
|
|
Other miscellaneous
benefits*
|
(1,528)
|
|
|
—
|
|
Non-GAAP provision
for income taxes
|
$
|
115,425
|
|
|
$
|
65,720
|
|
|
|
|
|
Reported net
income
|
$
|
301,230
|
|
|
$
|
268,901
|
|
Derivative
mark-to-market (gains) losses
|
(1,002)
|
|
|
1,389
|
|
Business realignment
activities
|
3,065
|
|
|
1,007
|
|
Acquisition-related
activities
|
5,591
|
|
|
(471)
|
|
Pension settlement
charges relating to Company-directed initiatives
|
—
|
|
|
1,481
|
|
Long-lived asset
impairment charges
|
—
|
|
|
1,600
|
|
Noncontrolling
interest share of business realignment and impairment
charges
|
—
|
|
|
(875)
|
|
Other miscellaneous
benefits
|
(3,057)
|
|
|
—
|
|
Non-GAAP net
income
|
$
|
305,827
|
|
|
$
|
273,032
|
|
|
|
|
|
Reported EPS -
Diluted
|
$
|
1.45
|
|
|
$
|
1.29
|
|
Derivative
mark-to-market (gains) losses
|
(0.02)
|
|
|
—
|
|
Business realignment
activities
|
0.03
|
|
|
0.01
|
|
Acquisition-related
activities
|
0.04
|
|
|
—
|
|
Pension settlement
charges relating to Company-directed initiatives
|
—
|
|
|
0.01
|
|
Noncontrolling
interest share of business realignment and impairment
charges
|
—
|
|
|
(0.01)
|
|
Other miscellaneous
benefits
|
(0.02)
|
|
|
—
|
|
Tax effect of all
adjustments reflected above**
|
(0.01)
|
|
|
0.01
|
|
Non-GAAP EPS -
Diluted
|
$
|
1.47
|
|
|
$
|
1.31
|
|
|
* 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
|
|
July 4,
2021
|
|
June 28,
2020
|
As reported gross
margin
|
46.5
|
%
|
|
46.4
|
%
|
Non-GAAP gross margin
(1)
|
46.4
|
%
|
|
46.4
|
%
|
|
|
|
|
As reported operating
profit margin
|
23.0
|
%
|
|
22.5
|
%
|
Non-GAAP operating
profit margin (2)
|
23.1
|
%
|
|
22.6
|
%
|
|
|
|
|
As reported effective
tax rate
|
28.0
|
%
|
|
19.8
|
%
|
Non-GAAP effective
tax rate (3)
|
27.4
|
%
|
|
19.4
|
%
|
|
|
(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).
|
We present 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 average foreign currency exchange rate between the
current fiscal period and the corresponding period of the prior
fiscal year.
A reconciliation between reported net sales growth rates and (i)
constant currency net sales growth rates and (ii) organic constant
currency net sales growth rates is provided below:
|
Three Months Ended
July 4, 2021
|
|
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
|
North
America
|
12.3
|
%
|
|
0.7
|
%
|
|
11.6
|
%
|
|
(0.1)
|
%
|
|
11.7
|
%
|
|
|
|
|
|
|
|
|
|
|
International and
Other
|
70.2
|
%
|
|
5.7
|
%
|
|
64.5
|
%
|
|
—
|
%
|
|
64.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
16.5
|
%
|
|
1.0
|
%
|
|
15.5
|
%
|
|
—
|
%
|
|
15.5
|
%
|
Appendix I
Details of the charges included in GAAP
results, as summarized in the press release (above), are as
follows:
Derivative Mark-to-Market (Gains) Losses: The
mark-to-market (gains) losses 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
(gains) losses 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 second quarter of 2021, business
realignment charges related primarily to severance expenses and
other third-party costs related to this program. During the first
quarter of 2017, we commenced the Margin for Growth Program to
improve global efficiency and effectiveness, optimize the company's
supply chain, streamline the company's operating model and reduce
administrative expenses to generate long-term savings. During the
second quarter of 2020, business realignment charges related
primarily to severance expenses and other third-party costs related
to this program.
Acquisition-Related Activities: During the second quarter
of 2021, we incurred costs to effectuate the Lily's
acquisition. During the second quarter of 2020, we recognized
a positive adjustment due to divestiture activity, partially offset
by costs related to the integration of the 2019 acquisition of ONE
Brands, LLC.
Pension Settlement Charges Relating to Company-Directed
Initiatives: During the second quarter of 2020, settlement
charges in our hourly defined benefit plan were triggered as a
result of lump sum withdrawals by employees retiring or leaving the
Company under a voluntary separation plan included within our
Margin for Growth Program.
Long-Lived Asset Impairment Charges: During the second
quarter of 2020, we recorded impairment charges to adjust
long-lived asset values associated with our Lotte Shanghai Foods
Co., Ltd. ("LSFC") disposal group.
