HERSHEY: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Type 10-Q)

This Administration's Dialogue and Evaluation ("MD&A") is meant to offer an
understanding of Hershey's monetary situation, outcomes of operations and money
flows by specializing in modifications in sure key measures from 12 months to 12 months. The MD&A
ought to be learn along side our Unaudited Consolidated Monetary
Statements and accompanying notes. This dialogue accommodates a variety of
forward-looking statements, all of that are primarily based on present expectations.
Precise outcomes might differ materially. Seek advice from the Protected Harbor Assertion under
in addition to the Danger Elements and different data contained in our 2020 Annual
Report on Type 10-Ok for data regarding the important thing dangers to attaining future
efficiency objectives.
The MD&A is organized within the following sections:
•  Overview
•  Developments Affecting Our Enterprise
•  Consolidated Outcomes of Operations
•  Section Outcomes
•  Liquidity and Capital Sources
•  Protected Harbor Assertion
OVERVIEW
Hershey is a world confectionery chief identified for bringing goodness to the
world by way of chocolate, sweets, mints, gum and different nice tasting snacks. We
are the biggest producer of high quality chocolate in North America, a number one snack
maker in america ("U.S.") and a world chief in chocolate and
non-chocolate confectionery. We market, promote and distribute our merchandise underneath
greater than 90 model names in roughly 85 international locations worldwide.
We report our operations by way of two segments: North America and Worldwide
and Different. The vast majority of our merchandise are confectionery or confectionery-based
and embody chocolate and non-chocolate confectionery merchandise, gum and mint
refreshment merchandise, spreads, snack bites and mixes, in addition to pantry gadgets
comparable to baking elements, toppings and sundae syrups. The confectionery and
confectionery-based portfolio is predominantly bought underneath the famend manufacturers of
Hershey's, Reese's and Kisses, in addition to Equipment Kat®, Jolly Rancher, Ice Breakers,
Twizzlers, Heath, Payday, Cadbury and quite a lot of different in style manufacturers. Our
snacks portfolio consists of ready-to-eat popcorn, baked and trans fats free snacks,
protein bars and different better-for-you snacks. The snacks portfolio is
predominantly bought underneath the manufacturers of SkinnyPop, Pirate's Booty, ONE Bar, and
Paqui.
2021 Acquisition and Divestiture
In June 2021, we accomplished the acquisition of Lily's Sweets, LLC ("Lily's"),
beforehand a privately held firm that sells a line of sugar-free and
low-sugar confectionery meals to retailers and distributors in america
and Canada. Lily's merchandise embody darkish and milk chocolate fashion bars, baking
chips, peanut butter cups and different confection merchandise that complement
Hershey's confectionery and confectionery-based portfolio. Lily's is anticipated to
generate annualized web gross sales over $100 million.
In January 2021, we accomplished the divestiture of Lotte Shanghai Meals Co., Ltd.
("LSFC"), which was beforehand included throughout the Worldwide and Different
phase ends in our consolidated monetary statements. Complete proceeds from
the divestiture and the affect on our consolidated monetary statements had been
immaterial.
2020 Divestitures
Throughout the second quarter of 2020, we accomplished the divestitures of KRAVE Pure
Meals, Inc. ("Krave") and the Scharffen Berger and Dagoba manufacturers, all of which
had been beforehand included throughout the North America phase ends in our
consolidated monetary statements. Complete proceeds from the divestitures and the
affect on our consolidated monetary statements, each individually and on an
combination foundation, had been immaterial.

  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 34 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

TRENDS AFFECTING OUR BUSINESS
On March 11, 2020, the World Well being Group designated coronavirus illness
2019 ("COVID-19") as a world pandemic, which has unfold worldwide and impacted
numerous markets world wide, together with the U.S. Numerous insurance policies and
initiatives have been carried out to cut back the worldwide transmission of COVID-19.

Native, state and nationwide governments proceed to emphasise the significance of
meals provide throughout this pandemic and requested that meals producers and retailers
stay open to satisfy the wants of our communities. Worker security is our first
precedence, and in consequence, we put preparedness plans in place at our
manufacturing amenities. Our manufacturing amenities are at the moment open;
nonetheless, we now have adjusted shift schedules, enforced social distancing, elevated
sanitation and adjusted time and attendance insurance policies for employee absenteeism. Our
gross sales groups proceed to help group meals provides, whereas adhering to
social distancing tips, implementing versatile hours, decreasing
person-to-person interplay and growing security measures. On the onset of the
pandemic, the Firm quickly closed all Hershey'sChocolate World shops in
the U.S. (3 areas), Niagara Falls (Ontario) and Singapore; nonetheless, since
July 2020, all areas had been re-opened on a restricted capability foundation with
elevated security measures and enforced social distancing.

In June 2020 we commenced a phased in strategy to reopen our company
headquarters in Hershey, Pennsylvania and different choose workplaces with elevated
security protocols. Now we have efficiently onboarded a number of groups; nonetheless,
occupancy ranges stay low as we proceed to observe the most recent COVID-19
associated public well being and authorities steerage. Because of this, a majority of our
office-based workers proceed to work remotely the place potential. Now we have disaster
administration groups in place to observe the frequently evolving scenario and
recommending danger mitigation actions as deemed needed. So far, there has
been minimal disruption to our provide chain community, together with the availability of our
elements, packaging or different sourced supplies, although it's potential that
extra important disruptions might happen if the COVID-19 pandemic continues to
affect markets world wide. We're additionally working intently with our enterprise
items, contract producers, distributors, contractors and different exterior
enterprise companions to reduce the potential affect on our enterprise.

