00000471112021--12-31Q2FALSEus-gaap:AccruedLiabilitiesCurrentus-gaap:AccruedLiabilitiesCurrentus-gaap:OtherLiabilitiesNoncurrentus-gaap:OtherLiabilitiesNoncurrent00000471112021-01-012021-07-04xbrli:shares0000047111us-gaap:CommonStockMember2021-07-230000047111us-gaap:CommonClassBMember2021-07-23iso4217:USD00000471112021-04-052021-07-0400000471112020-03-302020-06-2800000471112020-01-012020-06-28iso4217:USDxbrli:shares0000047111us-gaap:CommonStockMember2021-04-052021-07-040000047111us-gaap:CommonStockMember2020-03-302020-06-280000047111us-gaap:CommonStockMember2021-01-012021-07-040000047111us-gaap:CommonStockMember2020-01-012020-06-280000047111us-gaap:CommonClassBMember2021-04-052021-07-040000047111us-gaap:CommonClassBMember2020-03-302020-06-280000047111us-gaap:CommonClassBMember2021-01-012021-07-040000047111us-gaap:CommonClassBMember2020-01-012020-06-2800000471112021-07-0400000471112020-12-310000047111us-gaap:CommonStockMember2021-07-040000047111us-gaap:CommonStockMember2020-12-310000047111us-gaap:CommonClassBMember2021-07-040000047111us-gaap:CommonClassBMember2020-12-3100000471112019-12-3100000471112020-06-280000047111us-gaap:PreferredStockMember2021-04-040000047111us-gaap:CommonStockMemberus-gaap:CommonStockMember2021-04-040000047111us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-04-040000047111us-gaap:AdditionalPaidInCapitalMember2021-04-040000047111us-gaap:RetainedEarningsMember2021-04-040000047111us-gaap:TreasuryStockMember2021-04-040000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-040000047111us-gaap:NoncontrollingInterestMember2021-04-0400000471112021-04-040000047111us-gaap:RetainedEarningsMember2021-04-052021-07-040000047111us-gaap:NoncontrollingInterestMember2021-04-052021-07-040000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-052021-07-040000047111us-gaap:RetainedEarningsMemberus-gaap:CommonStockMember2021-04-052021-07-040000047111us-gaap:RetainedEarningsMemberus-gaap:CommonClassBMember2021-04-052021-07-040000047111us-gaap:AdditionalPaidInCapitalMember2021-04-052021-07-040000047111us-gaap:TreasuryStockMember2021-04-052021-07-040000047111us-gaap:PreferredStockMember2021-07-040000047111us-gaap:CommonStockMemberus-gaap:CommonStockMember2021-07-040000047111us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-07-040000047111us-gaap:AdditionalPaidInCapitalMember2021-07-040000047111us-gaap:RetainedEarningsMember2021-07-040000047111us-gaap:TreasuryStockMember2021-07-040000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-040000047111us-gaap:NoncontrollingInterestMember2021-07-040000047111us-gaap:PreferredStockMember2020-03-290000047111us-gaap:CommonStockMemberus-gaap:CommonStockMember2020-03-290000047111us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-03-290000047111us-gaap:AdditionalPaidInCapitalMember2020-03-290000047111us-gaap:RetainedEarningsMember2020-03-290000047111us-gaap:TreasuryStockMember2020-03-290000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-290000047111us-gaap:NoncontrollingInterestMember2020-03-2900000471112020-03-290000047111us-gaap:RetainedEarningsMember2020-03-302020-06-280000047111us-gaap:NoncontrollingInterestMember2020-03-302020-06-280000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-302020-06-280000047111us-gaap:RetainedEarningsMemberus-gaap:CommonStockMember2020-03-302020-06-280000047111us-gaap:RetainedEarningsMemberus-gaap:CommonClassBMember2020-03-302020-06-280000047111us-gaap:AdditionalPaidInCapitalMember2020-03-302020-06-280000047111us-gaap:TreasuryStockMember2020-03-302020-06-280000047111us-gaap:PreferredStockMember2020-06-280000047111us-gaap:CommonStockMemberus-gaap:CommonStockMember2020-06-280000047111us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-06-280000047111us-gaap:AdditionalPaidInCapitalMember2020-06-280000047111us-gaap:RetainedEarningsMember2020-06-280000047111us-gaap:TreasuryStockMember2020-06-280000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-280000047111us-gaap:NoncontrollingInterestMember2020-06-280000047111us-gaap:PreferredStockMember2020-12-310000047111us-gaap:CommonStockMemberus-gaap:CommonStockMember2020-12-310000047111us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-12-310000047111us-gaap:AdditionalPaidInCapitalMember2020-12-310000047111us-gaap:RetainedEarningsMember2020-12-310000047111us-gaap:TreasuryStockMember2020-12-310000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000047111us-gaap:NoncontrollingInterestMember2020-12-310000047111us-gaap:RetainedEarningsMember2021-01-012021-07-040000047111us-gaap:NoncontrollingInterestMember2021-01-012021-07-040000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-07-040000047111us-gaap:RetainedEarningsMemberus-gaap:CommonStockMember2021-01-012021-07-040000047111us-gaap:RetainedEarningsMemberus-gaap:CommonClassBMember2021-01-012021-07-040000047111us-gaap:AdditionalPaidInCapitalMember2021-01-012021-07-040000047111us-gaap:TreasuryStockMember2021-01-012021-07-040000047111us-gaap:PreferredStockMember2019-12-310000047111us-gaap:CommonStockMemberus-gaap:CommonStockMember2019-12-310000047111us-gaap:CommonStockMemberus-gaap:CommonClassBMember2019-12-310000047111us-gaap:AdditionalPaidInCapitalMember2019-12-310000047111us-gaap:RetainedEarningsMember2019-12-310000047111us-gaap:TreasuryStockMember2019-12-310000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000047111us-gaap:NoncontrollingInterestMember2019-12-310000047111us-gaap:RetainedEarningsMember2020-01-012020-06-280000047111us-gaap:NoncontrollingInterestMember2020-01-012020-06-280000047111us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-06-280000047111us-gaap:RetainedEarningsMemberus-gaap:CommonStockMember2020-01-012020-06-280000047111us-gaap:RetainedEarningsMemberus-gaap:CommonClassBMember2020-01-012020-06-280000047111us-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-280000047111us-gaap:TreasuryStockMember2020-01-012020-06-280000047111hsy:LilysSweetsLLCMember2021-04-052021-07-040000047111hsy:LilysSweetsLLCMember2021-07-040000047111us-gaap:TrademarksMemberhsy:LilysSweetsLLCMember2021-04-052021-07-040000047111srt:MinimumMemberhsy:LilysSweetsLLCMemberus-gaap:CustomerRelationshipsMember2021-04-052021-07-040000047111hsy:LilysSweetsLLCMemberus-gaap:CustomerRelationshipsMembersrt:MaximumMember2021-04-052021-07-040000047111us-gaap:OperatingSegmentsMemberhsy:NorthAmericaSegmentMember2020-12-310000047111us-gaap:OperatingSegmentsMemberhsy:InternationalandOtherSegmentMember2020-12-310000047111us-gaap:OperatingSegmentsMemberhsy:NorthAmericaSegmentMember2021-01-012021-07-040000047111us-gaap:OperatingSegmentsMemberhsy:InternationalandOtherSegmentMember2021-01-012021-07-040000047111us-gaap:OperatingSegmentsMemberhsy:NorthAmericaSegmentMember2021-07-040000047111us-gaap:OperatingSegmentsMemberhsy:InternationalandOtherSegmentMember2021-07-040000047111us-gaap:TrademarksMember2021-07-040000047111us-gaap:TrademarksMember2020-12-310000047111us-gaap:CustomerRelatedIntangibleAssetsMember2021-07-040000047111us-gaap:CustomerRelatedIntangibleAssetsMember2020-12-310000047111us-gaap:PatentsMember2021-07-040000047111us-gaap:PatentsMember2020-12-310000047111us-gaap:TrademarksMember2021-07-040000047111us-gaap:TrademarksMember2020-12-310000047111us-gaap:LineOfCreditMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2021-07-040000047111us-gaap:ForeignLineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2021-07-040000047111us-gaap:ForeignLineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2020-12-310000047111us-gaap:CommercialPaperMember2021-07-040000047111us-gaap:CommercialPaperMember2020-12-31xbrli:pure0000047111hsy:Debentures8.8Due2021Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Debentures8.8Due2021Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes310Due2021Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes310Due2021Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes2.625Due2023Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes2.625Due2023Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111us-gaap:DomesticCorporateDebtSecuritiesMemberhsy:Notes3375Due2023Member2021-07-040000047111us-gaap:DomesticCorporateDebtSecuritiesMemberhsy:Notes3375Due2023Member2020-12-310000047111hsy:Notes2.050Due2024Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes2.050Due2024Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes0900NotesDue2025Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes0900NotesDue2025Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes3.20Due2025Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes3.20Due2025Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111us-gaap:DomesticCorporateDebtSecuritiesMemberhsy:Notes2.30Due2026Member2020-12-310000047111us-gaap:DomesticCorporateDebtSecuritiesMemberhsy:Notes2.30Due2026Member2021-07-040000047111hsy:Debentures7.2Due2027Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Debentures7.2Due2027Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes2.450Due2029Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes2.450Due2029Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes1700Due2030Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes1700Due2030Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes3.375Due2046Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes3.375Due2046Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111hsy:Notes3.125Due2049Memberus-gaap:DomesticCorporateDebtSecuritiesMember2020-12-310000047111hsy:Notes3.125Due2049Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-07-040000047111us-gaap:DomesticCorporateDebtSecuritiesMemberhsy:Notes2650NotesDue2050Member2020-12-310000047111us-gaap:DomesticCorporateDebtSecuritiesMemberhsy:Notes2650NotesDue2050Member2021-07-040000047111hsy:Debentures8.8Due2021Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-01-012021-07-040000047111hsy:Notes310Due2021Memberus-gaap:DomesticCorporateDebtSecuritiesMember2021-01-012021-07-040000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMembersrt:MinimumMember2021-01-012021-07-040000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMembersrt:MaximumMember2021-01-012021-07-040000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2021-07-040000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2020-12-310000047111us-gaap:ForeignExchangeContractMember2021-01-012021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-12-310000047111us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2021-07-040000047111us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2020-12-310000047111us-gaap:FairValueHedgingMemberus-gaap:InterestRateContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-07-040000047111us-gaap:FairValueHedgingMemberus-gaap:InterestRateContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-12-310000047111us-gaap:NondesignatedMembersrt:MinimumMemberus-gaap:EquitySwapMember2021-01-012021-07-040000047111us-gaap:NondesignatedMemberus-gaap:EquitySwapMembersrt:MaximumMember2021-01-012021-07-040000047111us-gaap:EquitySwapMember2021-07-040000047111us-gaap:EquitySwapMember2020-12-310000047111us-gaap:NondesignatedMemberus-gaap:EquitySwapMember2021-07-040000047111us-gaap:NondesignatedMemberus-gaap:EquitySwapMember2020-12-310000047111us-gaap:NondesignatedMember2021-07-040000047111us-gaap:NondesignatedMember2020-12-310000047111us-gaap:CommodityContractMember2021-04-052021-07-040000047111us-gaap:CommodityContractMember2020-03-302020-06-280000047111us-gaap:CommodityContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-04-052021-07-040000047111us-gaap:CommodityContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-302020-06-280000047111us-gaap:ForeignExchangeContractMember2021-04-052021-07-040000047111us-gaap:ForeignExchangeContractMember2020-03-302020-06-280000047111us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-04-052021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-302020-06-280000047111us-gaap:InterestRateContractMember2021-04-052021-07-040000047111us-gaap:InterestRateContractMember2020-03-302020-06-280000047111us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-04-052021-07-040000047111us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-302020-06-280000047111us-gaap:EquitySwapMember2021-04-052021-07-040000047111us-gaap:EquitySwapMember2020-03-302020-06-280000047111us-gaap:CashFlowHedgingMemberus-gaap:EquitySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-04-052021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:EquitySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-302020-06-280000047111us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-04-052021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-302020-06-280000047111us-gaap:CommodityContractMember2021-01-012021-07-040000047111us-gaap:CommodityContractMember2020-01-012020-06-280000047111us-gaap:CommodityContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-07-040000047111us-gaap:CommodityContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-01-012020-06-280000047111us-gaap:ForeignExchangeContractMember2020-01-012020-06-280000047111us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-01-012020-06-280000047111us-gaap:InterestRateContractMember2021-01-012021-07-040000047111us-gaap:InterestRateContractMember2020-01-012020-06-280000047111us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-07-040000047111us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-01-012020-06-280000047111us-gaap:EquitySwapMember2021-01-012021-07-040000047111us-gaap:EquitySwapMember2020-01-012020-06-280000047111us-gaap:CashFlowHedgingMemberus-gaap:EquitySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:EquitySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-01-012020-06-280000047111us