Noncontrolling Interest Share of Business Realignment and
Impairment Charges: Certain of the business realignment and
impairment charges recorded related to 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 Benefits: During the second quarter of
2021, we recorded 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; 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, 2020. 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 July 4, 2021 and June 28, 2020
|
(unaudited) (in
thousands except percentages and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
July 4,
2021
|
|
June 28,
2020
|
|
July 4,
2021
|
|
June 28,
2020
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
1,989,422
|
|
|
$
|
1,707,329
|
|
|
$
|
4,285,370
|
|
|
$
|
3,744,646
|
|
Cost of
sales
|
|
1,063,977
|
|
|
914,777
|
|
|
2,310,974
|
|
|
2,085,472
|
|
Gross
profit
|
|
|
925,445
|
|
|
792,552
|
|
|
1,974,396
|
|
|
1,659,174
|
|
|
|
|
|
|
|
|
|
Selling, marketing and
administrative expense
|
467,629
|
|
|
408,949
|
|
|
962,294
|
|
|
884,333
|
|
Long-lived asset
impairment charges
|
—
|
|
|
1,600
|
|
|
—
|
|
|
9,143
|
|
Business realignment
costs (benefits)
|
1,141
|
|
|
(1,370)
|
|
|
2,383
|
|
|
(475)
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
456,675
|
|
|
383,373
|
|
|
1,009,719
|
|
|
766,173
|
|
Interest expense,
net
|
|
31,065
|
|
|
38,079
|
|
|
67,501
|
|
|
74,334
|
|
Other (income)
expense, net
|
|
7,194
|
|
|
11,217
|
|
|
9,608
|
|
|
22,750
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
418,416
|
|
|
334,077
|
|
|
932,610
|
|
|
669,089
|
|
Provision for income
taxes
|
|
117,186
|
|
|
66,035
|
|
|
234,509
|
|
|
132,264
|
|
|
|
|
|
|
|
|
|
|
|
Net income including
noncontrolling interest
|
301,230
|
|
|
268,042
|
|
|
698,101
|
|
|
536,825
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net (loss) gain
attributable to noncontrolling interest
|
—
|
|
|
(859)
|
|
|
1,072
|
|
|
(3,213)
|
|
Net income
attributable to The Hershey Company
|
$
|
301,230
|
|
|
$
|
268,901
|
|
|
$
|
697,029
|
|
|
$
|
540,038
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
- Basic
|
- Common
|
$
|
1.50
|
|
|
$
|
1.33
|
|
|
$
|
3.46
|
|
|
$
|
2.66
|
|
|
- Diluted
|
- Common
|
$
|
1.45
|
|
|
$
|
1.29
|
|
|
$
|
3.35
|
|
|
$
|
2.58
|
|
|
- Basic
|
- Class B
|
$
|
1.36
|
|
|
$
|
1.21
|
|
|
$
|
3.14
|
|
|
$
|
2.41
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
- Basic
|
- Common
|
146,111
|
|
|
147,635
|
|
|
146,550
|
|
|
147,954
|
|
|
- Diluted
|
- Common
|
207,671
|
|
|
209,070
|
|
|
208,126
|
|
|
209,596
|
|
|
- Basic
|
- Class B
|
60,614
|
|
|
60,614
|
|
|
60,614
|
|
|
60,614
|
|
|
|
|
|
|
|
|
|
|
|
Key
margins:
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
46.5
|
%
|
|
46.4
|
%
|
|
46.1
|
%
|
|
44.3
|
%
|
Operating profit
margin
|
|
23.0
|
%
|
|
22.5
|
%
|
|
23.6
|
%
|
|
20.5
|
%
|
Net margin
|
|
15.1
|
%
|
|
15.7
|
%
|
|
16.3
|
%
|
|
14.4
|
%
|
The Hershey
Company
|
Supplementary
Information – Segment Results
|
for the periods
ended July 4, 2021 and June 28, 2020
|
(unaudited) (in
thousands except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
July 4,
2021
|
|
June 28,
2020
|
|
%
Change
|
|
July 4,
2021
|
|
June 28,
2020
|
|
%
Change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
1,779,193
|
|
|
$
|
1,583,787
|
|
|
12.3
|
%
|
|
$
|
3,861,065
|
|
|
$
|
3,428,608
|
|
|
12.6
|
%
|
International and Other
|
|
210,229
|
|
|
123,542
|
|
|
70.2
|
%
|
|
424,305
|
|
|
316,038
|
|
|
34.3
|
%
|
Total
|
|
$
|
1,989,422
|
|
|
$
|
1,707,329
|
|
|
16.5
|