As of July 4, 2021, we imagine we now have enough liquidity to fulfill our money
wants; nonetheless, we proceed to judge and take motion, as needed, to
protect ample liquidity and be certain that our enterprise can proceed to function
through the ongoing COVID-19 pandemic. We proceed to observe our discretionary
spending throughout the group (see   Liquidity and Capital Sources
included on this MD&A).

Throughout the second quarter of 2021, many state governments started easing COVID-19
restrictions, leading to elevated journey forward of the summer season season, approval
for full capability at main sporting and leisure occasions, elevated
occupancy limits for indoor gathering and the removing of face protecting
necessities (topic to sure exceptions). Moreover, growing
availability and the rollout of vaccinations proceed world wide, albeit
with slower than anticipated rollouts and challenges inside sure international locations.
We skilled a rise in our web gross sales and revenue through the three and 6
months ended July 4, 2021, which was primarily pushed by robust on a regular basis
efficiency on our core U.S. confection manufacturers and strong market development in
choose worldwide markets (see   Section Outcomes   included on this MD&A).

Based mostly on the size and severity of COVID-19, together with new developments in outbreaks
and hotspots, the unfold of COVID-19 variants, potential resurgences and the
continued distribution of vaccinations, we might expertise continued volatility
in retail foot visitors, client procuring and consumption conduct. We are going to
proceed to judge the character and extent of those potential impacts to our
enterprise, consolidated outcomes of operations, phase outcomes, liquidity and
capital sources.

  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 35 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

CONSOLIDATED OPERATING RESULTS

                                                     Three Months Ended                                                  Six Months Ended
                                            July 4, 2021           June 28, 2020         % Change        July 4, 2021          June 28, 2020         % Change
In tens of millions of {dollars} besides per
share quantities
Internet gross sales                                  $       1,989.4       $         1,707.3              16.5  %       $      4,285.4       $         3,744.6              14.4  %
Price of gross sales                                      1,064.0                   914.8              16.3  %              2,311.0                 2,085.5              10.8  %
Gross revenue                                         925.4                   792.5              16.8  %              1,974.4                 1,659.1              19.0  %
Gross margin                                     46.5    %               46.4    %                                 46.1    %               44.3    %
Promoting, advertising and marketing & administrative
("SM&A") bills                                    467.6                   408.9              14.3  %                962.3                   884.3               8.8  %
SM&A expense as a p.c of web
gross sales                                            23.5    %               24.0    %                                 22.5    %               23.6    %
Lengthy-lived asset impairment expenses                      -                     1.6                   NM                    -                     9.1                   NM
Enterprise realignment prices
(advantages)                                             1.1                   (1.4)                   NM                  2.4                   (0.5)                   NM
Working revenue                                     456.7                   383.4              19.1  %              1,009.7                   766.2              31.8  %
Working revenue margin                          23.0    %               22.5    %                                 23.6    %               20.5    %
Curiosity expense, web                                 31.1                    38.1             (18.4) %                 67.5                    74.3              (9.2) %
Different (revenue) expense, web                            7.2                    11.2             (35.9) %                  9.6                    22.8             (57.8) %
Provision for revenue taxes                           117.2                    66.1              77.5  %                234.5                   132.3              77.3  %
Efficient revenue tax price                            28.0%                   19.8%                                     25.1%                   19.8%
Internet revenue together with noncontrolling
curiosity                                             301.2                   268.0              12.4  %                698.1                   536.8              30.0  %
Much less: Internet (loss) achieve attributable
to noncontrolling curiosity                               -                   (0.9)                   NM                  1.1                   (3.2)                   NM
Internet revenue attributable to The
Hershey Firm                            $         301.2       $           268.9              12.0  %       $        697.0       $           540.0              29.1  %
Internet revenue per share-diluted               $          1.45       $            1.29              12.4  %       $         3.35       $            2.58    

29.8%

NOTE: Proportion modifications will not be calculated straight as proven as a consequence of rounding of quantities proven above. NM = not important


Outcomes of Operations - Second Quarter 2021 vs. Second Quarter 2020
Internet Gross sales
Internet gross sales elevated 16.5% within the second quarter of 2021 in comparison with the identical
interval of 2020, reflecting a quantity improve of 14.5% as a consequence of a rise in
on a regular basis core U.S. confection manufacturers, in addition to favorable value realization of
1.0% as a consequence of increased costs on sure merchandise and a good affect from
international forex change charges of 1.0%.
Key U.S. Market Metrics
For the second quarter of 2021, our whole U.S. retail takeaway elevated 2.8% in
the expanded multi-outlet mixed plus comfort retailer channels (IRI MULO +
C-Shops), which incorporates sweet, mint, gum, salty snacks, meat snacks and
grocery gadgets. Our U.S. sweet, mint and gum ("CMG") client takeaway elevated
2.3%, leading to a CMG market share lack of roughly 113 foundation factors.
The CMG client takeaway and market share data replicate measured channels
of distribution accounting for about 90% of our U.S. confectionery
retail enterprise. These channels of distribution primarily embody meals, drug,
mass merchandisers, and comfort retailer channels, plus Wal-Mart Shops, Inc.,
partial greenback, membership and navy channels. These metrics are primarily based on measured
market scanned purchases as reported by Info Sources, Included
("IRI"), the Firm's market insights and analytics supplier, and supply a
means to evaluate our retail takeaway and market place relative to the general
class.

