HERSHEY,
Pa., July 28, 2022 /PRNewswire/ -- The Hershey
Company (NYSE: HSY) today announced net sales and earnings for the
second quarter ended July 3, 2022, and raised its full-year
financial outlook.
"Our business momentum continued in the second quarter, with
double-digit sales growth in each of our segments resulting in
strong earnings per share performance," said Michele Buck, The Hershey Company President and
Chief Executive Officer. "These results reflect the strength
and resilience of our categories, consumers' love for our brands,
the investments we are making in our business, and the exceptional
execution of our dedicated employees. We are raising our
financial expectations for the year and investing more heavily in
our brands, capabilities and people in the second half to continue
this momentum into 2023."
Second-Quarter 2022 Financial
Results Summary1
- Consolidated net sales of $2,372.6
million, an increase of 19.3%.
- Organic, constant currency net sales increased 14.1%.
- The impact of acquisitions on net sales was a 5.3-point
benefit2 while foreign currency exchange was a 0.1-point
headwind.
- Reported net income of $315.6
million and $1.53 earnings per
share-diluted, an increase of 5.5%.
- Adjusted earnings per share-diluted of $1.80, an increase of 22.4%.
1
|
All comparisons for
the second quarter of 2022 are with respect to the second quarter
ended July 4, 2021
|
2
|
Reflects the impact
from the 2021 acquisitions of Pretzels Inc. (Pretzels), Dot's
Pretzels, LLC (Dot's) and Lily's Sweets, LLC
(Lily's)
|
|
|
2022 Full-Year Financial
Outlook
The Hershey Company is increasing its net sales outlook to
reflect continued strength in consumer demand and net price
realization. Price elasticities are expected to moderate from
the second quarter, but remain favorable to historical levels, as
inflation and fewer government benefits are expected to weaken
consumers' buying power.
Profit from increased sales growth is expected to more than
offset higher supply chain costs, elevated advertising and
merchandising levels and increased incentive compensation costs, to
deliver higher reported and adjusted earnings per share growth.
To reflect this strength in performance and expectations for the
second half of the year, the company is raising its full-year
financial outlook to the following:
2022 Full-Year
Outlook
|
|
Prior
Guidance
|
|
Current
Guidance
|
Net sales
growth3
|
|
10% - 12%
|
|
12% - 14%
|
Reported earnings per
share growth
|
|
8% - 11%
|
|
9% - 12%
|
Adjusted earnings per
share growth
|
|
10% - 12%
|
|
12% - 14%
|
|
|
3
|
The impact of the
Pretzels, Dot's and Lily's acquisitions is anticipated to be a 4-
to 5-point benefit to net sales growth for the full-year
2022.
|
Below is a reconciliation of projected 2022 and full-year 2021
earnings per share-diluted calculated in accordance with U.S.
generally accepted accounting principles (GAAP) to non-GAAP
adjusted earnings per share-diluted:
|
2022
(Projected)
|
|
2021
|
Reported EPS –
Diluted
|
$7.78 –
$7.99
|
|
$7.11
|
Derivative
mark-to-market gains
|
—
|
|
(0.12)
|
Business realignment
activities
|
0.02 – 0.04
|
|
0.09
|
Acquisition-related
activities
|
0.21 – 0.25
|
|
0.16
|
Noncontrolling interest
share of business realignment and impairment charges
|
—
|
|
0.03
|
Other miscellaneous
losses (benefits)
|
0.07
|
|
(0.07)
|
Tax effect of all
adjustments reflected above
|
(0.09)
|
|
(0.01)
|
Adjusted EPS –
Diluted
|
$8.05 -
$8.20
|
|
$7.19
|
2022 projected earnings per share-diluted, as presented above,
does not include the impact of mark-to-market gains and losses on
our commodity derivative contracts that are reflected within
corporate unallocated expense in segment results until the related
inventory is sold since we are not able to forecast the impact of
the market changes.
Second-Quarter 2022
Results
Consolidated net sales increased 19.3% to $2,372.6 million in the second quarter of 2022,
including a 5.3-point benefit from the acquisitions of Pretzels,
Dot's and Lily's, while foreign currency exchange was a 0.1-point
headwind. Organic, constant currency net sales increased
14.1% driven by pricing and volume gains across segments. Net
price realization contributed 9.5 points to net sales growth driven
by list price increases as well as moderately lower levels of
promotional activity. Volume contributed to an additional
4.6-point benefit driven by the replenishment of distributor
inventory levels, primarily in the North America Confectionery
segment, along with favorable price elasticities in the North
America Salty Snacks and International segments.