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-07-040000047111us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-01-012020-06-280000047111us-gaap:InterestExpenseMemberus-gaap:FairValueHedgingMemberus-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-07-040000047111us-gaap:InterestExpenseMemberus-gaap:FairValueHedgingMemberus-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-04-052021-07-040000047111us-gaap:InterestExpenseMemberus-gaap:FairValueHedgingMemberus-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-302020-06-280000047111us-gaap:InterestExpenseMemberus-gaap:FairValueHedgingMemberus-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-01-012020-06-280000047111us-gaap:FairValueInputsLevel3Member2021-07-040000047111us-gaap:FairValueInputsLevel3Member2020-12-310000047111us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2021-07-040000047111us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2021-07-040000047111us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2021-07-040000047111us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2021-07-040000047111us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2021-07-040000047111us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2021-07-040000047111us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2021-07-040000047111us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2021-07-040000047111us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-07-040000047111us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-07-040000047111us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-07-040000047111us-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMember2021-07-040000047111us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2020-12-310000047111us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2020-12-310000047111us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2020-12-310000047111us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeContractMember2020-12-310000047111us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2020-12-310000047111us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2020-12-310000047111us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2020-12-310000047111us-gaap:FairValueMeasurementsRecurringMemberus-gaap:EquitySwapMember2020-12-310000047111us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310000047111us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310000047111us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310000047111us-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-12-310000047111us-gaap:FairValueInputsLevel2Member2021-07-040000047111us-gaap:FairValueInputsLevel2Member2020-12-310000047111us-gaap:OtherAssetsMember2020-01-012020-06-280000047111hsy:PropertyPlantandEquipmentGrossMember2021-07-040000047111hsy:PropertyPlantandEquipmentGrossMember2020-12-310000047111hsy:AccumulatedDepreciationMember2021-07-040000047111hsy:AccumulatedDepreciationMember2020-12-310000047111us-gaap:PropertyPlantAndEquipmentMember2021-07-040000047111us-gaap:PropertyPlantAndEquipmentMember2020-12-310000047111srt:MaximumMember2021-07-040000047111us-gaap:OtherNoncurrentAssetsMember2021-07-040000047111us-gaap:OtherNoncurrentAssetsMember2020-12-310000047111us-gaap:CostOfSalesMember2021-04-052021-07-040000047111us-gaap:CostOfSalesMember2020-03-302020-06-280000047111us-gaap:CostOfSalesMember2021-01-012021-07-040000047111us-gaap:CostOfSalesMember2020-01-012020-06-280000047111us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-04-052021-07-040000047111us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-03-302020-06-280000047111us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-07-040000047111us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-06-280000047111us-gaap:RestructuringChargesMember2021-04-052021-07-040000047111us-gaap:RestructuringChargesMember2020-03-302020-06-280000047111us-gaap:RestructuringChargesMember2021-01-012021-07-040000047111us-gaap:RestructuringChargesMember2020-01-012020-06-280000047111us-gaap:EmployeeSeveranceMemberhsy:InternationalOptimizationProgramMember2021-04-052021-07-040000047111us-gaap:EmployeeSeveranceMemberhsy:InternationalOptimizationProgramMember2020-03-302020-06-280000047111us-gaap:EmployeeSeveranceMemberhsy:InternationalOptimizationProgramMember2021-01-012021-07-040000047111us-gaap:EmployeeSeveranceMemberhsy:InternationalOptimizationProgramMember2020-01-012020-06-280000047111us-gaap:OtherRestructuringMemberhsy:InternationalOptimizationProgramMember2021-04-052021-07-040000047111us-gaap:OtherRestructuringMemberhsy:InternationalOptimizationProgramMember2020-03-302020-06-280000047111us-gaap:OtherRestructuringMemberhsy:InternationalOptimizationProgramMember2021-01-012021-07-040000047111us-gaap:OtherRestructuringMemberhsy:InternationalOptimizationProgramMember2020-01-012020-06-280000047111hsy:MarginforGrowthProgramMemberus-gaap:EmployeeSeveranceMember2021-04-052021-07-040000047111hsy:MarginforGrowthProgramMemberus-gaap:EmployeeSeveranceMember2020-03-302020-06-280000047111hsy:MarginforGrowthProgramMemberus-gaap:EmployeeSeveranceMember2021-01-012021-07-040000047111hsy:MarginforGrowthProgramMemberus-gaap:EmployeeSeveranceMember2020-01-012020-06-280000047111us-gaap:OtherRestructuringMemberhsy:MarginforGrowthProgramMember2021-04-052021-07-040000047111us-gaap:OtherRestructuringMemberhsy:MarginforGrowthProgramMember2020-03-302020-06-280000047111us-gaap:OtherRestructuringMemberhsy:MarginforGrowthProgramMember2021-01-012021-07-040000047111us-gaap:OtherRestructuringMemberhsy:MarginforGrowthProgramMember2020-01-012020-06-280000047111srt:MinimumMemberhsy:InternationalOptimizationProgramMember2021-07-040000047111hsy:InternationalOptimizationProgramMembersrt:MaximumMember2021-07-040000047111hsy:InternationalOptimizationProgramMember2021-04-052021-07-040000047111hsy:InternationalOptimizationProgramMember2021-01-012021-07-040000047111hsy:InternationalOptimizationProgramMember2021-07-040000047111hsy:MarginforGrowthProgramMember2020-03-302020-06-280000047111hsy:MarginforGrowthProgramMember2020-01-012020-06-280000047111us-gaap:RestructuringChargesMemberhsy:MarginforGrowthProgramMemberus-gaap:GeographicConcentrationRiskMemberhsy:NorthAmericaSegmentMember2021-01-012021-07-040000047111us-gaap:RestructuringChargesMemberhsy:MarginforGrowthProgramMemberhsy:InternationalandOtherSegmentMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-07-040000047111us-gaap:PensionPlansDefinedBenefitMember2021-04-052021-07-040000047111us-gaap:PensionPlansDefinedBenefitMember2020-03-302020-06-280000047111us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-04-052021-07-040000047111us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-03-302020-06-280000047111us-gaap:PensionPlansDefinedBenefitMember2021-01-012021-07-040000047111us-gaap:PensionPlansDefinedBenefitMember2020-01-012020-06-280000047111us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-01-012021-07-040000047111us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-01-012020-06-280000047111us-gaap:EmployeeStockOptionMember2021-01-012021-07-040000047111us-gaap:EmployeeStockOptionMember2020-01-012020-06-280000047111srt:MinimumMemberhsy:PerformanceStockUnitsandRestrictedStockUnitsMember2020-01-012020-06-280000047111srt:MinimumMemberhsy:PerformanceStockUnitsandRestrictedStockUnitsMember2021-01-012021-07-040000047111srt:MaximumMemberhsy:PerformanceStockUnitsandRestrictedStockUnitsMember2020-01-012020-06-280000047111srt:MaximumMemberhsy:PerformanceStockUnitsandRestrictedStockUnitsMember2021-01-012021-07-040000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2020-12-310000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2021-01-012021-07-040000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2021-07-040000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2020-01-012020-06-280000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2020-06-280000047111hsy:PerformanceStockUnitsandRestrictedStockUnitsMember2021-01-012021-07-040000047111us-gaap:GeographicConcentrationRiskMemberhsy:NorthAmericaSegmentMemberus-gaap:RevenueFromContractWithCustomerMember2021-01-012021-07-040000047111us-gaap:OperatingSegmentsMemberhsy:NorthAmericaSegmentMember2021-04-052021-07-040000047111us-gaap:OperatingSegmentsMemberhsy:NorthAmericaSegmentMember2020-03-302020-06-280000047111us-gaap:OperatingSegmentsMemberhsy:NorthAmericaSegmentMember2020-01-012020-06-280000047111us-gaap:OperatingSegmentsMemberhsy:InternationalandOtherSegmentMember2021-04-052021-07-040000047111us-gaap:OperatingSegmentsMemberhsy:InternationalandOtherSegmentMember2020-03-302020-06-280000047111us-gaap:OperatingSegmentsMemberhsy:InternationalandOtherSegmentMember2020-01-012020-06-280000047111us-gaap:OperatingSegmentsMember2021-04-052021-07-040000047111us-gaap:OperatingSegmentsMember2020-03-302020-06-280000047111us-gaap:OperatingSegmentsMember2021-01-012021-07-040000047111us-gaap:OperatingSegmentsMember2020-01-012020-06-280000047111us-gaap:CorporateNonSegmentMember2021-04-052021-07-040000047111us-gaap:CorporateNonSegmentMember2020-03-302020-06-280000047111us-gaap:CorporateNonSegmentMember2021-01-012021-07-040000047111us-gaap:CorporateNonSegmentMember2020-01-012020-06-280000047111us-gaap:MaterialReconcilingItemsMember2021-04-052021-07-040000047111us-gaap:MaterialReconcilingItemsMember2020-03-302020-06-280000047111us-gaap:MaterialReconcilingItemsMember2021-01-012021-07-040000047111us-gaap:MaterialReconcilingItemsMember2020-01-012020-06-280000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2021-04-052021-07-040000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2020-03-302020-06-280000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2021-01-012021-07-040000047111us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2020-01-012020-06-280000047111us-gaap:OperatingSegmentsMemberus-gaap:CommodityContractMember2021-04-052021-07-040000047111us-gaap:OperatingSegmentsMemberus-gaap:CommodityContractMember2020-03-302020-06-280000047111us-gaap:OperatingSegmentsMemberus-gaap:CommodityContractMember2021-01-012021-07-040000047111us-gaap:OperatingSegmentsMemberus-gaap:CommodityContractMember2020-01-012020-06-280000047111us-gaap:CommodityContractMemberus-gaap:CostOfSalesMember2021-01-012021-07-040000047111us-gaap:OperatingSegmentsMemberus-gaap:CommodityContractMembersrt:ScenarioForecastMember2022-01-012022-07-030000047111us-gaap:CorporateMemberus-gaap:CorporateNonSegmentMember2021-04-052021-07-040000047111us-gaap:CorporateMemberus-gaap:CorporateNonSegmentMember2020-03-302020-06-280000047111us-gaap:CorporateMemberus-gaap:CorporateNonSegmentMember2021-01-012021-07-040000047111us-gaap:CorporateMemberus-gaap:CorporateNonSegmentMember2020-01-012020-06-280000047111country:US2021-04-052021-07-040000047111country:US2020-03-302020-06-280000047111country:US2021-01-012021-07-040000047111country:US2020-01-012020-06-280000047111us-gaap:NonUsMember2021-04-052021-07-040000047111us-gaap:NonUsMember2020-03-302020-06-280000047111us-gaap:NonUsMember2021-01-012021-07-040000047111us-gaap:NonUsMember2020-01-012020-06-280000047111hsy:ConfectioneryAndConfectioneryBasedPortfolioDomain2021-04-052021-07-040000047111hsy:ConfectioneryAndConfectioneryBasedPortfolioDomain2020-03-302020-06-280000047111hsy:ConfectioneryAndConfectioneryBasedPortfolioDomain2021-01-012021-07-040000047111hsy:ConfectioneryAndConfectioneryBasedPortfolioDomain2020-01-012020-06-280000047111hsy:SnacksPortfolioDomain2021-04-052021-07-040000047111hsy:SnacksPortfolioDomain2020-03-302020-06-280000047111hsy:SnacksPortfolioDomain2021-01-012021-07-040000047111hsy:SnacksPortfolioDomain2020-01-012020-06-280000047111hsy:HersheyCommonStockMember2021-01-012021-07-040000047111hsy:A2018ShareRepurchaseProgramMember2021-07-040000047111hsy:A2021ShareRepurchaseProgramMember2021-05-310000047111hsy:LotteShanghaiFoodCompanyMemberus-gaap:NoncontrollingInterestMember2021-01-190000047111us-gaap:EmployeeStockOptionMemberus-gaap:CommonStockMember2021-04-052021-07-040000047111us-gaap:CommonClassBMemberus-gaap:EmployeeStockOptionMember2021-04-052021-07-040000047111us-gaap:EmployeeStockOptionMemberus-gaap:CommonStockMember2020-03-302020-06-280000047111us-gaap:CommonClassBMemberus-gaap:EmployeeStockOptionMember2020-03-302020-06-280000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMemberus-gaap:CommonStockMember2021-04-052021-07-040000047111us-gaap:CommonClassBMemberhsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2021-04-052021-07-040000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMemberus-gaap:CommonStockMember2020-03-302020-06-280000047111us-gaap:CommonClassBMemberhsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2020-03-302020-06-280000047111us-gaap:EmployeeStockOptionMember2021-04-052021-07-040000047111us-gaap:EmployeeStockOptionMember2020-03-302020-06-280000047111us-gaap:EmployeeStockOptionMemberus-gaap:CommonStockMember2021-01-012021-07-040000047111us-gaap:CommonClassBMemberus-gaap:EmployeeStockOptionMember2021-01-012021-07-040000047111us-gaap:EmployeeStockOptionMemberus-gaap:CommonStockMember2020-01-012020-06-280000047111us-gaap:CommonClassBMemberus-gaap:EmployeeStockOptionMember2020-01-012020-06-280000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMemberus-gaap:CommonStockMember2021-01-012021-07-040000047111us-gaap:CommonClassBMemberhsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2021-01-012021-07-040000047111hsy:PerformanceSharesAndRestrictedStockUnitsRSUMemberus-gaap:CommonStockMember2020-01-012020-06-280000047111us-gaap:CommonClassBMemberhsy:PerformanceSharesAndRestrictedStockUnitsRSUMember2020-01-012020-06-280000047111us-gaap:EmployeeStockOptionMember2021-01-012021-07-040000047111us-gaap:EmployeeStockOptionMember2020-01-012020-06-28