  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 36 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

Price of Gross sales and Gross Margin
Price of gross sales elevated 16.3% within the second quarter of 2021 in comparison with the identical
interval of 2020. The rise was pushed by increased gross sales quantity, increased freight
and logistics prices and extra plant prices. These drivers had been partially
offset by the incremental $14.3 million of favorable mark-to-market exercise on
our commodity spinoff devices meant to economically hedge future
years' commodity purchases. Moreover, the rise was partially offset by
favorable value realization and provide chain productiveness.
Gross margin elevated by 10 foundation factors within the second quarter of 2021 in contrast
to the identical interval of 2020. The rise was pushed by the favorable
year-over-year mark-to-market affect from commodity spinoff devices,
favorable value realization and provide chain productiveness. These components had been
offset by increased freight and logistics prices and extra plant prices.
SM&A Bills
SM&A bills elevated $58.7 million or 14.3% within the second quarter of 2021
pushed by promoting will increase and company bills. Complete promoting and
associated client advertising and marketing bills elevated 9.9% pushed by elevated
funding in core manufacturers and incremental sponsorships in North America. SM&A
bills, excluding promoting and associated client advertising and marketing, elevated
roughly 16.6% within the second quarter of 2021 pushed by increased compensation
prices and investments in capabilities and expertise.
Lengthy-Lived Asset Impairment Prices
We had no impairment expenses through the second quarter of 2021. Throughout the
second quarter of 2020, we recorded long-lived asset impairment expenses of $1.6
million, predominantly comprised of impairment expenses to regulate long-lived
asset values of our LSFC disposal group which was beforehand labeled as held
on the market.

Enterprise Realignment Actions
We periodically undertake enterprise realignment actions designed to extend
our effectivity and focus our enterprise in help of our key development methods.
Within the second quarter of 2021, we recorded enterprise realignment prices of $1.1
million associated to the Worldwide Optimization Program, a program targeted on
optimizing our China working mannequin to enhance our operational effectivity and
present for a robust, sustainable and simplified base going ahead. Within the
second quarter of 2020, we recorded enterprise realignment advantages of $1.4
million associated to the Margin for Progress Program, a program targeted on enhancing
international effectivity and effectiveness, optimizing the Firm's provide chain,
streamlining the Firm's working mannequin and decreasing administrative bills
to generate long-term financial savings. Prices related to enterprise realignment
actions are labeled in our Consolidated Statements of Earnings as described
in   Notice 9   to the Unaudited Consolidated Monetary Statements.
Working Revenue and Working Revenue Margin
Working revenue elevated 19.1% within the second quarter of 2021 in comparison with the
similar interval of 2020 predominantly as a consequence of increased gross revenue, partially offset
by increased SM&A bills, as famous above. Working revenue margin elevated to
23.0% in 2021 from 22.5% in 2020 pushed by these similar components.
Curiosity Expense, Internet
Internet curiosity expense was $7.0 million decrease within the second quarter of 2021
in comparison with the identical interval of 2020. The lower was primarily as a consequence of decrease
long-term debt balances in 2021 versus 2020, particularly ensuing from $785
million of long-term debt repayments with various maturity dates over the past
twelve months previous July 4, 2021.


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 37 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

Different (Earnings) Expense, Internet
Different (revenue) expense, web totaled expense of $7.2 million within the second
quarter of 2021 versus web expense of $11.2 million within the second quarter of
2020. The lower in web expense was primarily as a consequence of decrease write-downs on
fairness investments qualifying for historic and renewable vitality tax credit in
2021 versus 2020 and decrease non-service price elements of web periodic profit
price referring to pension and different post-retirement profit plans throughout 2021.
Earnings Taxes and Efficient Tax Price
The efficient revenue tax price was 28.0% for the second quarter of 2021 in contrast
with 19.8% for the second quarter of 2020. Relative to the 21% statutory price,
the 2021 efficient tax price was impacted by incremental tax reserves incurred as
a results of an antagonistic ruling in reference to a non-U.S. tax litigation
matter in addition to state taxes, partially offset by funding tax credit.
Relative to the 21% statutory price, the 2020 efficient tax price benefited from
funding tax credit and modifications in tax reserves, partially offset by state
taxes.
Internet Earnings attributable to The Hershey Firm and Earnings Per Share-diluted
Internet revenue elevated $32.3 million, or 12.0%, whereas EPS-diluted elevated $0.16,
or 12.4%, within the second quarter of 2021 in comparison with the identical interval of 2020. The
improve in each web revenue and EPS-diluted was pushed primarily by increased gross
revenue, partially offset by increased SM&A bills and better revenue taxes, as
famous above. Our 2021 EPS-diluted additionally benefited from decrease weighted-average
shares excellent on account of share repurchases pursuant to our
Board-approved repurchase applications.
Outcomes of Operations - First Six Months 2021 vs. First Six Months 2020
Internet Gross sales
Internet gross sales elevated 14.4% within the first six months of 2021 in comparison with the identical
interval of 2020, reflecting a quantity improve of 12.6% as a consequence of a rise in
on a regular basis core U.S. confection manufacturers, in addition to favorable value realization of
1.5% as a consequence of increased costs on sure merchandise and a good affect from
international forex change charges of 0.4%. This was partially offset by a 0.1%
lower from web acquisitions and divestitures (predominantly pushed by the
2020 divestitures of Krave and the Scharffen Berger and Dagoba manufacturers).
Price of Gross sales and Gross Margin
Price of gross sales elevated 10.8% within the first six months of 2021 in comparison with the
similar interval of 2020. The rise was pushed by increased gross sales quantity, increased
freight and logistics prices and extra plant prices. These drivers had been
partially offset by the incremental $105.0 million of favorable mark-to-market
exercise on our commodity spinoff devices meant to economically hedge
future years' commodity purchases; nonetheless, had been considerably impacted by
monetary market volatility throughout March 2020 amid COVID-19 fears. Moreover,
the rise was partially offset by favorable value realization and provide
chain productiveness.
Gross margin elevated by 180 foundation factors within the first six months of 2021
in comparison with the identical interval of 2020. The rise was pushed by the favorable
year-over-year mark-to-market affect from commodity spinoff devices,
favorable value realization and provide chain productiveness. These components had been
offset by increased freight and logistics prices and extra plant prices.
Promoting, Advertising and marketing and Administrative
SM&A bills elevated $78.0 million or 8.8% within the first six months of 2021.
Complete promoting and associated client advertising and marketing bills elevated 5.9% pushed
by elevated funding in core manufacturers and incremental sponsorships in North
America. SM&A bills, excluding promoting and associated client advertising and marketing,
elevated roughly 10.4% within the first six months of 2021 pushed by increased
compensation prices and investments in capabilities and expertise.