Reported gross margin was 42.1% in the second quarter of 2022,
compared to 46.5% in the second quarter of 2021, a decrease of 440
basis points. This decrease was primarily driven by
derivative mark-to-market losses, combined with higher supply chain
costs and unfavorable mix, which was partially offset by sales
growth. Adjusted gross margin was 43.9% in the second quarter
of 2022, a decrease of 250 basis points. Higher raw material,
packaging and logistics cost inflation, as well as labor
investments, contributed to this decline, in addition to
unfavorable mix from recent acquisitions. These headwinds
were partially offset by accelerating net price realization and
volume gains.
Selling, marketing and administrative expenses increased 16.2%
in the second quarter of 2022 versus the second quarter of 2021,
primarily driven by higher amortization, integration and operating
expenses related to recent acquisitions. Advertising and
related consumer marketing expenses increased 3.2% in the second
quarter of 2022 versus the same period last year. Moderate
advertising increases across brands and segments without capacity
constraints were largely offset by cost efficiencies related to new
media partners, primarily benefiting the North America
Confectionery segment. Selling, marketing and administrative
expenses, excluding advertising and related consumer marketing,
increased 22.4% versus the second quarter of 2021. This
increase was driven by a loss related to the sale of non-operating
assets; higher acquisition-related costs; incremental capabilities
and technology investments, including the upgrade of the company's
enterprise resource planning (ERP) system, as well as related
amortization; and salary and benefit inflation.
Second-quarter 2022 reported operating profit was $456.5 million, in line with prior year,
resulting in an operating profit margin of 19.2%, a decrease of 380
basis points. Adjusted operating profit of $526.9 million increased 14.7% versus the second
quarter of 2021, resulting in adjusted operating profit margin of
22.2%, a decrease of 90 basis points. Profit increases in
adjusted operating profit were driven by pricing and volume gains,
partially offset by broad-based inflation, acquisition-related
costs, and higher advertising, capability and technology
investments. Reported operating profit was similarly affected
but was further offset by a loss related to the sale of
non-operating assets, derivative mark-to-market losses, and higher
integration costs related to recent acquisitions. The
aforementioned costs outpaced sales growth resulting in a
degradation of reported and adjusted operating margin in the second
quarter.
The reported effective tax rate in the second quarter of 2022
was 21.8%, a decrease of 620 basis points versus the second quarter
of 2021. The adjusted effective tax rate in the second
quarter of 2022 was 21.4%, a decrease of 600 basis points versus
the second quarter of 2021. Both the reported and adjusted
effective tax rate decreases were driven primarily by higher
international tax reserves accrued in the prior year period, as
well as the timing of renewable energy tax credits.
The company's second-quarter 2022 results, as prepared in
accordance with GAAP, included items positively impacting
comparability of $70.4 million, or
$0.27 per share-diluted. For
the second quarter of 2021, items positively impacting
comparability totaled $2.8 million,
or $0.02 per share-diluted.
The following table presents a summary of items impacting
comparability in each period (see Appendix I for additional
information):
|
Pre-Tax
(millions)
|
|
Earnings Per
Share-Diluted
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
July 3,
2022
|
|
July 4,
2021
|
|
July 3,
2022
|
|
July 4,
2021
|
|
|
|
|
|
|
|
|
Derivative
mark-to-market losses (gains)
|
$
40.8
|
|
$
(3.4)
|
|
$
0.20
|
|
$
(0.02)
|
Business realignment
activities
|
0.7
|
|
3.5
|
|
0.01
|
|
0.03
|
Acquisition-related
activities
|
15.3
|
|
7.3
|
|
0.07
|
|
0.04
|
Other miscellaneous
losses (benefits)
|
13.6
|
|
(4.6)
|
|
0.07
|
|
(0.02)
|
Tax effect of all
adjustments reflected above
|
—
|
|
—
|
|
(0.08)
|
|
(0.01)
|
|
$
70.4
|
|
$
2.8
|
|
$
0.27
|
|
$
0.02
|
Segment performance for the second quarter of 2022 versus the
prior-year period are detailed below. See the schedule of
supplementary information within this press release for additional
information on segment net sales and profit.
North America
Confectionery
Hershey's North America
Confectionery segment net sales were $1,909.1 million in the second quarter of 2022,
an increase of 12.9% versus the same period last year.