%
|
|
$
|
4,285,370
|
|
|
$
|
3,744,646
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
565,905
|
|
|
$
|
497,587
|
|
|
13.7
|
%
|
|
$
|
1,227,465
|
|
|
$
|
1,079,142
|
|
|
13.7
|
%
|
International and Other
|
|
42,183
|
|
|
(3,969)
|
|
|
NM
|
|
|
76,023
|
|
|
12,035
|
|
|
531.7
|
%
|
Total segment
income
|
|
608,088
|
|
|
493,618
|
|
|
23.2
|
%
|
|
1,303,488
|
|
|
1,091,177
|
|
|
19.5
|
%
|
Unallocated corporate
expense (1)
|
|
148,577
|
|
|
107,495
|
|
|
38.2
|
%
|
|
288,274
|
|
|
233,576
|
|
|
23.4
|
%
|
Mark-to-market
adjustment for commodity derivatives (2)
|
|
(3,385)
|
|
|
487
|
|
|
(795.1)
|
%
|
|
(5,669)
|
|
|
82,241
|
|
|
(106.9)
|
%
|
Long-lived asset
impairment charges
|
|
—
|
|
|
1,600
|
|
|
NM
|
|
|
—
|
|
|
9,143
|
|
|
NM
|
|
Costs associated with
business realignment initiatives
|
|
3,469
|
|
|
1,275
|
|
|
172.1
|
%
|
|
10,396
|
|
|
2,170
|
|
|
379.1
|
%
|
Acquisition-related
activities
|
|
7,337
|
|
|
(612)
|
|
|
NM
|
|
|
7,508
|
|
|
1,024
|
|
|
633.2
|
%
|
Other miscellaneous
benefits
|
|
(4,585)
|
|
|
—
|
|
|
NM
|
|
|
(6,740)
|
|
|
(3,150)
|
|
|
114.0
|
%
|
Operating
profit
|
|
456,675
|
|
|
383,373
|
|
|
19.1
|
%
|
|
1,009,719
|
|
|
766,173
|
|
|
31.8
|
%
|
Interest expense,
net
|
|
31,065
|
|
|
38,079
|
|
|
(18.4)
|
%
|
|
67,501
|
|
|
74,334
|
|
|
(9.2)
|
%
|
Other (income)
expense, net
|
|
7,194
|
|
|
11,217
|
|
|
(35.9)
|
%
|
|
9,608
|
|
|
22,750
|
|
|
(57.8)
|
%
|
Income before income
taxes
|
|
$
|
418,416
|
|
|
$
|
334,077
|
|
|
25.2
|
%
|
|
$
|
932,610
|
|
|
$
|
669,089
|
|
|
39.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
Six Months
Ended
|
|
|
|
July 4,
2021
|
|
June 28,
2020
|
|
July 4,
2021
|
|
June 28,
2020
|
Segment income (loss)
as a percent of net sales:
|
|
|
|
|
|
|
|
|
North
America
|
|
31.8
|
%
|
|
31.4
|
%
|
|
31.8
|
%
|
|
31.5
|
%
|
International and
Other
|
|
20.1
|
%
|
|
(3.2)
|
%
|
|
17.9
|
%
|
|
3.8
|
%
|
The Hershey
Company
|
Consolidated
Balance Sheets
|
as of July 4, 2021
and December 31, 2020
|
(in thousands of
dollars)
|
|
|
|
|
Assets
|
July 4,
2021
|
|
December 31,
2020
|
|
(unaudited)
|
|
|
Cash and cash
equivalents
|
$
|
426,201
|
|
|
$
|
1,143,987
|
|
Accounts receivable -
trade, net
|
532,401
|
|
|
615,233
|
|
Inventories
|
1,060,422
|
|
|
964,207
|
|
Prepaid expenses and
other
|
200,157
|
|
|
254,478
|
|
|
|
|
|
Total current
assets
|
2,219,181
|
|
|
2,977,905
|
|
|
|
|
|
Property, plant and
equipment, net
|
2,341,825
|
|
|
2,285,255
|
|
Goodwill
|
2,166,446
|
|
|
1,988,215
|
|
Other
intangibles
|
1,509,435
|
|
|
1,295,214
|
|
Other non-current
assets
|
612,614
|
|
|
555,887
|
|
Deferred income
taxes
|
34,362
|
|
|
29,369
|
|
|
|
|
|
Total
assets
|
$
|
8,883,863
|
|
|
$
|
9,131,845
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Accounts
payable
|
$
|
615,641
|
|
|
$
|
580,058
|
|
Accrued
liabilities
|
708,292
|
|
|
781,766
|
|
Accrued income
taxes
|
52,035
|
|
|
17,051
|
|
Short-term
debt
|
207,564
|
|
|
74,041
|
|
Current portion of
long-term debt
|
3,470
|
|
|
438,829
|
|
|
|
|
|
Total current
liabilities
|
1,587,002
|
|
|
1,891,745
|
|
|
|
|
|
Long-term
debt
|
4,095,200
|
|
|
4,089,755
|
|
Other long-term
liabilities
|
671,601
|
|
|
683,434
|
|
Deferred income
taxes
|
256,167
|
|
|
229,028
|
|
|
|
|
|
Total
liabilities
|
6,609,970
|
|
|
6,893,962
|
|
|
|
|
|
Total stockholders'
equity
|
2,273,893
|
|
|
2,237,883
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
8,883,863
|
|
|
$
|
9,131,845
|
|
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SOURCE The Hershey Company