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 38 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————-

Lengthy-Lived Asset Impairment Prices
We had no impairment expenses through the first six months of 2021. Throughout the
first six months of 2020, we recorded long-lived asset impairment expenses of
$9.1 million, predominantly comprised of impairment expenses to regulate long-lived
asset values of our LSFC disposal group which was beforehand labeled as held
on the market. Moreover, in reference to a earlier sale, the Firm
wrote-down sure receivables deemed uncollectible.
Enterprise Realignment Actions
Throughout the first six months of 2021, we recorded enterprise realignment prices of
$2.4 million associated to the Worldwide Optimization Program. Throughout the first
six months of 2020, we recorded enterprise realignment advantages of $0.5 million
associated to the Margin for Progress Program. Prices related to enterprise
realignment actions are labeled in our Consolidated Statements of Earnings
as described in   Notice 9   to the Unaudited Consolidated Monetary Statements.
Working Revenue and Working Revenue Margin
Working revenue elevated 31.8% within the first six months of 2021 in comparison with the
similar interval of 2020 predominantly as a consequence of increased gross revenue and decrease
impairment expenses, partially offset by increased SM&A bills, as famous above.
Working revenue margin elevated to 23.6% in 2021 from 20.5% in 2020 pushed by
these similar components.
Curiosity Expense, Internet
Internet curiosity expense was $6.8 million decrease within the first six months of 2021
in comparison with the identical interval of 2020. The lower was primarily as a consequence of decrease
long-term debt balances in 2021 versus 2020, particularly ensuing from $785
million of long-term debt repayments with various maturity dates over the past
twelve months previous July 4, 2021.
Different (Earnings) Expense, Internet
Different (revenue) expense, web totaled expense of $9.6 million within the first six
months of 2021 versus expense of $22.8 million within the first six months of 2020.
The lower in web expense was primarily as a consequence of decrease write-downs on fairness
investments qualifying for historic and renewable vitality tax credit in 2021
versus 2020 and decrease non-service price elements of web periodic profit price
referring to pension and different post-retirement profit plans throughout 2021.
Earnings Taxes and Efficient Tax Price
Our efficient revenue tax price was 25.1% for the primary six months of 2021
in contrast with 19.8% for the primary six months of 2020. Relative to the 21%
statutory price, the 2021 efficient tax price was impacted by incremental tax
reserves incurred on account of an antagonistic ruling in reference to a non-U.S.
tax litigation matter in addition to state taxes, partially offset by funding tax
credit and the advantage of worker share-based funds. Relative to the 21%
statutory price, the 2020 efficient tax price was favorably impacted by funding
tax credit and the advantage of worker share-based funds, partially offset
by state taxes.
Internet Earnings attributable to The Hershey Firm and Earnings Per Share-diluted
Internet revenue elevated $157.0 million, or 29.1%, whereas EPS-diluted elevated
$0.77, or 29.8%, within the first six months of 2021 in comparison with the identical interval of
2020. The rise in each web revenue and EPS-diluted was pushed primarily by
increased gross revenue and decrease impairment expenses, partially offset by increased
SM&A bills and better revenue taxes. Our 2021 EPS-diluted additionally benefited from
decrease weighted-average shares excellent on account of share repurchases
pursuant to our Board-approved repurchase applications.

  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 39 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————-

SEGMENT RESULTS
The abstract that follows gives a dialogue of the outcomes of operations of
our two reportable segments: North America and Worldwide and Different. The
segments replicate our operations on a geographic foundation. For phase reporting
functions, we use "phase revenue" to judge phase efficiency and allocate
sources. Section revenue excludes unallocated common company administrative
bills, unallocated mark-to-market features and losses on commodity derivatives,
enterprise realignment and impairment expenses, acquisition-related prices and different
uncommon features or losses that aren't a part of our measurement of phase
efficiency. This stuff of our working revenue are largely managed centrally
on the company degree and are excluded from the measure of phase revenue
reviewed by the CODM and used for useful resource allocation and inner administration
reporting and efficiency analysis. Section revenue and phase revenue margin,
that are offered within the phase dialogue that follows, are non-GAAP
measures and don't purport to be options to working revenue as a measure
of working efficiency. We imagine that these measures are helpful to buyers
and different customers of our monetary data in evaluating ongoing working
profitability in addition to in evaluating working efficiency in relation to our
rivals, as they exclude the actions that aren't straight attributable
to our ongoing phase operations.