Excluding the 0.8-point benefit from the acquisition of Lily's and
a 0.3-point headwind from foreign currency exchange, organic,
constant currency net sales increased 12.4%. Net price
realization was a 9.8-point benefit driven by list price increases
as well as a lower level of promotional activity in response to
capacity constraints. Volume drove an additional 2.6-point
benefit driven by the replenishment of distributor inventory
levels, which contributed approximately 6.0 points to net sales
growth and was partially offset by price elasticities.
Hershey's U.S. candy, mint and
gum (CMG) retail takeaway for the 12-week period ended July 17, 2022 in the multi-outlet plus
convenience store channels (MULO+C) increased 5.0%. Consumer
demand and unit velocities remained steady with strength in
take-home chocolate and sweets, while growth in unit pricing drove
year-over-year gains. Hershey's take-home chocolate increased 6.6%
in the latest period as at-home consumption remained strong and
above pre-pandemic levels. Momentum of Hershey's sweets brands continued with retail
takeaway of 7.7%, driven by Jolly Rancher Gummies and
Twizzlers summer programming. Hershey's CMG share declined 54 basis points
as production and on-shelf availability of certain products
remained constrained and promotional levels were reduced to enable
inventory replenishment. Declines were in line with
expectations and an improvement from the first quarter as on-shelf
availability increased. Hershey's confectionery share remains 83 basis
points higher than pre-pandemic levels.
The North America Confectionery segment reported segment income
of $618.9 million in the second
quarter of 2022, reflecting an increase of 11.6% versus the
prior-year period. The increase in segment income was driven
by pricing and volume gains, which were partially offset by higher
supply chain costs, increased acquisition costs related to Lily's,
higher capability and technology investments and increased trade
show and travel expenses as the prior-year period was impacted by
pandemic-related restrictions. The aforementioned costs
outpaced sales growth in the second quarter, resulting in segment
margin of 32.4%, a decrease of 40 basis points.
North America Salty
Snacks
Hershey's North America Salty
Snacks segment net sales were $256.3
million in the second quarter of 2022, an increase of 99.9%
versus the same period last year. Sales from the acquisitions
of Dot's and Pretzels was a 71.6-point benefit. Net price
realization was a 14.6-point benefit, while volume contributed 13.7
points driven by strong consumer demand and favorable price
elasticities.
Hershey's U.S. salty snack
retail takeaway, including Dot's, in MULO+C increased 26.3% in the
12-week period ended July 17, 2022,
driven by pricing and strong consumer demand across Hershey's salty snack brands.
SkinnyPop brand retail sales increased 16.9% versus the
prior-year period and resulted in a ready-to-eat popcorn share gain
of approximately 130 basis points. Pirate's Booty
brand continues to report strong takeaway with retail sales growth
of 32.4%. Both SkinnyPop and Pirate's Booty
brands reported double-digit growth across all classes of trade and
nearly all pack-types in the period with exceptional strength in
multi-packs, which increased 30.4%. This growth is driven by
consumers' demand for convenience and on-the-go snacking along with
the company's assortment strategy. Dot's Homestyle
Pretzels brand also had tremendous retail sales growth of 45.4%
during the period driven by continued strong distribution gains,
resulting in a pretzel category share gain of approximately 340
basis points.
North America Salty Snacks segment income increased 43.7% to
$37.4 million in the second quarter
of 2022, compared to $26.0 million in
the second quarter of 2021. Pricing gains and higher volumes
offset unfavorable mix, acquisition-related costs and higher supply
chain costs due to inflation and higher-than-expected demand, to
drive segment income growth in the second quarter. The
aforementioned costs outpaced sales growth in the second quarter,
resulting in segment margin of 14.6%, a decrease of 570 basis
points.
International
Second-quarter 2022 net sales for Hershey's International segment increased
21.3% versus the same period last year to $207.2 million. Excluding a 0.7-point
benefit from foreign currency exchange rates, constant currency net
sales increased 20.6%. Volume gains contributed 17.6 points
to net sales growth, driven by the strong consumer buying power and
demand across markets. Price realization was a 3.0-point
benefit.
The International segment reported a $30.7 million profit in the second quarter of
2022, reflecting an increase of $3.1
million versus the prior-year period. The profit
increase was driven by volume gains and net price realization,
which were partially offset by higher supply chain cost inflation
and logistics costs, as well as increased advertising investment,
salary and benefit inflation and increased travel expenses.