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to_______
Commission file number 1-183
HSY-20210704_G1.JPG
THE HERSHEY COMPANY
(Exact name of registrant as specified in its charter)
Delaware 23-0691590
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
19 East Chocolate Avenue, Hershey, PA 17033
(Address of principal executive offices and Zip Code)
(717) 534-4200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, one dollar par value HSY New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Common Stock, one dollar par value—145,425,767 shares, as of July 23, 2021.
Class B Common Stock, one dollar par value—60,613,777 shares, as of July 23, 2021.



THE HERSHEY COMPANY
Quarterly Report on Form 10-Q
For the Period Ended July 4, 2021

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
2
Item 1. Financial Statements
2
2
3
4
5
6
Notes to Unaudited Consolidated Financial Statements
8
8
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits

The Hershey Company | Q2 2021 Form 10-Q | Page 1
HSY-20210704_G2.JPG


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended 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 stock
$ 1.50  $ 1.33  $ 3.46  $ 2.66 
Class B common stock
$ 1.36  $ 1.21  $ 3.14  $ 2.41 
Net income per share—diluted:
Common stock
$ 1.45  $ 1.29  $ 3.35  $ 2.58 
Class B common stock
$ 1.36  $ 1.20  $ 3.13  $ 2.41 
Dividends paid per share:
Common stock
$ 0.804  $ 0.773  $ 1.608  $ 1.546 
Class B common stock
$ 0.731  $ 0.702  $ 1.462  $ 1.404 

See Notes to Unaudited Consolidated Financial Statements.
The Hershey Company | Q2 2021 Form 10-Q | Page 2
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

For the Three Months Ended
For the Six Months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount
Net income including noncontrolling interest $ 301,230  $ 268,042  $ 698,101  $ 536,825 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Foreign currency translation gains (losses) during period $ 12,996  $ —  12,996  $ 3,052  $ —  3,052  $ 14,194  $ —  14,194  $ (48,292) $ —  (48,292)
Reclassification to earnings due to the sale of businesses —  —  —  —  —  —  5,210  —  5,210  —  —  — 
Pension and post-retirement benefit plans:
Net actuarial gain and service cost 18,481  (4,399) 14,082  (16,685) 3,954  (12,731) 20,705  (4,928) 15,777  (16,685) 3,954  (12,731)
Reclassification to earnings 8,936  (2,201) 6,735  8,542  (2,183) 6,359  15,789  (4,068) 11,721  13,297  (2,731) 10,566 
Cash flow hedges:
(Losses) gains on cash flow hedging derivatives (6,344) (446) (6,790) 675  838  1,513  (7,979) (159) (8,138) 6,056  (268) 5,788 
Reclassification to earnings 5,681  158  5,839  1,205  (817) 388  8,818  (382) 8,436  3,297  (1,930) 1,367 
Total other comprehensive income (loss), net of tax $ 39,750  $ (6,888) 32,862  $ (3,211) $ 1,792  (1,419) $ 56,737  $ (9,537) 47,200  $ (42,327) $ (975) (43,302)
Total comprehensive income including noncontrolling interest $ 334,092  $ 266,623  $ 745,301  $ 493,523 
Comprehensive (loss) income attributable to noncontrolling interest (8) (826) 6,326  (3,288)
Comprehensive income attributable to The Hershey Company $ 334,100  $ 267,449  $ 738,975  $ 496,811 

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q2 2021 Form 10-Q | Page 3
HSY-20210704_G2.JPG