Our phase outcomes, together with a reconciliation to our consolidated outcomes,
had been as follows:
                                                            Three Months Ended                              Six Months Ended
                                                   July 4, 2021           June 28, 2020           July 4, 2021           June 28, 2020
In tens of millions of {dollars}
Internet Gross sales:
North America                                    $     1,779.2$      1,583.8$     3,861.1$      3,428.6
Worldwide and Different                                  210.2                   123.5                  424.3                   316.0
Complete                                            $     1,989.4$      1,707.3$     4,285.4$      3,744.6

Section Earnings (Loss):
North America                                    $       565.9$        497.6$     1,227.5$      1,079.1
Worldwide and Different                                   42.2                    (4.0)                  76.0                    12.0
Complete phase revenue                                     608.1                   493.6                1,303.5                 1,091.1
Unallocated company expense (1)                        151.3                   106.9                  289.1                   231.4
Unallocated mark-to-market (features) losses
on commodity derivatives (2)                              (3.4)                    0.5                   (5.7)                   82.2
Lengthy-lived asset impairment expenses                          -                     1.6                      -                     9.1
Prices related to enterprise realignment
actions                                                 3.5                     1.3                   10.4                     2.2
Working revenue                                         456.7                   383.3                1,009.7                   766.2
Curiosity expense, web                                     31.1                    38.1                   67.5                    74.3
Different (revenue) expense, web                                7.2                    11.2                    9.6                    22.8
Earnings earlier than revenue taxes                       $       418.4          $   

334.0 $ 932.6$ 669.1


(1)Consists of centrally-managed (a) company useful prices referring to authorized,
treasury, finance and human sources, (b) bills related to the
oversight and administration of our international operations, together with warehousing,
distribution and manufacturing, data techniques and international shared companies,
(c) non-cash stock-based compensation expense, (d) acquisition-related prices and
(e) different features or losses that aren't integral to phase efficiency.
(2)Internet (features) losses on mark-to-market valuation of commodity spinoff
positions acknowledged in unallocated spinoff (features) losses. See   Notice 13
to the Unaudited Consolidated Monetary Statements.


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 40 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

North America
The North America phase is liable for our chocolate and non-chocolate
confectionery market place, in addition to our grocery and rising snacks market
positions, in america and Canada. This consists of creating and rising
our enterprise in chocolate and non-chocolate confectionery, pantry, meals service
and different snacking product strains. North America outcomes, which accounted for
89.4% and 92.8% of our web gross sales for the three months ended July 4, 2021 and
June 28, 2020, respectively, had been as follows:
                                             Three Months Ended                                                    Six Months Ended
                                    July 4, 2021          June 28, 2020          % Change          July 4, 2021          June 28, 2020          % Change
In tens of millions of {dollars}
Internet gross sales                          $    1,779.2$     1,583.8                    12.3  %       $    3,861.1$     3,428.6                    12.6  %
Section revenue                            565.9                  497.6                    13.7  %            1,227.5                1,079.1                    13.8  %
Section margin                             31.8  %                31.4  %                                       31.8  %                31.5  %


Outcomes of Operations - Second Quarter 2021 vs. Second Quarter 2020
Internet gross sales of our North America phase elevated $195.4 million or 12.3% within the
second quarter of 2021 in comparison with the identical interval of 2020, reflecting a quantity
improve of 11.8% as a consequence of a rise in on a regular basis core U.S. confection manufacturers and
a good affect from international forex change charges of 0.7%. This was
partially offset by unfavorable value realization of 0.1% and a 0.1% lower
from web acquisitions and divestitures (predominantly pushed by the 2020
divestitures of Krave and the Scharffen Berger and Dagoba manufacturers).
Our North America phase revenue elevated $68.3 million or 13.7% within the second
quarter of 2021 in comparison with the identical interval of 2020, primarily as a consequence of quantity
will increase, partially offset by increased provide chain-related prices, increased freight
and logistics prices, increased promoting expense and unfavorable value
realization.
Outcomes of Operations - First Six Months 2021 vs. First Six Months 2020
Internet gross sales of our North America phase elevated $432.5 million or 12.6% within the
first six months of 2021 in comparison with the identical interval of 2020, reflecting a
quantity improve of 11.3% as a consequence of a rise in on a regular basis core U.S. confection
manufacturers, favorable value realization of 0.9% attributed to increased costs on
sure merchandise and a good affect from international forex change charges of
0.5%. This was partially offset by a 0.1% lower from web acquisitions and
divestitures (predominantly pushed by the 2020 divestitures of Krave and the
Scharffen Berger and Dagoba manufacturers).
Our North America phase revenue elevated $148.4 million or 13.8% within the first
six months of 2021 in comparison with the identical interval of 2020, primarily as a consequence of quantity
will increase and favorable value realization, partially offset by increased provide
chain-related prices, increased freight and logistics prices and better promoting
expense.