The aforementioned costs outpaced sales growth in the second
quarter, resulting in segment margin of 14.8%, a decrease of 130
basis points.
Unallocated Corporate
Expense
Hershey's unallocated corporate
expense in the second quarter of 2022 was $160.1 million, an increase of $11.5 million, or 7.7%, versus the same period of
2021. This increase was driven by higher amortization;
integration and operating expenses related to recent acquisitions;
incremental capabilities and technology investments, including the
upgrade of the company's ERP system, as well as related
amortization; and salary and benefit inflation.
Dividend Increase
The Board of Directors of The Hershey Company declared a
quarterly dividend of $1.036 on the
Common Stock and $0.942 on the Class
B Common Stock, payable September 15,
2022, to shareholders of record as of August 19, 2022, representing an increase of 15%,
or $0.135 and $0.123 per share, respectively. It is the
371st consecutive regular dividend on the Common Stock
and the 152nd consecutive regular dividend on the Class
B Common Stock.
Live Webcast
At approximately 7 a.m. (Eastern
time) today, Hershey will
post a pre-recorded management discussion of its second-quarter
2022 results and business update to its website at
www.thehersheycompany.com/investors. In addition, at
8:30 a.m. (Eastern time) today, the
company will host a live question and answer session with investors
and financial analysts. Details to access this call are
available on the company's website.
Note: In this release, for the second-quarter 2022,
Hershey references income measures
that are not in accordance with GAAP because they exclude certain
items impacting comparability, including gains and losses
associated with mark-to-market commodity derivatives, business
realignment activities, acquisition-related activities, and other
miscellaneous losses and benefits. The company refers to
these income measures as "adjusted" or "non-GAAP" financial
measures throughout this release. These non-GAAP financial
measures are used in evaluating results of operations for internal
purposes and are not intended to replace the presentation of
financial results in accordance with GAAP. Rather, the
company believes exclusion of such items provides additional
information to investors to facilitate the comparison of past and
present operations. A reconciliation of the non-GAAP
financial measures referenced in this release to their nearest
comparable GAAP financial measures as presented in the Consolidated
Statements of Income is provided below.
Reconciliation of
Certain Non-GAAP Financial Measures
|
Consolidated
results
|
Three Months
Ended
|
In thousands except
per share data
|
July 3,
2022
|
|
July 4,
2021
|
Reported gross
profit
|
$
999,999
|
|
$
925,445
|
Derivative
mark-to-market losses (gains)
|
40,838
|
|
(3,385)
|
Business realignment
activities
|
(23)
|
|
1,042
|
Acquisition-related
activities
|
592
|
|
—
|
Non-GAAP gross
profit
|
$
1,041,406
|
|
$
923,102
|
|
|
|
|
Reported operating
profit
|
$
456,531
|
|
$
456,675
|
Derivative
mark-to-market losses (gains)
|
40,838
|
|
(3,385)
|
Business realignment
activities
|
699
|
|
3,469
|
Acquisition-related
activities
|
15,270
|
|
7,337
|
Other miscellaneous
losses (benefits)
|
13,568
|
|
(4,585)
|
Non-GAAP operating
profit
|
$
526,906
|
|
$
459,511
|
|
|
|
|
Reported provision for
income taxes
|
$
87,904
|
|
$
117,186
|
Derivative
mark-to-market losses (gains)*
|
6,427
|
|
(2,383)
|
Business realignment
activities*
|
169
|
|
404
|
Acquisition-related
activities*
|
3,663
|
|
1,746
|
Other miscellaneous
losses (benefits)*
|
3,256
|
|
(1,528)
|
Non-GAAP provision for
income taxes
|
$
101,419
|
|
$
115,425
|
|
|
|
|
Reported net
income
|
$
315,556
|
|
$
301,230
|
Derivative
mark-to-market losses (gains)
|
34,411
|
|
(1,002)
|
Business realignment
activities
|
530
|
|
3,065
|
Acquisition-related
activities
|
11,607
|
|
5,591
|
Other miscellaneous
losses (benefits)
|
10,312
|
|
(3,057)
|
Non-GAAP net
income
|
$
372,416
|
|
$
305,827
|
|
|
|
|
Reported EPS -
Diluted
|
$
1.53
|
|
$
1.45
|
Derivative
mark-to-market losses (gains)
|
0.20
|
|
(0.02)
|
Business realignment
activities
|
0.01
|
|
0.03
|
Acquisition-related
activities
|
0.07
|
|
0.04
|
Other miscellaneous
losses (benefits)
|
0.07
|
|
(0.02)
|
Tax effect of all
adjustments reflected above**
|
(0.08)
|
|
(0.01)
|
Non-GAAP EPS -
Diluted
|
$
1.80
|
|
$
1.47
|
|
|
*
|
The tax effect for each
adjustment is determined by calculating the tax impact of the
adjustment on the company's quarterly effective tax rate, unless
the nature of the item and/or the tax jurisdiction in which the
item has been recorded requires application of a specific tax rate
or tax treatment, in which case the tax effect of such item is
estimated by applying such specific tax rate or tax
treatment.