THE HERSHEY COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
July 4, 2021 December 31, 2020
(unaudited)
ASSETS
Current assets:
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
Current liabilities:
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 
Stockholders’ equity:
The Hershey Company stockholders’ equity
Preferred stock, shares issued: none in 2021 and 2020
—  — 
Common stock, shares issued: 160,939,248 at July 4, 2021 and December 31, 2020
160,939  160,939 
Class B common stock, shares issued: 60,613,777 at July 4, 2021 and December 31, 2020
60,614  60,614 
Additional paid-in capital 1,218,708  1,191,200 
Retained earnings 2,301,805  1,928,673 
Treasury—common stock shares, at cost: 15,528,828 at July 4, 2021 and 13,325,898 at December 31, 2020
(1,180,881) (768,992)
Accumulated other comprehensive loss (296,136) (338,082)
Total—The Hershey Company stockholders’ equity 2,265,049  2,234,352 
Noncontrolling interest in subsidiary 8,844  3,531 
Total stockholders’ equity 2,273,893  2,237,883 
Total liabilities and stockholders’ equity $ 8,883,863  $ 9,131,845 

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q2 2021 Form 10-Q | Page 4
HSY-20210704_G2.JPG



THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
July 4, 2021 June 28, 2020
Operating Activities
Net income including noncontrolling interest $ 698,101  $ 536,825 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 153,929  142,524 
Stock-based compensation expense 32,482  25,490 
Deferred income taxes 5,789  3,309 
Impairment of long-lived assets —  9,143 
Write-down of equity investments 7,771  18,550 
Other 51,355  27,311 
Changes in assets and liabilities, net of business acquisitions and divestitures:
Accounts receivable—trade, net 88,945  11,794 
Inventories (68,968) (194,396)
Prepaid expenses and other current assets 14,432  15,730 
Accounts payable and accrued liabilities (33,238) (19,304)
Accrued income taxes 68,317  65,169 
Contributions to pension and other benefit plans (9,338) (8,333)
Other assets and liabilities 8,075  (19,765)
Net cash provided by operating activities 1,017,652  614,047 
Investing Activities
Capital additions (including software) (227,607) (185,784)
Equity investments in tax credit qualifying partnerships (57,445) (26,392)
Business acquisitions, net of cash and cash equivalents acquired (418,191) — 
Other investing activities 3,123  2,374 
Net cash used in investing activities (700,120) (209,802)
Financing Activities
Net increase in short-term debt 137,027  166,017 
Long-term borrowings, net of debt issuance costs —  989,876 
Repayment of long-term debt and finance leases (436,957) (352,104)
Cash dividends paid (324,304) (314,279)
Repurchase of common stock (434,346) (211,196)
Exercise of stock options 16,889  17,544 
Net cash (used in) provided by financing activities (1,041,691) 295,858 
Effect of exchange rate changes on cash and cash equivalents (5,061) (17,351)
(Decrease) increase in cash and cash equivalents, including cash classified as held for sale (729,220) 682,752 
Less: Decrease (increase) in cash and cash equivalents classified as held for sale 11,434  (10,683)
Net (decrease) increase in cash and cash equivalents (717,786) 672,069 
Cash and cash equivalents, beginning of period 1,143,987  493,262 
Cash and cash equivalents, end of period $ 426,201  $ 1,165,331 
Supplemental Disclosure
Interest paid $ 68,345  $ 74,944 
Income taxes paid 139,078  71,633 

See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q2 2021 Form 10-Q | Page 5
HSY-20210704_G2.JPG



THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three Months Ended July 4, 2021 and June 28, 2020
(in thousands)
(unaudited)


Preferred
Stock
Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Common
Stock
Accumulated Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Subsidiaries
Total
Stockholders’
Equity
Balance, April 4, 2021
—  $ 160,939  $ 60,614  $ 1,195,748  $ 2,162,464  $ (994,765) $ (329,006) $ 8,852  $ 2,264,846 
Net income 301,230  —  301,230 
Other comprehensive income (loss) 32,870  (8) 32,862 
Dividends (including dividend equivalents):
Common Stock, $0.804 per share
(117,581) (117,581)
Class B Common Stock, $0.731 per share
(44,308) (44,308)
Stock-based compensation 17,121  17,121 
Exercise of stock options and incentive-based transactions 5,839  7,871  13,710 
Repurchase of common stock (193,987) (193,987)
Balance, July 4, 2021
$ —  $ 160,939  $ 60,614  $ 1,218,708  $ 2,301,805  $ (1,180,881) $ (296,136) $ 8,844  $ 2,273,893 

Preferred
Stock
Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Common
Stock
Accumulated Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Subsidiaries
Total
Stockholders’
Equity
Balance, March 29, 2020
—  $ 160,939  $ 60,614  $ 1,153,130  $ 1,404,453  $ (742,164) $ (365,741) $ 3,310  $ 1,674,541 
Net income (loss) 268,901  (859) 268,042 
Other comprehensive (loss) income (1,452) 33  (1,419)
Dividends (including dividend equivalents):
Common Stock, $0.773 per share
(114,260) (114,260)
Class B Common Stock, $0.702 per share
(42,551) (42,551)
Stock-based compensation 12,612  12,612 
Exercise of stock options and incentive-based transactions (3,864) 5,008  1,144 
Repurchase of common stock (42,020) (42,020)
Balance, June 28, 2020
$ —  $ 160,939  $ 60,614  $ 1,161,878  $ 1,516,543  $ (779,176) $ (367,193) $ 2,484  $ 1,756,089 


See Notes to Unaudited Consolidated Financial Statements.










The Hershey Company | Q2 2021 Form 10-Q | Page 6
HSY-20210704_G2.JPG



THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Six Months Ended July 4, 2021 and June 28, 2020
(in thousands)
(unaudited)


Preferred
Stock
Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Common
Stock
Accumulated Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Subsidiaries
Total
Stockholders’
Equity
Balance, December 31, 2020
—  $ 160,939  $ 60,614  $ 1,191,200  $ 1,928,673  $ (768,992) $ (338,082) $ 3,531  $ 2,237,883 
Net income 697,029  1,072  698,101 
Other comprehensive income 41,946  5,254  47,200 
Dividends (including dividend equivalents):
Common Stock, $1.608 per share
(235,280) (235,280)
Class B Common Stock, $1.462 per share
(88,617) (88,617)
Stock-based compensation 33,076  33,076 
Exercise of stock options and incentive-based transactions (5,568) 22,457  16,889 
Repurchase of common stock (434,346) (434,346)
Divestiture of noncontrolling interest (1,013) (1,013)
Balance, July 4, 2021
$ —  $ 160,939  $ 60,614  $ 1,218,708  $ 2,301,805  $ (1,180,881) $ (296,136) $ 8,844  $ 2,273,893 

Preferred
Stock
Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Common
Stock
Accumulated Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Subsidiaries
Total
Stockholders’
Equity
Balance, December 31, 2019
—  $ 160,939  $ 60,614  $ 1,142,210  $ 1,290,461  $ (591,036) $ (323,966) $ 5,772  $ 1,744,994 
Net income (loss) 540,038  (3,213) 536,825 
Other comprehensive loss (43,227) (75) (43,302)
Dividends (including dividend equivalents):
Common Stock, $1.546 per share
(228,854) (228,854)
Class B Common Stock, $1.404 per share
(85,102) (85,102)
Stock-based compensation 25,180  25,180 
Exercise of stock options and incentive-based transactions (5,512) 23,056  17,544 
Repurchase of common stock (211,196) (211,196)
Balance, June 28, 2020
$ —  $ 160,939  $ 60,614  $ 1,161,878  $ 1,516,543  $ (779,176) $ (367,193) $ 2,484  $ 1,756,089 


See Notes to Unaudited Consolidated Financial Statements.

The Hershey Company | Q2 2021 Form 10-Q | Page 7
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data or if otherwise indicated)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated financial statements provided in this report include the accounts of The Hershey Company (the “Company,” “Hershey,” “we” or “us”) and our majority-owned subsidiaries and entities in which we have a controlling financial interest after the elimination of intercompany accounts and transactions. We have a controlling financial interest if we own a majority of the outstanding voting common stock and minority shareholders do not have substantive participating rights, we have significant control through contractual or economic interests in which we are the primary beneficiary or we have the power to direct the activities that most significantly impact the entity's economic performance. We use the equity method of accounting when we have a 20% to 50% interest in other companies and exercise significant influence. Other investments that are not controlled, and over which we do not have the ability to exercise significant influence, are accounted for under the cost method. Both equity and cost method investments are included as Other non-current assets in the Consolidated Balance Sheets.
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not contain certain information and disclosures required by GAAP for comprehensive financial statements. The financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in our opinion, necessary for a fair presentation of the results of operations, financial position, and cash flows for the indicated periods.
Operating results for the quarter ended July 4, 2021 may not be indicative of the results that may be expected for the year ending December 31, 2021 because of seasonal effects on our business. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Annual Report on Form 10-K”), which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.
COVID-19
On March 11, 2020, the World Health Organization designated coronavirus disease 2019 ("COVID-19") as a global pandemic. We continue to actively monitor COVID-19 and its potential impact on our operations and financial results. Employee health and safety remains our first priority while we continue our efforts to support community food supplies. Since the onset of COVID-19, there has been minimal disruption to our supply chain network, and all our manufacturing plants are currently open. We are also working closely with our business units, contract manufacturers, distributors, contractors and other external business partners to minimize the potential impact on our business.
The ultimate impact that COVID-19 will have on our consolidated financial statements remains uncertain and ultimately will be dictated by the length and severity of the pandemic, including COVID-19 variants or potential resurgences, as well as the economic recovery and actions taken in response by local, state and national governments around the world, including the distribution of vaccinations. We will continue to evaluate the nature and extent of these potential impacts to our business and consolidated financial statements.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted the

The Hershey Company | Q2 2021 Form 10-Q | Page 8
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

provisions of this ASU in the fourth quarter of 2020. Adoption of the new standard did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. Entities may apply this ASU upon issuance through December 31, 2022 on a prospective basis. We are currently evaluating the impact of the new standard on our consolidated financial statements and related disclosures.
No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.
2. BUSINESS ACQUISITION AND DIVESTITURES
2021 Activity
Lily's Sweets, LLC
On June 25, 2021, we completed the acquisition of Lily's Sweets, LLC ("Lily's"), previously a privately held company that sells a line of sugar-free and low-sugar confectionery foods to retailers and distributors in the United States and Canada. Lily's products include dark and milk chocolate style bars, baking chips, peanut butter cups and other confection products that complement Hershey’s confectionery and confectionery-based portfolio. The initial cash consideration paid for Lily's totaled $418,191 and the Company may be required to pay additional cash consideration if certain defined targets related to net sales and gross margin are exceeded during the period of the closing date through December 31, 2021. As of the acquisition date, the estimated fair value of the contingent consideration obligation was classified as a liability of $5,000 and was determined using a scenario-based analysis on forecasted future results. Acquisition-related costs for the Lily's acquisition were immaterial.