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q |

Web page 41 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

Worldwide and Different
The Worldwide and Different phase consists of all different international locations the place we
at the moment manufacture, import, market, promote or distribute chocolate and
non-chocolate confectionery and different merchandise. At the moment, this consists of our
operations in India and different Asia markets, Latin America, Europe, Africa and
the Center East, together with exports to those areas. Whereas a much less important
element, this phase additionally consists of our international retail operations, together with
Hershey'sChocolate World shops in Hershey, Pennsylvania, New York Metropolis, Las
Vegas, Niagara Falls (Ontario) and Singapore, in addition to operations related
with licensing using sure emblems and merchandise to 3rd events
world wide. Worldwide and Different outcomes, which accounted for 10.6% and
7.2% of our web gross sales for the three months ended July 4, 2021 and June 28, 2020,
respectively, had been as follows:
                                            Three Months Ended                                                   Six Months Ended
                                    July 4, 2021          June 28, 2020         % Change          July 4, 2021         June 28, 2020         % Change
In tens of millions of {dollars}
Internet gross sales                          $      210.2$      123.5                    70.2  %       $     424.3$      316.0                    34.3  %
Section revenue                             42.2                  (4.0)                        NM              76.0                  12.0                   533.3  %
Section margin                             20.1  %               (3.2) %                                      17.9  %                3.8  %


NM = not significant
Outcomes of Operations - Second Quarter 2021 vs. Second Quarter 2020
Internet gross sales of our Worldwide and Different phase elevated $86.7 million or
70.2% within the second quarter of 2021 in comparison with the identical interval of 2020,
reflecting a quantity improve of 49.5% and favorable value realization of 15.0%.
The quantity improve was primarily attributed to strong market development in
Mexico, Brazil, India and AEMEA Markets, the place web gross sales elevated by 137.7%,
68.7%, 57.6% and 53.1%, respectively. These will increase additionally benefited from a
favorable affect from international forex change charges of 5.7%.
Our Worldwide and Different phase additionally consists of licensing, owned retail and
world journey retail, the place web gross sales elevated roughly 91.0% through the
second quarter of 2021 in comparison with the identical interval of 2020. This improve is due
to the Firm's momentary closure of all Hershey'sChocolate World shops at
the onset of the pandemic and consists of america (3 areas), Niagara
Falls (Ontario) and Singapore. In July 2020, all areas had been re-opened on a
restricted capability foundation with elevated security measures.
Our Worldwide and Different phase generated revenue of $42.2 million within the
second quarter of 2021 in comparison with $4.0 million within the second quarter of 2020
with the development primarily ensuing from execution of our Worldwide
Optimization Program in China, as we streamline and optimize our China working
mannequin, in addition to quantity will increase and favorable value realization.
Outcomes of Operations - First Six Months 2021 vs. First Six Months 2020
Internet gross sales of our Worldwide and Different phase elevated $108.3 million or
34.3% within the first six months of 2021 in comparison with the identical interval of 2020,
reflecting a quantity improve of 26.7% and favorable value realization of seven.6%.
The quantity improve was primarily attributed to strong market development in
Mexico, Brazil, India and AEMEA Markets, the place web gross sales elevated by 40.1%,
34.7%, 53.2% and 32.0%, respectively.
Our Worldwide and Different phase additionally consists of licensing, owned retail and
world journey retail, the place web gross sales elevated roughly 39.3% through the
first six months of 2021 in comparison with the identical interval of 2020. This improve is
as a result of Firm's momentary closure of all Hershey'sChocolate World shops
on the onset of the pandemic and consists of america (3 areas),
Niagara Falls (Ontario) and Singapore. In July 2020, all areas had been
re-opened on a restricted capability foundation with elevated security measures.
Our Worldwide and Different phase generated revenue of $76.0 million within the
first six months of 2021 in comparison with $12.0 million within the first six months of
2020 with the development primarily ensuing from execution of our
Worldwide Optimization Program in China, as we streamline and optimize our
China working mannequin, in addition to quantity will increase and favorable value
realization.


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 42 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

Unallocated Company Expense
Unallocated company expense consists of centrally-managed (a) company
useful prices referring to authorized, treasury, finance and human sources, (b)
bills related to the oversight and administration of our international
operations, together with warehousing, distribution and manufacturing, data
techniques and international shared companies, (c) non-cash stock-based compensation
expense and (d) different features or losses that aren't integral to phase
efficiency.
Within the second quarter of 2021, unallocated company expense totaled $151.3
million, as in comparison with $106.9 million within the second quarter of 2020. The
improve is primarily pushed by increased group insurance coverage prices from
COVID-19-related delays in preventive care, incremental investments in
capabilities and expertise and better incentive compensation.
Within the first six months of 2021, unallocated company expense totaled $289.1
million, as in comparison with $231.4 million within the first six months of 2020. The
improve is primarily pushed by incremental investments in capabilities and
expertise and better incentive compensation.
LIQUIDITY AND CAPITAL RESOURCES
Traditionally, our main supply of liquidity has been money generated from
operations. Home seasonal working capital wants, which usually peak throughout
the summer season months, are typically met by using money readily available, financial institution borrowings
or the issuance of economic paper. Business paper may additionally be issued, from
time to time, to finance ongoing enterprise transactions, such because the compensation of
long-term debt, enterprise acquisitions and for different common company functions.
At July 4, 2021, our money and money equivalents totaled $426.2 million, a
lower of $717.8 million in comparison with the 2020 year-end steadiness. We imagine we
have enough liquidity to fulfill our money wants; nonetheless, we proceed to
consider and take motion, as needed, to protect ample liquidity and
be certain that our enterprise can proceed to function through the ongoing COVID-19
pandemic. Further element concerning the web makes use of of money are outlined within the
following dialogue.
Roughly 85% of the steadiness of our money and money equivalents at July 4,
2021 was held by subsidiaries domiciled outdoors of america. Throughout the
first six months of 2021, beforehand undistributed earnings of sure
worldwide subsidiaries had been now not thought-about indefinitely reinvested;
nonetheless, the Firm had beforehand acknowledged a one-time U.S. repatriation tax
due underneath U.S. tax reform, and in consequence, solely an immaterial quantity of
withholding tax was acknowledged. For the rest of the Firm's money held by
worldwide subsidiaries, we intend to proceed to reinvest the undistributed
earnings indefinitely. We imagine we now have enough liquidity to fulfill our
money wants, together with our money wants in america.
Money Circulation Abstract
The next desk is derived from our Consolidated Statements of Money Flows:
                                                                          Six Months Ended
In tens of millions of {dollars}                                         July 4, 2021             June 28, 2020
Internet money offered by (utilized in):
Working actions                                        $           1,017.7       $            614.0
Investing actions                                                  (700.1)                  (209.8)
Financing actions                                                (1,041.7)                   295.9
Impact of change price modifications on money and money
equivalents                                                             (5.1)                   (17.3)
Much less: Money labeled as property held on the market                           11.4                    (10.7)
(Lower) improve in money and money equivalents            $         (717.8)         $         672.1