|
**
|
Adjustments reported
above are reported on a pre-tax basis before the tax effect
described in the reconciliation above for Non-GAAP provision for
income taxes.
|
In the assessment of our results, we review and discuss the
following financial metrics that are derived from the reported and
non-GAAP financial measures presented above:
|
Three Months
Ended
|
|
July 3,
2022
|
|
July 4,
2021
|
As reported gross
margin
|
42.1 %
|
|
46.5 %
|
Non-GAAP gross margin
(1)
|
43.9 %
|
|
46.4 %
|
|
|
|
|
As reported operating
profit margin
|
19.2 %
|
|
23.0 %
|
Non-GAAP operating
profit margin (2)
|
22.2 %
|
|
23.1 %
|
|
|
|
|
As reported effective
tax rate
|
21.8 %
|
|
28.0 %
|
Non-GAAP effective tax
rate (3)
|
21.4 %
|
|
27.4 %
|
|
|
(1)
|
Calculated as non-GAAP
gross profit as a percentage of net sales for each period
presented.
|
(2)
|
Calculated as non-GAAP
operating profit as a percentage of net sales for each period
presented.
|
(3)
|
Calculated as non-GAAP
provision for income taxes as a percentage of non-GAAP income
before taxes (calculated as non-GAAP operating profit minus
non-GAAP interest expense, net plus or minus non-GAAP other
(income) expense, net).
|
We present certain percentage changes in net sales on a constant
currency basis, which excludes the impact of foreign currency
exchange. To present this information for historical periods,
current period net sales for entities reporting in currencies other
than the U.S. dollar are translated into U.S. dollars at the
average monthly exchange rates in effect during the corresponding
period of the prior fiscal year, rather than at the actual average
monthly exchange rates in effect during the current period of the
current fiscal year. As a result, the foreign currency impact
is equal to the current year results in local currencies multiplied
by the change in the average foreign currency exchange rate between
the current fiscal period and the corresponding period of the prior
fiscal year.
A reconciliation between reported net sales growth rates and (i)
constant currency net sales growth rates and (ii) organic constant
currency net sales growth rates is provided below:
|
Three Months Ended
July 3, 2022
|
|
Percentage
Change as
Reported
|
|
Impact of
Foreign
Currency
Exchange
|
|
Percentage
Change on
Constant
Currency Basis
|
|
Impact
of Acquisitions
|
|
Percentage
Change on
Organic
Constant
Currency Basis
|
North America
Confectionery
|
12.9 %
|
|
(0.3) %
|
|
13.2 %
|
|
0.8 %
|
|
12.4 %
|
|
|
|
|
|
|
|
|
|
|
North America Salty
Snacks
|
99.9 %
|
|
— %
|
|
99.9 %
|
|
71.6 %
|
|
28.3 %
|
|
|
|
|
|
|
|
|
|
|
International
|
21.3 %
|
|
0.7 %
|
|
20.6 %
|
|
— %
|
|
20.6 %
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
19.3 %
|
|
(0.1) %
|
|
19.4 %
|
|
5.3 %
|
|
14.1 %
|
Appendix I
Details of the charges included in GAAP results, as summarized
in the press release (above), are as follows:
Derivative mark-to-market losses (gains): The
mark-to-market losses (gains) on commodity derivatives are recorded
as unallocated and excluded from adjusted results until such time
as the related inventory is sold, at which time the corresponding
losses (gains) are reclassified from unallocated to segment
income. Since we often purchase commodity contracts to price
inventory requirements in future years, we make this adjustment to
facilitate the year-over-year comparison of cost of sales on a
basis that matches the derivative gains and losses with the
underlying economic exposure being hedged for the period.