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

Goodwill $ 174,516 
Other intangible assets 235,800 
Other assets acquired, primarily current assets 30,383 
Other liabilities assumed, primarily current liabilities (9,620)
Deferred income taxes (7,888)
Net assets acquired $ 423,191 

The purchase price allocation presented above is preliminary. We are in the process of refining the valuation of acquired assets and liabilities, including goodwill, and expect to finalize the purchase price allocation by the end of 2021.

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


The Hershey Company | Q2 2021 Form 10-Q | Page 9
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Other intangible assets include trademarks valued at $151,600 and customer relationships valued at $84,200. Trademarks were assigned an estimated useful life of 33 years and customer relationships were assigned estimated useful lives ranging from 17 to 18 years.
Lotte Shanghai Foods Co., Ltd.
In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd. ("LSFC"), which was previously included within the International and Other segment results in our consolidated financial statements. Total proceeds from the divestiture and the impact on our consolidated financial statements were immaterial and were recorded in the selling, marketing and administrative ("SM&A") expense caption within the Consolidated Statements of Income.
2020 Activity
During the second quarter of 2020, we completed the divestitures of KRAVE Pure Foods, Inc. and the Scharffen Berger and Dagoba brands, all of which were previously included within the North America segment results in our consolidated financial statements. Total proceeds from the divestitures and the impact on our Consolidated Statements of Income, both individually and on an aggregate basis, were immaterial.
3. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying value of goodwill by reportable segment for the six months ended July 4, 2021 are as follows:
North America
    International
   and Other
Total
Balance at December 31, 2020
$ 1,970,445  $ 17,770  $ 1,988,215 
Acquired during the period (see Note 2)
174,516  —  174,516 
Foreign currency translation 3,876  (161) 3,715 
Balance at July 4, 2021
$ 2,148,837  $ 17,609  $ 2,166,446 

The following table provides the gross carrying amount and accumulated amortization for each major class of intangible asset:
July 4, 2021 December 31, 2020
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Intangible assets subject to amortization:
Trademarks $ 1,364,454  $ (122,567) $ 1,211,086  $ (104,939)
Customer-related 289,467  (56,495) 204,101  (49,616)
Patents 8,848  (8,848) 8,556  (8,542)
Total
1,662,769  (187,910) 1,423,743  (163,097)
Intangible assets not subject to amortization:
Trademarks 34,576  34,568 
Total other intangible assets
$ 1,509,435  $ 1,295,214 
Total amortization expense for the three months ended July 4, 2021 and June 28, 2020 was $11,635 and $11,580, respectively. Total amortization expense for the six months ended July 4, 2021 and June 28, 2020 was $23,256 and $23,220, respectively.
4. SHORT AND LONG-TERM DEBT
Short-term Debt
As a source of short-term financing, we utilize cash on hand and commercial paper or bank loans with an original maturity of three months or less. We maintain a $1.5 billion unsecured revolving credit facility with the option to

The Hershey Company | Q2 2021 Form 10-Q | Page 10
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

increase borrowings by an additional $500 million with the consent of the lenders. This facility is scheduled to expire on July 2, 2024; however, we may extend the termination date for up to two additional one-year periods upon notice to the administrative agent under the facility.
The credit agreement contains certain financial and other covenants, customary representations, warranties and events of default. As of July 4, 2021, we were in compliance with all covenants pertaining to the credit agreement, and we had no significant compensating balance agreements that legally restricted these funds. For more information, refer to the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K.
In addition to the revolving credit facility, we maintain lines of credit with domestic and international commercial banks. Commitment fees relating to our revolving credit facility and lines of credit are not material. Short-term debt consisted of the following:
July 4, 2021 December 31, 2020
Short-term foreign bank borrowings against lines of credit $ 57,574 $ 74,041
U.S. commercial paper 149,990
Total short-term debt $ 207,564 $ 74,041
Weighted average interest rate on outstanding commercial paper 0.1  % N/A

Long-term Debt
Long-term debt consisted of the following:
Debt Type and Rate
Maturity Date
July 4, 2021 December 31, 2020
8.800% Debentures (1)
February 15, 2021 $ —  $ 84,715 
3.100% Notes (2)
May 15, 2021 —  350,000 
2.625% Notes
May 1, 2023 250,000  250,000 
3.375% Notes
May 15, 2023 500,000  500,000 
2.050% Notes
November 15, 2024 300,000  300,000 
0.900% Notes
June 1, 2025 300,000  300,000 
3.200% Notes
August 21, 2025 300,000  300,000 
2.300% Notes
August 15, 2026 500,000  500,000 
7.200% Debentures
August 15, 2027 193,639  193,639 
2.450% Notes
November 15, 2029 300,000  300,000 
1.700% Notes
June 1, 2030 350,000  350,000 
3.375% Notes
August 15, 2046 300,000  300,000 
3.125% Notes
November 15, 2049 400,000 400,000
2.650% Notes
June 1, 2050 350,000 350,000
Finance lease obligations (see Note 7)
79,603 80,755
Net impact of interest rate swaps, debt issuance costs and unamortized debt discounts (24,572) (30,525)
Total long-term debt 4,098,670  4,528,584 
Less—current portion 3,470 438,829
Long-term portion $ 4,095,200  $ 4,089,755 
(1)In February 2021, we repaid $84,715 of 8.800% Debentures due upon their maturity.
(2)In May 2021, we repaid $350,000 of 3.100% Notes due upon their maturity.

The Hershey Company | Q2 2021 Form 10-Q | Page 11
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Interest Expense
Net interest expense consists of the following:
Three Months Ended Six Months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Interest expense $ 34,768  $ 40,520  $ 73,531  $ 79,776 
Capitalized interest
(3,084) (1,664) (4,801) (3,081)
Interest expense
31,684  38,856  68,730  76,695 
Interest income (619) (777) (1,229) (2,361)
Interest expense, net
$ 31,065  $ 38,079  $ 67,501  $ 74,334 

5. DERIVATIVE INSTRUMENTS
We are exposed to market risks arising principally from changes in foreign currency exchange rates, interest rates and commodity prices. We use certain derivative instruments to manage these risks. These include interest rate swaps to manage interest rate risk, foreign currency forward exchange contracts to manage foreign currency exchange rate risk, and commodities futures and options contracts to manage commodity market price risk exposures.
In entering into these contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. We mitigate this risk by entering into exchanged-traded contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties. We do not expect any significant losses from counterparty defaults.

Commodity Price Risk
We enter into commodities futures and options contracts and other commodity derivative instruments to reduce the effect of future price fluctuations associated with the purchase of raw materials, energy requirements and transportation services. We generally hedge commodity price risks for 3- to 24-month periods. Our open commodity derivative contracts had a notional value of $387,871 as of July 4, 2021 and $279,843 as of December 31, 2020.
Derivatives used to manage commodity price risk are not designated for hedge accounting treatment. Therefore, the changes in fair value of these derivatives are recorded as incurred within cost of sales. As discussed in Note 13, we define our segment income to exclude gains and losses on commodity derivatives until the related inventory is sold, at which time the related gains and losses are reflected within segment income.  This enables us to continue to align the derivative gains and losses with the underlying economic exposure being hedged and thereby eliminate the mark-to-market volatility within our reported segment income.

Foreign Exchange Price Risk
We are exposed to foreign currency exchange rate risk related to our international operations, including non-functional currency intercompany debt and other non-functional currency transactions of certain subsidiaries. Principal currencies hedged include the euro, Canadian dollar, Japanese yen, British pound, Brazilian real, Malaysian ringgit, Mexican peso and Swiss franc. We typically utilize foreign currency forward exchange contracts to hedge these exposures for periods ranging from 3 to 12 months. The contracts are either designated as cash flow hedges or are undesignated. The net notional amount of foreign exchange contracts accounted for as cash flow hedges was $183,136 at July 4, 2021 and $130,131 at December 31, 2020. The effective portion of the changes in fair value on these contracts is recorded in other comprehensive income and reclassified into earnings in the same period in which the hedged transactions affect earnings. The net notional amount of foreign exchange contracts that are not designated as accounting hedges was $1,775 at July 4, 2021 and $2,519 at December 31, 2020. The change in fair value on these instruments is recorded directly in cost of sales or selling, marketing and administrative expense, depending on the nature of the underlying exposure.