  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q |

Web page 43 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————-

Working actions
We generated money of $1.0 billion from working actions within the first six
months of 2021, a rise of $403.7 million in comparison with $614.0 million within the
similar interval of 2020. This improve in web money offered by working actions
was primarily pushed by the next components:
•Internet revenue adjusted for non-cash expenses to operations (together with depreciation,
amortization, stock-based compensation, deferred revenue taxes, long-lived asset
expenses, a write-down of fairness investments and different expenses) resulted in
$186.3 million of upper money circulate in 2021 relative to 2020.
•Internet working capital (comprised of commerce accounts receivable, stock,
accounts payable and accrued liabilities) consumed money of $13.3 million in
2021, in comparison with $201.9 million in 2020. This $188.6 million fluctuation was
primarily pushed by increased money receipts from prospects leading to a barely
decrease funding in accounts receivable on the finish of the second quarter of 2021
in comparison with the identical interval of 2020, in addition to robust demand of U.S.
inventories, particularly our on a regular basis core U.S. confection manufacturers.
•Accrued revenue taxes generated constant ranges of money in 2021 and 2020;
nonetheless, we paid money of $139.1 million for revenue taxes throughout 2021 in comparison with
$71.6 million in the identical interval of 2020. This $67.5 million improve in money
funds was primarily as a result of 2020 deferral of quarterly estimated tax
funds on account of the CARES Act.

Investing actions
We used money of $700.1 million for investing actions within the first six months
of 2021, a rise of $490.3 million in comparison with $209.8 million in the identical
interval of 2020. This improve in web money utilized in investing actions was
primarily pushed by the next components:
•Capital spending. Capital expenditures, together with capitalized software program,
primarily to help capability enlargement, innovation and price financial savings, had been
$227.6 million within the first six months of 2021 in comparison with $185.8 million within the
similar interval of 2020. For full 12 months 2021, we count on capital expenditures,
together with capitalized software program, to approximate $550 million. Our 2021 capital
expenditures are largely pushed by the continuation of our ERP system
implementation, in addition to our provide chain capability initiatives.
•Investments in partnerships qualifying for tax credit. We make investments in
partnership entities that in flip make fairness investments in initiatives eligible
to obtain federal historic and renewable vitality tax credit. We invested
roughly $57.4 million within the first six months of 2021, in comparison with $26.4
million in the identical interval of 2020.
•Enterprise Acquisition. In June 2021, we acquired Lily's for an preliminary money
buy value of $418.2 million. Additional particulars concerning our enterprise
acquisition exercise is offered in   Notice 2   to the Unaudited Consolidated
Monetary Statements.
Financing actions
We used money of $1.0 billion for financing actions within the first six months of
2021, in comparison with money generated of $295.9 million in the identical interval of 2020.
This fluctuation of $1.3 billion for financing actions was primarily pushed by
the next components:
•Quick-term borrowings, web. Along with using money readily available, we use
short-term borrowings (business paper and financial institution borrowings) to fund seasonal
working capital necessities and ongoing enterprise wants. Throughout the first six
months of 2021, we generated money circulate of $137.0 million predominantly by way of
the issuance of short-term business paper, partially offset by a discount in
short-term international borrowings. Throughout the first six months of 2020, we generated
money circulate of $166.0 million predominantly by way of the issuance of short-term
business paper, in addition to a rise in short-term international financial institution borrowings.


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 44 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————-

•Lengthy-term debt borrowings and repayments. Throughout the first six months of 2021,
we repaid $84.7 million of 8.800% Debentures due upon their maturity and $350.0
million of three.100% Notes due upon their maturity. Throughout the first six months of
2020, we issued $300 million of 0.900% Notes due in 2025, $350 million of 1.700%
Notes due in 2030 and $350 million of two.650% Notes due in 2050 (the "2020
Notes"). Proceeds from the issuance of the 2020 Notes, web of reductions and
issuance prices, totaled $989.9 million. Moreover, in Might 2020, we repaid
$350 million of two.900% Notes due upon their maturity.
•Dividend funds. Complete dividend funds to holders of our Frequent Inventory and
Class B Frequent Inventory had been $324.3 million through the first six months of 2021, an
improve of $10.0 million in comparison with $314.3 million in the identical interval of 2020.
Particulars concerning our 2021 money dividends paid to stockholders are as follows:
                                                                   Quarter 