Business realignment activities: We periodically undertake
restructuring and cost reduction activities as part of ongoing
efforts to enhance long-term profitability. During the fourth
quarter of 2020, we commenced the International Optimization
Program to streamline resources and investments in select
international markets, including the optimization of our
China operating model to improve
efficiencies and provide a more sustainable and simplified base
going forward. During the second quarter of 2022 and 2021, business
realignment charges related primarily to other third-party costs
related to this program, as well as severance and employee benefit
costs.
Acquisition-related activities: During the second quarter
of 2022, we incurred costs related to the integration of the 2021
acquisitions of Lily's, Dot's and Pretzels. During the second
quarter of 2021, we incurred costs to effectuate the Lily's
acquisition.
Noncontrolling interest share of business realignment and
impairment charges: Certain of the business realignment and
impairment charges recorded related to the divestiture of Lotte
Shanghai Foods Co., Ltd., a joint venture in which we previously
owned a 50% controlling interest. Therefore, we have also
adjusted for the portion of these charges included within the
income (loss) attributed to the noncontrolling interest.
Other miscellaneous losses (benefits): During the second
quarter of 2022, we recorded a loss on the sale of non-operating
assets located in Pennsylvania. During the second quarter of
2021, we recorded a gain on a receivable previously deemed
uncollectible.
Tax effect of all adjustments: This line item reflects the
aggregate tax effect of all pre-tax adjustments reflected in the
preceding line items of the applicable table. The tax effect
for each adjustment is determined by calculating the tax impact of
the adjustment on the company's quarterly effective tax rate,
unless the nature of the item and/or the tax jurisdiction in which
the item has been recorded requires application of a specific tax
rate or tax treatment, in which case the tax effect of such item is
estimated by applying such specific tax rate or tax treatment.
Safe Harbor Statement
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Many of these forward-looking statements can be identified by the
use of words such as "anticipate," "assume," "believe," "continue,"
"estimate," "expect," "forecast," "future," "intend," "plan,"
"potential," "predict," "project," "strategy," "target" and similar
terms, and future or conditional tense verbs like "could," "may,"
"might," "should," "will" and "would," among others. These
statements are made based upon current expectations that are
subject to risk and uncertainty. Because actual results may differ
materially from those contained in the forward-looking statements,
you should not place undue reliance on the forward-looking
statements when deciding whether to buy, sell or hold the company's
securities. Factors that could cause results to differ materially
include, but are not limited to: risks related to the impact of the
COVID-19 global pandemic on our business, suppliers, distributors,
consumers, customers, and employees; the scope and duration of the
pandemic; government actions and restrictive measures implemented
in response to the pandemic, including the distribution of
vaccinations and continuation of social distancing guidelines and
stay at home orders; disruptions or inefficiencies in our supply
chain due to the loss or disruption of essential manufacturing or
supply elements or other factors; issues or concerns related to the
quality and safety of our products, ingredients or packaging, human
and workplace rights, and other environmental, social or governance
matters; changes in raw material and other costs, along with the
availability of adequate supplies of raw materials; the company's
ability to successfully execute business continuity plans to
address the COVID-19 pandemic and resulting changes in consumer
preferences and the broader economic and operating environment;
selling price increases, including volume declines associated with
pricing elasticity; market demand for our new and existing
products; increased marketplace competition; failure to
successfully execute and integrate acquisitions, divestitures and
joint ventures; changes in governmental laws and regulations,
including taxes; political, economic, and/or financial market
conditions, including impacts on the business arising from the
conflict between Russia and
Ukraine; risks and uncertainties
related to our international operations; disruptions, failures or
security breaches of our information technology infrastructure; our
ability to hire, engage and retain a talented global workforce, our
ability to realize expected cost savings and operating efficiencies
associated with strategic initiatives or restructuring programs;
complications with the design or implementation of our new
enterprise resource planning system; and such other matters as
discussed in our Annual Report on Form 10-K for the year
ended December 31, 2021 and from time to time our other
filings with the U.S. Securities and Exchange Commission. The
company undertakes no obligation to publicly update or revise any
forward-looking statements to reflect actual results, changes in
expectations or events or circumstances.