The Hershey Company | Q2 2021 Form 10-Q | Page 12
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Interest Rate Risk
We manage our targeted mix of fixed and floating rate debt with debt issuances and by entering into fixed-to-floating interest rate swaps in order to mitigate fluctuations in earnings and cash flows that may result from interest rate volatility. These swaps are designated as fair value hedges, for which the gain or loss on the derivative and the offsetting loss or gain on the hedged item are recognized in current earnings as interest expense (income), net. In December 2020, our fixed-to-floating interest rate swap matured in connection with the repayment of certain long-term debt upon its maturity. Therefore, as of July 4, 2021 and December 31, 2020, we had no open interest rate swap derivative instruments in a fair value hedging relationship.
In order to manage interest rate exposure, in previous years we utilized interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions. These swaps, which were settled upon issuance of the related debt, were designated as cash flow hedges and the gains and losses that were deferred in other comprehensive income are being recognized as an adjustment to interest expense over the same period that the hedged interest payments affect earnings.
Equity Price Risk
We are exposed to market price changes in certain broad market indices related to our deferred compensation obligations to our employees. To mitigate this risk, we use equity swap contracts to hedge the portion of the exposure that is linked to market-level equity returns. These contracts are not designated as hedges for accounting purposes and are entered into for periods of 3 to 12 months. The change in fair value of these derivatives is recorded in selling, marketing and administrative expense, together with the change in the related liabilities. The notional amount of the contracts outstanding at July 4, 2021 and December 31, 2020 was $22,882 and $30,194, respectively.
The following table presents the classification of derivative assets and liabilities within the Consolidated Balance Sheets as of July 4, 2021 and December 31, 2020:
July 4, 2021 December 31, 2020
Assets (1) Liabilities (1) Assets (1) Liabilities (1)
Derivatives designated as cash flow hedging instruments:
Foreign exchange contracts $ 43  $ 8,012  $ 2,388  $ 5,522 
Derivatives not designated as hedging instruments:
Commodities futures and options (2) 170  3,895  3,299  1,648 
Deferred compensation derivatives 1,956  —  3,630  — 
Foreign exchange contracts 565  —  176  93 
2,691  3,895  7,105  1,741 
Total $ 2,734  $ 11,907  $ 9,493  $ 7,263 

(1)Derivatives assets are classified on our Consolidated Balance Sheets within prepaid expenses and other as well as other non-current assets. Derivative liabilities are classified on our Consolidated Balance Sheets within accrued liabilities and other long-term liabilities.
(2)As of July 4, 2021, amounts reflected on a net basis in liabilities were assets of $51,073 and liabilities of $54,087, which are associated with cash transfers receivable or payable on commodities futures contracts reflecting the change in quoted market prices on the last trading day for the period. The comparable amounts reflected on a net basis in assets at December 31, 2020 were assets of $32,674 and liabilities of $29,376. At July 4, 2021 and December 31, 2020, the remaining amount reflected in assets and liabilities related to the fair value of other non-exchange traded derivative instruments, respectively.


The Hershey Company | Q2 2021 Form 10-Q | Page 13
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Income Statement Impact of Derivative Instruments
The effect of derivative instruments on the Consolidated Statements of Income for the three months ended July 4, 2021 and June 28, 2020 was as follows:
Non-designated Hedges Cash Flow Hedges
Gains (losses) recognized in income (a) Gains (losses) recognized in other comprehensive income ("OCI") Gains (losses) reclassified from accumulated OCI ("AOCI") into income (b)
2021 2020 2021 2020 2021 2020
Commodities futures and options
$ 16,877  $ 2,624  $ —  $ —  $ —  $ — 
Foreign exchange contracts 435  (554) (6,344) 675  (2,972) 1,138 
Interest rate swap agreements
—  —  —  —  (2,709) (2,343)
Deferred compensation derivatives
1,956  4,626  —  —  —  — 
Total
$ 19,268  $ 6,696  $ (6,344) $ 675  $ (5,681) $ (1,205)
The effect of derivative instruments on the Consolidated Statements of Income for the six months ended July 4, 2021 and June 28, 2020 was as follows:
Non-designated Hedges Cash Flow Hedges
Gains (losses) recognized in income (a) Gains (losses) recognized in OCI Gains (losses) reclassified from AOCI into income (b)
2021 2020 2021 2020 2021 2020
Commodities futures and options
$ 30,556  $ (74,468) $ —  $ —  $ —  $ — 
Foreign exchange contracts 573  (3,876) (7,979) 6,056  (3,144) 1,390 
Interest rate swap agreements
—  —  —  —  (5,674) (4,687)
Deferred compensation derivatives
3,510  (1,133) —  —  —  — 
Total
$ 34,639  $ (79,477) $ (7,979) $ 6,056  $ (8,818) $ (3,297)

(a)Gains (losses) recognized in income for non-designated commodities futures and options contracts were included in cost of sales. Gains (losses) recognized in income for non-designated foreign currency forward exchange contracts and deferred compensation derivatives were included in selling, marketing and administrative expenses.
(b)Gains (losses) reclassified from AOCI into income for foreign currency forward exchange contracts were included in selling, marketing and administrative expenses. Losses reclassified from AOCI into income for interest rate swap agreements were included in interest expense.
The amount of pretax net losses on derivative instruments, including interest rate swap agreements and foreign currency forward exchange contracts expected to be reclassified into earnings in the next 12 months was approximately $19,317 as of July 4, 2021. This amount is primarily associated with interest rate swap agreements.
Fair Value Hedging Relationships
For the three and six months ended July 4, 2021, we had no interest rate swap derivative instruments in a fair value hedging relationship. For the three and six months ended June 28, 2020, we recognized a net pretax benefit to interest expense of $608 and $759, respectively, relating to our fixed-to-floating interest swap arrangements.

The Hershey Company | Q2 2021 Form 10-Q | Page 14
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

6. FAIR VALUE MEASUREMENTS
Accounting guidance on fair value measurements requires that financial assets and liabilities be classified and disclosed in one of the following categories of the fair value hierarchy:
Level 1 – Based on unadjusted quoted prices for identical assets or liabilities in an active market.
Level 2 – Based on observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 – Based on unobservable inputs that reflect the entity's own assumptions about the assumptions that a market participant would use in pricing the asset or liability.

We did not have any Level 3 financial assets or liabilities, nor were there any transfers between levels during the periods presented.
The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of July 4, 2021 and December 31, 2020:
Assets (Liabilities)
Level 1 Level 2 Level 3 Total
July 4, 2021:
Derivative Instruments:
Assets:
Foreign exchange contracts (1) $ $ 608 $ $ 608
Deferred compensation derivatives (2) —  1,956  —  1,956 
Commodities futures and options (3) 170  —  —  170 
Liabilities:
Foreign exchange contracts (1) —  8,012  —  8,012 
Commodities futures and options (3) 3,895  —  —  3,895 
December 31, 2020:
Assets:
Foreign exchange contracts (1) $ $ 2,564 $ $ 2,564
Deferred compensation derivatives (2) —  3,630  —  3,630 
Commodities futures and options (3) 3,299  —  —  3,299 
Liabilities:
Foreign exchange contracts (1) —  5,615  —  5,615 
Commodities futures and options (3) 1,648  —  —  1,648 
(1)The fair value of foreign currency forward exchange contracts is the difference between the contract and current market foreign currency exchange rates at the end of the period. We estimate the fair value of foreign currency forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences.
(2)The fair value of deferred compensation derivatives is based on quoted prices for market interest rates and a broad market equity index.
(3)The fair value of commodities futures and options contracts is based on quoted market prices.


The Hershey Company | Q2 2021 Form 10-Q | Page 15
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Other Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of July 4, 2021 and December 31, 2020 because of the relatively short maturity of these instruments.
The estimated fair value of our long-term debt is based on quoted market prices for similar debt issues and is, therefore, classified as Level 2 within the valuation hierarchy. The fair values and carrying values of long-term debt, including the current portion, were as follows:
Fair Value Carrying Value
July 4, 2021 December 31, 2020 July 4, 2021 December 31, 2020
Current portion of long-term debt $ 3,470 $ 443,215 $ 3,470 $ 438,829
Long-term debt 4,338,773  4,479,499  4,095,200  4,089,755 
Total $ 4,342,243  $ 4,922,714  $ 4,098,670  $ 4,528,584 

Other Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, GAAP requires that, under certain circumstances, we also record assets and liabilities at fair value on a nonrecurring basis.
In connection with the acquisition of Lily's in the second quarter of 2021, as discussed in Note 2, we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty and a form of the multi-period excess earnings, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.
During the six months ended July 4, 2021, we recorded no impairment charges. During the six months ended June 28, 2020, we recorded the following impairment charges, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy:
2020
Adjustment to disposal group (1) $ 6,200 
Other asset write-down (2) 2,943 
Long-lived asset impairment charges $ 9,143 
(1)In connection with the sale of the LSFC joint venture (disposal group previously classified as held for sale), we recorded impairment charges to adjust long-lived asset values. The fair value of the disposal group was supported by potential sales prices with third-party buyers. The sale of the LSFC joint venture was completed in January 2021.
(2)In connection with a previous sale, the Company wrote-down certain receivables deemed uncollectible.
7. LEASES
We lease office and retail space, warehouse and distribution facilities, land, vehicles, and equipment. We determine if an agreement is or contains a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are based on the estimated present value of lease payments over the lease term and are recognized at the lease commencement date.
As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate in determining the present value of lease payments. The estimated incremental borrowing rate is derived from information available at the lease commencement date.

The Hershey Company | Q2 2021 Form 10-Q | Page 16
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. A limited number of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements generally do not contain residual value guarantees or material restrictive covenants.
For real estate, equipment and vehicles that support selling, marketing and general administrative activities the Company accounts for the lease and non-lease components as a single lease component. These asset categories comprise the majority of our leases. The lease and non-lease components of real estate and equipment leases supporting production activities are not accounted for as a single lease component. Consideration for such contracts are allocated to the lease component and non-lease components based upon relative standalone prices either observable or estimated if observable prices are not readily available.
The components of lease expense for the three months ended July 4, 2021 and June 28, 2020 were as follows:
Three Months Ended
Lease expense Classification July 4, 2021 June 28, 2020
Operating lease cost Cost of sales or SM&A (1) $ 11,088  $ 10,673 
Finance lease cost:
Amortization of ROU assets Depreciation and amortization (1) 1,999  1,949 
Interest on lease liabilities Interest expense, net 1,109  1,112 
Net lease cost (2) $ 14,196  $ 13,734 
The components of lease expense for the six months ended July 4, 2021 and June 28, 2020 were as follows:  
Six Months Ended
Lease expense Classification July 4, 2021 June 28, 2020
Operating lease cost Cost of sales or SM&A (1) $ 22,554  $ 21,217 
Finance lease cost:
Amortization of ROU assets Depreciation and amortization (1) 4,061  3,979 
Interest on lease liabilities Interest expense, net 2,221  2,234 
Net lease cost (2) $ 28,836  $ 27,430 
(1)Supply chain-related amounts were included in cost of sales.
(2)Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial.
Information regarding our lease terms and discount rates were as follows:
July 4, 2021 December 31, 2020
Weighted-average remaining lease term (years)
Operating leases 12.8 12.5
Finance leases 30.3 30.1
Weighted-average discount rate
Operating leases 3.7  % 3.8  %
Finance leases 5.9  % 5.9  %


The Hershey Company | Q2 2021 Form 10-Q | Page 17
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Supplemental balance sheet information related to leases were as follows:
Leases Classification July 4, 2021 December 31, 2020
Assets
Operating lease ROU assets Other non-current assets $ 206,068  $ 224,268 
Finance lease ROU assets, at cost Property, plant and equipment, gross 99,939  101,426 
Accumulated amortization Accumulated depreciation (16,287) (13,361)
Finance lease ROU assets, net Property, plant and equipment, net 83,652  88,065 
Total leased assets $ 289,720  $ 312,333 
Liabilities
Current
Operating Accrued liabilities $ 28,559  $ 36,578 
Finance Current portion of long-term debt 4,188  4,868 
Non-current
Operating Other long-term liabilities 172,352  181,871 
Finance Long-term debt 75,415  75,887 
Total lease liabilities $ 280,514  $ 299,204 

The maturity of our lease liabilities as of July 4, 2021 were as follows:
Operating leases Finance leases Total
2021 (rest of year) $ 20,512  $ 4,349  $ 24,861 
2022 28,643  7,391  36,034 
2023 20,818  5,285  26,103 
2024 15,748  4,709  20,457 
2025 14,200  4,741  18,941 
Thereafter 160,392  161,625  322,017 
Total lease payments 260,313  188,100  448,413 
Less: Imputed interest 59,402  108,497  167,899 
Total lease liabilities $ 200,911  $ 79,603  $ 280,514 

As of July 4, 2021, the Company had entered in an additional lease as a lessee, primarily for real estate. This lease has not yet commenced and will result in ROU assets and corresponding lease liabilities of approximately $20,000. This lease is expected to commence during the second half of 2021, with a lease term of approximately 8 years.