Ended

In tens of millions of {dollars} besides per share quantities April 4, 2021

    July 4, 2021
Dividends paid per share - Frequent inventory               $           0.804      $        0.804
Dividends paid per share - Class B frequent inventory       $           0.731      $        0.731
Complete money dividends paid                             $           162.7      $        161.6
Declaration date                                         February 2, 2021      April 27, 2021
Document date                                             February 19, 2021        Might 21, 2021
Fee date                                               March 15, 2021       June 15, 2021


•Share repurchases. We used money for whole share repurchases of $434.3 million
and $211.2 million through the first six months of 2021 and 2020, respectively,
pursuant to our observe of replenishing treasury shares out there for issuance
for inventory choices and incentive compensation, in addition to our share repurchases
within the open market underneath pre-approved share repurchase applications. In July 2018,
our Board of Administrators authorized a $500 million share repurchase authorization.
As of July 4, 2021, roughly $110 million remained out there for
repurchases of our Frequent Inventory underneath this program. The share repurchase program
doesn't have an expiration date. In Might 2021, our Board of Administrators authorized
a further $500 million share repurchase authorization. This program is to
start after the present 2018 authorization is accomplished and is to be
utilized at administration's discretion. For the rest of 2021, we count on share
repurchases to return to a extra conventional buyback technique.
•Proceeds from the train of inventory choices, together with tax advantages. We
obtained $16.9 million from worker workouts of inventory choices, web of worker
taxes withheld from share-based awards, through the first six months of 2021, a
minimal lower in comparison with $17.5 million in the identical interval of 2020.

Current accounting statements Info on just lately adopted and printed accounting requirements is included in

Notice 1 to the unaudited consolidated monetary statements.


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q | 

Web page 45 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————

Protected Harbor Assertion
We're topic to altering financial, aggressive, regulatory and technological
dangers and uncertainties that would have a cloth affect on our enterprise,
monetary situation or outcomes of operations. In reference to the "protected
harbor" provisions of the Personal Securities Litigation Reform Act of 1995, we
observe the next components that, amongst others, might trigger future outcomes to
differ materially from the forward-looking statements, expectations and
assumptions that we now have mentioned straight or implied on this Prospectus. Many
of those forward-looking statements could be recognized by way of phrases such
as "anticipate," "assume," "imagine," "proceed," "estimate," "count on,"
"forecast," "future," "intend," "plan," "potential," "predict," "undertaking,"
"technique," "goal" and comparable phrases, and future or conditional tense verbs
like "might," "might," "would possibly," "ought to," "will" and "would," amongst others.

The components that would trigger our precise outcomes to vary materially from the
outcomes projected in our forward-looking statements embody, however usually are not restricted
to the next:

•Our enterprise and monetary outcomes could also be negatively impacted by the failure to
efficiently handle a disruption in client and commerce patterns, in addition to
operational challenges related to the precise or perceived results of a
illness outbreak, together with epidemics, pandemics or comparable widespread public
well being issues, comparable to, the COVID-19 pandemic;

•Our Firm's fame or model picture is likely to be impacted on account of points
or issues referring to the standard and security of our merchandise, elements or
packaging, human and office rights, and different environmental, social or
governance issues, which in flip might end in litigation or in any other case
negatively affect our working outcomes;

•Disruption to our manufacturing operations or provide chain might impair our
means to supply or ship completed merchandise, leading to a destructive affect
on our working outcomes;

• We might not be capable of rent, have interaction and retain the gifted international workforce we have to drive our development methods;

• The rise within the prices of uncooked supplies and vitality in addition to the provision of ample provides of uncooked supplies might have an effect on future monetary outcomes;

•Value will increase will not be enough to offset price will increase and preserve
profitability or might end in gross sales quantity declines related to pricing
elasticity;

• Market demand for brand new and present merchandise might lower;

• Elevated competitors available in the market might hurt our enterprise;

• Our monetary outcomes could also be adversely affected by the failure to efficiently execute or combine acquisitions, divestitures and joint ventures;

• Our worldwide operations might not meet projected development goals, which might have a destructive affect on our total enterprise and outcomes of operations;

• We might not totally understand the anticipated price financial savings and / or operational efficiencies related to our strategic initiatives or restructuring applications, which might have a destructive affect on our enterprise;

• Modifications in authorities legal guidelines and laws might improve our prices and obligations or affect demand for our merchandise;

•Political, financial and/or monetary market circumstances might negatively affect
our monetary outcomes;


  Desk of Contents              The Hershey Firm | Q2 2021 Type 10-Q |

Web page 46 [[Image Removed: hsy-20210704_g2.jpg]]

————————————————– ——————————-

• Disruptions, failures or safety breaches in our IT infrastructure might have a destructive affect on our operations;

• Issues with the design or implementation of our new enterprise useful resource planning system might have a destructive affect on our enterprise and operations; and

•Such different issues as mentioned in our 2020 Annual Report on Type 10-Ok, our
Quarterly Report on Type 10-Q for the quarterly interval ended April 4, 2021, and
this Quarterly Report on Type 10-Q, together with Half II, Merchandise 1A, "Danger Elements."
We undertake no obligation to publicly replace or revise any forward-looking
statements to replicate precise outcomes, modifications in expectations or occasions or
circumstances after the date this Quarterly Report on Type 10-Q is filed.

© Edgar on-line, supply Previews

About Edith J.

Check Also

VERIZON COMMUNICATIONS INC: Working outcomes and monetary place (Type 8-Ok)

Merchandise 2.02. Outcomes of Operations and Monetary Situation Hooked up as an exhibit hereto are …