The Hershey
Company
|
Consolidated
Statements of Income
|
for the periods
ended July 3, 2022 and July 4, 2021
|
(unaudited) (in
thousands except percentages and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
July 3,
2022
|
|
July 4,
2021
|
|
July 3,
2022
|
|
July 4,
2021
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$ 2,372,582
|
|
$ 1,989,422
|
|
$ 5,038,803
|
|
$ 4,285,370
|
Cost of
sales
|
|
1,372,583
|
|
1,063,977
|
|
2,793,324
|
|
2,310,974
|
Gross profit
|
|
|
999,999
|
|
925,445
|
|
2,245,479
|
|
1,974,396
|
|
|
|
|
|
|
|
|
Selling, marketing and
administrative expense
|
543,468
|
|
467,629
|
|
1,067,684
|
|
962,294
|
Business realignment
costs
|
—
|
|
1,141
|
|
274
|
|
2,383
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
456,531
|
|
456,675
|
|
1,177,521
|
|
1,009,719
|
Interest expense,
net
|
|
33,413
|
|
31,065
|
|
66,592
|
|
67,501
|
Other (income) expense,
net
|
|
19,658
|
|
7,194
|
|
30,065
|
|
9,608
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
403,460
|
|
418,416
|
|
1,080,864
|
|
932,610
|
Provision for income
taxes
|
|
87,904
|
|
117,186
|
|
231,830
|
|
234,509
|
|
|
|
|
|
|
|
|
|
|
Net income including
noncontrolling interest
|
315,556
|
|
301,230
|
|
849,034
|
|
698,101
|
|
|
|
|
|
|
|
|
|
|
Less: Net gain
attributable to noncontrolling interest
|
—
|
|
—
|
|
—
|
|
1,072
|
Net income attributable
to The Hershey Company
|
$
315,556
|
|
$
301,230
|
|
$
849,034
|
|
$
697,029
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
- Basic
|
- Common
|
$
1.57
|
|
$
1.50
|
|
$
4.24
|
|
$
3.46
|
|
- Diluted
|
- Common
|
$
1.53
|
|
$
1.45
|
|
$
4.10
|
|
$
3.35
|
|
- Basic
|
- Class B
|
$
1.44
|
|
$
1.36
|
|
$
3.85
|
|
$
3.14
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
- Basic
|
- Common
|
146,362
|
|
146,111
|
|
146,248
|
|
146,550
|
|
- Diluted
|
- Common
|
206,449
|
|
207,671
|
|
206,861
|
|
208,126
|
|
- Basic
|
- Class B
|
59,114
|
|
60,614
|
|
59,530
|
|
60,614
|
|
|
|
|
|
|
|
|
|
|
Key margins:
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
42.1 %
|
|
46.5 %
|
|
44.6 %
|
|
46.1 %
|
Operating profit
margin
|
|
19.2 %
|
|
23.0 %
|
|
23.4 %
|
|
23.6 %
|
Net margin
|
|
13.3 %
|
|
15.1 %
|
|
16.8 %
|
|
16.3 %
|
The Hershey
Company
|
Supplementary
Information – Segment Results
|
for the periods
ended July 3, 2022 and July 4, 2021
|
(unaudited) (in
thousands except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
July 3,
2022
|
|
July 4,
2021
|
|
%
Change
|
|
July 3,
2022
|
|
July 4,
2021
|
|
%
Change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$
1,909,101
|
|
$
1,690,372
|
|
12.9 %
|
|
$
4,126,145
|
|
$
3,675,788
|
|
12.3 %
|
North America Salty Snacks
|
|
256,297
|
|
128,203
|
|
99.9 %
|
|
482,419
|
|
249,621
|
|
93.3 %
|
International
|
|
207,184
|
|
170,847
|
|
21.3 %
|
|
430,239
|
|
359,961
|
|
19.5 %
|
Total
|
|
$
2,372,582
|
|
$
1,989,422
|
|
19.3 %
|
|
$
5,038,803
|
|
$
4,285,370
|
|
17.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
$ 618,864
|
|
$ 554,488
|
|
11.6 %
|
|
$
1,400,749
|
|
$
1,197,093
|
|
17.0 %
|
North America Salty Snacks
|
|
37,433
|
|
26,041
|
|
43.7 %
|
|
58,734
|
|
51,419
|
|
14.2 %
|
International
|
|
30,700
|
|
27,559
|
|
11.4 %
|
|
72,679
|
|
54,976
|
|
32.2 %
|
Total segment
income
|
|
686,997
|
|
608,088
|
|
13.0 %
|
|
1,532,162
|
|
1,303,488
|
|
17.5 %
|
Unallocated corporate
expense (1)
|
|
160,091
|
|
148,577
|
|
7.7 %
|
|
297,368
|
|