The Hershey Company | Q2 2021 Form 10-Q | Page 18
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Supplemental cash flow and other information related to leases were as follows:
Six Months Ended
July 4, 2021 June 28, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 21,773  $ 21,335 
Operating cash flows from finance leases 2,221  2,234 
Financing cash flows from finance leases 2,240  2,105 
ROU assets obtained in exchange for lease liabilities:
Operating leases $ 6,190  $ 20,814 
Finance leases 436  2,076 
8. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
We invest in partnerships which make equity investments in projects eligible to receive federal historic and renewable energy tax credits. The tax credits, when realized, are recognized as a reduction of tax expense under the flow-through method, at which time the corresponding equity investment is written-down to reflect the remaining value of the future benefits to be realized. The equity investment write-down is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 18).

Additionally, we acquire ownership interests in emerging snacking businesses and startup companies, which vary in method of accounting based on our percentage of ownership and ability to exercise significant influence over decisions relating to operating and financial affairs. These investments afford the Company the rights to distribute brands that the Company does not own to third-party customers primarily in North America. Net sales and expenses of our equity method investees are not consolidated into our financial statements; rather, our proportionate share of earnings or losses are recorded on a net basis within other (income) expense, net in the Consolidated Statements of Income.

Both equity and cost method investments are reported within other non-current assets in our Consolidated Balance Sheets. We regularly review our investments and adjust accordingly for capital contributions, dividends received and other-than-temporary impairments. Total investments in unconsolidated affiliates was $81,606 and $52,351 as of July 4, 2021 and December 31, 2020, respectively.
9. BUSINESS REALIGNMENT ACTIVITIES
We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies. Costs associated with business realignment activities are classified in our Consolidated Statements of Income as follows:
Three Months Ended Six Months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Cost of sales $ 1,042  $ —  $ 5,037  $ — 
Selling, marketing and administrative expense 1,286  2,645  2,976  2,645 
Business realignment costs (benefits) 1,141  (1,370) 2,383  (475)
Costs associated with business realignment activities $ 3,469  $ 1,275  $ 10,396  $ 2,170 

The Hershey Company | Q2 2021 Form 10-Q | Page 19
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Costs recorded by program during the six months ended July 4, 2021 and June 28, 2020 related to these activities were as follows:
Three Months Ended Six Months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
International Optimization Program:
Severance $ 1,198  $ —  $ 2,822  $ — 
Other program costs 2,271  —  7,574  — 
Margin for Growth Program:
Severance —  (1,410) —  (653)
Other program costs —  2,685  —  2,823 
Total $ 3,469  $ 1,275  $ 10,396  $ 2,170 
The following table presents the liability activity for costs qualifying as exit and disposal costs for the six months ended July 4, 2021:
Total
Liability balance at December 31, 2020 (1)
$ 12,748 
2021 business realignment charges (2)
4,700 
Cash payments
(14,913)
Liability balance at July 4, 2021 (1)
$ 2,535 
(1)The liability balances reflected above are reported within accrued liabilities and other long-term liabilities.
(2)The costs reflected in the liability roll-forward represent employee-related and certain third-party service provider charges.
2020 International Optimization Program
In the fourth quarter of 2020, we commenced a program ("International Optimization Program") to streamline resources and investments in select international markets, including the optimization of our China operating model that will improve our operational efficiency and provide for a strong, sustainable and simplified base going forward.
The International Optimization Program is expected to be completed by mid-2022, with total pre-tax costs anticipated to be $50,000 to $75,000. Cash costs are expected to be $40,000 to $65,000, primarily related to workforce reductions of approximately 350 positions outside of the United States, costs to consolidate and relocate production, and third-party costs incurred to execute these activities. The costs and related benefits of the International Optimization Program relate to the International and Other segment. However, segment operating results do not include these business realignment expenses because we evaluate segment performance excluding such costs.
For the three and six months ended July 4, 2021, we recognized total costs associated with the International Optimization Program of $3,469 and $10,396, respectively. These charges predominantly included third-party charges in support of our initiative to transform our China operating model, as well as severance and employee benefit costs. Since inception, we have incurred pre-tax charges to execute the program totaling $39,739.
Margin for Growth Program
In the first quarter of 2017, the Company's Board of Directors ("Board") unanimously approved several initiatives under a single program focused on improving global efficiency and effectiveness, optimizing the Company’s supply chain, streamlining the Company’s operating model and reducing administrative expenses to generate long-term savings. This project was completed in mid-2020.
For the three and six months ended June 28, 2020, we recognized total costs associated with the Margin for Growth Program of $1,275 and $2,170, respectively. These charges included employee severance, largely relating to initiatives to improve the cost structure of our corporate operating model as part of optimizing our global supply chain. In addition, we incurred other program costs, which related primarily to third-party charges in support of our initiative to improve global efficiency and effectiveness.

The Hershey Company | Q2 2021 Form 10-Q | Page 20
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

The costs and related benefits of the Margin for Growth Program relate approximately 63% to the North America segment and 37% to the International and Other segment. However, segment operating results do not include these business realignment expenses because we evaluate segment performance excluding such costs.
10. INCOME TAXES
The majority of our taxable income is generated in the United States and taxed at the United States statutory rate of 21%. The effective tax rates for the six months ended July 4, 2021 and June 28, 2020 were 25.1% and 19.8%, respectively. Relative to the statutory rate, the 2021 effective tax rate was impacted by incremental tax reserves incurred as a result of an adverse ruling in connection with a non-U.S. tax litigation matter as well as state taxes, partially offset by investment tax credits and the benefit of employee share-based payments.
The Company and its subsidiaries file tax returns in the United States, including various state and local returns, and in other foreign jurisdictions. We are routinely audited by taxing authorities in our filing jurisdictions, and a number of these disputes are currently underway, including multi-year controversies at various stages of review, negotiation and litigation in Malaysia, Mexico, and the United States. The outcome of tax audits cannot be predicted with certainty, including the timing of resolution or potential settlements. If any issues addressed in our tax audits are resolved in a manner not consistent with management’s expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. During the second quarter of 2021, we recorded incremental tax reserves as a result of an adverse ruling in connection with a non-U.S. tax litigation matter. Based on our current assessments, we believe adequate provision has been made for all income tax uncertainties. We reasonably expect reductions in the liability for unrecognized tax benefits of approximately $22,387 within the next 12 months because of the expiration of statutes of limitations and settlements of tax audits.
American Rescue Plan Act
On March 11, 2021, the American Rescue Plan Act ("ARPA") was signed into law. The ARPA strengthens and extends certain federal programs enacted through the CARES Act and other COVID-19 relief measures, and establishes new federal programs, including provisions on taxes, healthcare and unemployment benefits. The ARPA did not have a material impact on our consolidated financial statements for the six months ended July 4, 2021.
Coronavirus Aid, Relief, and Economic Security Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. The CARES Act did not have a material impact on our consolidated financial statements for the six months ended July 4, 2021 and June 28, 2020.

The Hershey Company | Q2 2021 Form 10-Q | Page 21
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

11. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
Net Periodic Benefit Cost
The components of net periodic benefit cost for the three months ended July 4, 2021 and June 28, 2020 were as follows:
Pension Benefits Other Benefits
Three Months Ended Three Months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Service cost $ 5,433 $ 5,411 $ 45 $ 41
Interest cost 4,536  6,966  965  1,505 
Expected return on plan assets (12,193) (13,142) —  — 
Amortization of prior service (credit) cost
(1,535) (1,824) —  75 
Amortization of net loss (gain) 5,604  6,582  —  (10)
Settlement loss 4,932  3,653  —  — 
Total net periodic benefit cost $ 6,777  $ 7,646  $ 1,010  $ 1,611 
We made contributions of $325 and $4,000 to the pension plans and other benefits plans, respectively, during the second quarter of 2021. In the second quarter of 2020, we made contributions of $248 and $3,976 to our pension plans and other benefit plans, respectively. The contributions in 2021 and 2020 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans.

The components of net periodic benefit cost for the six months ended July 4, 2021 and June 28, 2020 were as follows:
 
Pension Benefits Other Benefits
Six Months Ended Six Months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Service cost $ 10,922 $ 10,843 $ 90 $ 80
Interest cost 8,726  13,956  1,929  3,012 
Expected return on plan assets (24,612) (26,310) —  — 
Amortization of prior service (credit) cost
(3,071) (3,651) —  150 
Amortization of net loss (gain) 11,420  13,164  —  (19)
Settlement loss 7,440  3,653  —  — 
Total net periodic benefit cost $ 10,825  $ 11,655  $ 2,019  $ 3,223 
We made contributions of $1,183 and $8,155 to the pension plans and other benefits plans, respectively, during the first six months of 2021. In the first six months of 2020, we made contributions of $1,005 and $7,328 to our pension plans and other benefit plans, respectively. The contributions in 2021 and 2020 also included benefit payments from our non-qualified pension plans and post-retirement benefit plans.