288,274
|
|
3.2 %
|
Unallocated
mark-to-market losses (gains) on commodity derivatives
(2)
|
|
40,838
|
|
(3,385)
|
|
NM
|
|
13,459
|
|
(5,669)
|
|
NM
|
Costs associated with
business realignment initiatives
|
|
699
|
|
3,469
|
|
(79.9) %
|
|
1,980
|
|
10,396
|
|
(81.0) %
|
Acquisition-related
activities
|
|
15,270
|
|
7,337
|
|
108.1 %
|
|
28,266
|
|
7,508
|
|
276.5 %
|
Other miscellaneous
losses (benefits)
|
|
13,568
|
|
(4,585)
|
|
NM
|
|
13,568
|
|
(6,740)
|
|
NM
|
Operating
profit
|
|
456,531
|
|
456,675
|
|
NM
|
|
1,177,521
|
|
1,009,719
|
|
16.6 %
|
Interest expense,
net
|
|
33,413
|
|
31,065
|
|
7.6 %
|
|
66,592
|
|
67,501
|
|
(1.3) %
|
Other (income) expense,
net
|
|
19,658
|
|
7,194
|
|
173.3 %
|
|
30,065
|
|
9,608
|
|
212.9 %
|
Income before income
taxes
|
|
$ 403,460
|
|
$ 418,416
|
|
(3.6) %
|
|
$
1,080,864
|
|
$ 932,610
|
|
15.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes
centrally-managed (a) corporate functional costs relating to legal,
treasury, finance, and human resources, (b) expenses associated
with the oversight and administration of our global operations,
including warehousing, distribution and manufacturing, information
systems and global shared services, (c) non-cash stock-based
compensation expense and (d) other gains or losses that are not
integral to segment performance.
|
(2)
|
Net (gains) losses on
mark-to-market valuation of commodity derivative positions
recognized in unallocated derivative losses (gains).
|
NM
|
- not
meaningful
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
July 3,
2022
|
|
July 4,
2021
|
|
July 3,
2022
|
|
July 4,
2021
|
Segment income as a
percent of net sales:
|
|
|
|
|
|
|
|
|
North America Confectionery
|
|
32.4 %
|
|
32.8 %
|
|
33.9 %
|
|
32.6 %
|
North America Salty Snacks
|
|
14.6 %
|
|
20.3 %
|
|
12.2 %
|
|
20.6 %
|
International
|
|
14.8 %
|
|
16.1 %
|
|
16.9 %
|
|
15.3 %
|
The Hershey
Company
|
Consolidated Balance
Sheets
|
as of July 3,
2022 and December 31, 2021
|
(in thousands of
dollars)
|
|
|
|
|
Assets
|
July 3,
2022
|
|
December 31,
2021
|
|
(unaudited)
|
|
|
Cash and cash
equivalents
|
$
339,722
|
|
$
329,266
|
Accounts receivable -
trade, net
|
654,399
|
|
671,464
|
Inventories
|
1,208,239
|
|
988,511
|
Prepaid expenses and
other
|
226,105
|
|
256,965
|
|
|
|
|
Total current
assets
|
2,428,465
|
|
2,246,206
|
|
|
|
|
Property, plant and
equipment, net
|
2,590,826
|
|
2,586,187
|
Goodwill
|
2,616,497
|
|
2,633,174
|
Other
intangibles
|
2,007,748
|
|
2,037,588
|
Other non-current
assets
|
904,822
|
|
868,203
|
Deferred income
taxes
|
40,516
|
|
40,873
|
|
|
|
|
Total assets
|
$
10,588,874
|
|
$
10,412,231
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Accounts
payable
|
$
876,193
|
|
$
692,338
|
Accrued
liabilities
|
736,685
|
|
855,638
|
Accrued income
taxes
|
20,543
|
|
3,070
|
Short-term
debt
|
914,916
|
|
939,423
|
Current portion of
long-term debt
|
752,573
|
|
2,844
|
|
|
|
|
Total current
liabilities
|
3,300,910
|
|
2,493,313
|
|
|
|
|
Long-term
debt
|
3,340,472
|
|
4,086,627
|
Other long-term
liabilities
|
764,041
|
|
787,058
|
Deferred income
taxes
|
291,711
|
|
288,004
|
|
|
|
|
Total
liabilities
|
7,697,134
|
|
7,655,002
|
|
|
|
|
Total stockholders'
equity
|
2,891,740
|
|
2,757,229
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
10,588,874
|
|
$
10,412,231
|
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SOURCE The Hershey Company