The non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 18).


The Hershey Company | Q2 2021 Form 10-Q | Page 22
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

During the first and second quarters of 2021, we recognized pension settlement charges in our hourly retirement plan due to lump sum withdrawals by employees retiring or leaving the Company. In addition, we recognized pension settlement charges in our salaried retirement plan during the second quarter of 2021 due to lump sum withdrawals by employees retiring or leaving the Company. The non-cash settlement charges, which represent the acceleration of a portion of the respective plan’s accumulated unrecognized actuarial loss, were triggered when the cumulative lump sum distributions exceeded the plan's anticipated annual service and interest costs. In connection with the second quarter 2021 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 34 basis points higher than the rate as of December 31, 2020 and an expected rate of return on plan assets of 4.8%.
12. STOCK COMPENSATION PLANS
Share-based grants for compensation and incentive purposes are made pursuant to the Equity and Incentive Compensation Plan (“EICP”). The EICP provides for grants of one or more of the following stock-based compensation awards to employees, non-employee directors and certain service providers upon whom the successful conduct of our business is dependent:
Non-qualified stock options ("stock options");
Performance stock units ("PSUs") and performance stock;
Stock appreciation rights;
Restricted stock units ("RSUs") and restricted stock; and
Other stock-based awards.
The EICP also provides for the deferral of stock-based compensation awards by participants if approved by the Compensation and Executive Organization Committee of our Board and if in accordance with an applicable deferred compensation plan of the Company. Currently, the Compensation and Executive Organization Committee has authorized the deferral of PSU and RSU awards by certain eligible employees under the Company’s Deferred Compensation Plan. Our Board has authorized our non-employee directors to defer any portion of their cash retainer, committee chair fees and RSUs awarded that they elect to convert into deferred stock units under our Directors’ Compensation Plan.
At the time stock options are exercised or PSUs and RSUs become payable, Common Stock is issued from our accumulated treasury shares. Dividend equivalents are credited on RSUs on the same date and at the same rate as dividends paid on our Common Stock. Dividend equivalents are charged to retained earnings and included in accrued liabilities until paid.
Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. In addition, historical data is used to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.
For the periods presented, compensation expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows:
Three Months Ended Six Months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Pre-tax compensation expense
$ 16,826  $ 12,915  $ 32,482  $ 25,490 
Related income tax benefit 4,500  2,492  8,023  4,894 
Compensation expenses for stock compensation plans are primarily included in selling, marketing and administrative expense. As of July 4, 2021, total stock-based compensation expense related to non-vested awards not yet recognized was $101,018 and the weighted-average period over which this amount is expected to be recognized was approximately 2.2 years.

The Hershey Company | Q2 2021 Form 10-Q | Page 23
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

Stock Options
The exercise price of each stock option awarded under the EICP equals the closing price of our Common Stock on the New York Stock Exchange on the date of grant. Each stock option has a maximum term of 10 years. Grants of stock options provide for pro-rated vesting, typically over a four-year period. Expense for stock options is based on grant date fair value and recognized on a straight-line method over the vesting period, net of estimated forfeitures.

A summary of activity relating to grants of stock options for the period ended July 4, 2021 is as follows:
Stock Options Shares Weighted-Average
Exercise Price (per share)
Weighted-Average Remaining
Contractual Term
Aggregate Intrinsic Value
Outstanding at beginning of the period
1,839,811  $99.72 4.8 years
Granted 32,155  $147.98
Exercised
(338,047) $96.46
Forfeited (3,009) $102.58
Outstanding as of July 4, 2021
1,530,910  $101.44 4.6 years $ 111,076 
Options exercisable as of July 4, 2021
1,344,804  $100.00 4.3 years $ 99,512 

The weighted-average fair value of options granted was $24.12 and $21.31 per share for the periods ended July 4, 2021 and June 28, 2020, respectively. The fair value was estimated on the date of grant using a Black-Scholes option-pricing model and the following weighted-average assumptions:
Six Months Ended
July 4, 2021 June 28, 2020
Dividend yields
2.2  % 2.1  %
Expected volatility 21.8  % 17.5  %
Risk-free interest rates
1.0  % 1.3  %
Expected term in years 6.3 6.7
The total intrinsic value of options exercised was $21,453 and $23,597 for the periods ended July 4, 2021 and June 28, 2020, respectively.
Performance Stock Units and Restricted Stock Units
Under the EICP, we grant PSUs to selected executives and other key employees. Vesting is contingent upon the achievement of certain performance objectives. We grant PSUs over 3-year performance cycles. If we meet targets for financial measures at the end of the applicable 3-year performance cycle, we award a resulting number of shares of our Common Stock to the participants. The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award.
For PSUs granted, the target award is a combination of a market-based total shareholder return and performance-based components. For market-based condition components, market volatility and other factors are taken into consideration in determining the grant date fair value and the related compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. For performance-based condition components, we estimate the probability that the performance conditions will be achieved each quarter and adjust compensation expenses accordingly. The performance scores of PSU grants during the six months ended July 4, 2021 and June 28, 2020 can range from 0% to 250% of the targeted amounts.

The Hershey Company | Q2 2021 Form 10-Q | Page 24
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

We recognize the compensation expenses associated with PSUs ratably over the 3-year term. Compensation expenses is based on the grant date fair value because the grants can only be settled in shares of our Common Stock. The grant date fair value of PSUs is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s Common Stock on the date of grant for performance-based components.
During the six months ended July 4, 2021 and June 28, 2020, we awarded RSUs to certain executive officers and other key employees under the EICP. We also awarded RSUs to non-employee directors.
We recognize the compensation expenses associated with employee RSUs over a specified award vesting period based on the grant date fair value of our Common Stock. We recognize expense for employee RSUs based on the straight-line method. The compensation expenses associated with non-employee director RSUs is recognized ratably over the vesting period, net of estimated forfeitures.
A summary of activity relating to grants of PSUs and RSUs for the period ended July 4, 2021 is as follows:
Performance Stock Units and Restricted Stock Units
Number of units Weighted-average grant date fair value for equity awards (per unit)
Outstanding at beginning of year
1,053,332  $135.11
Granted
382,841  $153.39
Performance assumption change (1)
144,722  $142.56
Vested
(308,664) $115.57
Forfeited
(35,938) $124.56
Outstanding as of July 4, 2021
1,236,293  $146.11
(1)Reflects the net number of PSUs above and below target levels based on the performance metrics.
The following table sets forth information about the fair value of the PSUs and RSUs granted for potential future distribution to employees and non-employee directors. In addition, the table provides assumptions used to determine the fair value of the market-based total shareholder return component using the Monte Carlo simulation model on the date of grant.
Six Months Ended
July 4, 2021 June 28, 2020
Units granted
382,841 326,283
Weighted-average fair value at date of grant
$ 153.39 $ 163.30
Monte Carlo simulation assumptions:
Estimated values $ 66.44 $ 80.08
Dividend yields 2.2  % 2.0  %
Expected volatility 26.4  % 17.3  %

The fair value of shares vested totaled $46,352 and $41,874 for the periods ended July 4, 2021 and June 28, 2020, respectively.
Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 263,269 units as of July 4, 2021. Each unit is equivalent to one share of the Company’s Common Stock.

The Hershey Company | Q2 2021 Form 10-Q | Page 25
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)

13. SEGMENT INFORMATION
Our organizational structure is designed to ensure continued focus on North America, coupled with an emphasis on profitable growth in our focus international markets. Our business is primarily organized around geographic regions, which enables us to build processes for repeatable success in our global markets. As a result, we have defined our operating segments on a geographic basis, as this aligns with how our Chief Operating Decision Maker (“CODM”) manages our business, including resource allocation and performance assessment. Our North America business, which generates approximately 90% of our consolidated revenue, is our only reportable segment. None of our other operating segments meet the quantitative thresholds to qualify as reportable segments; therefore, these operating segments are combined and disclosed below as International and Other.
North America - This segment is responsible for our traditional chocolate and non-chocolate confectionery market position, as well as our grocery and growing snacks market positions, in the United States and Canada. This includes developing and growing our business in chocolate and non-chocolate confectionery, pantry, food service and other snacking product lines.
International and Other - International and Other is a combination of all other operating segments that are not individually material, including those geographic regions where we operate outside of North America. We currently have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Asia, Latin America, Middle East, Europe, Africa and other regions. This segment also includes our global retail operations, including Hershey's Chocolate World stores in Hershey, Pennsylvania, New York City, Las Vegas, Niagara Falls (Ontario) and Singapore, as well as operations associated with licensing the use of certain of the Company's trademarks and products to third parties around the world.
For segment reporting purposes, we use “segment income” to evaluate segment performance and allocate resources. Segment income excludes unallocated general corporate administrative expenses, unallocated mark-to-market gains and losses on commodity derivatives, business realignment and impairment charges, acquisition-related costs and other unusual gains or losses that are not part of our measurement of segment performance. These items of our operating income are managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM as well as the measure of segment performance used for incentive compensation purposes.
As discussed in Note 5, derivatives used to manage commodity price risk are not designated for hedge accounting treatment. These derivatives are recognized at fair market value with the resulting realized and unrealized (gains) losses recognized in unallocated derivative (gains) losses outside of the reporting segment results until the related inventory is sold, at which time the related gains and losses are reallocated to segment income. This enables us to align the derivative gains and losses with the underlying economic exposure being hedged and thereby eliminate the mark-to-market volatility within our reported segment income.
Certain manufacturing, warehousing, distribution and other activities supporting our global operations are integrated to maximize efficiency and productivity. As a result, assets and capital expenditures are not managed on a segment basis and are not included in the information reported to the CODM for the purpose of evaluating performance or allocating resources. We disclose depreciation and amortization that is generated by segment-specific assets, since these amounts are included within the measure of segment income reported to the CODM.

The Hershey Company | Q2 2021 Form 10-Q | Page 26
HSY-20210704_G2.JPG


THE HERSHEY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(amounts in thousands, except share data or if otherwise indicated)