HERSHEY CO

The Hershey Company is a global confectionery leader known for making more moments of goodness through chocolate, sweets, mints, and other great tasting snacks. The Company is the largest producer of quality chocolate in North America, a leading snack maker in the United States and a global leader in chocolate and non-chocolate confectionery. Hershey markets, sells, and distributes its products under more than 85 brand names in approximately 65 countries worldwide. The Company reports its operations through three segments: North America Confectionery, North America Salty Snacks, and International. The North America Confectionery segment is responsible for the traditional chocolate and non-chocolate confectionery market position in the United States and Canada, including gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines. The North America Salty Snacks segment is responsible for salty snacking products in the United States, including ready-to-eat popcorn, baked and trans fat-free snacks, pretzels, and other snacks. The International segment is a combination of all other operating segments that are not individually material, including geographic regions where the Company operates outside of North America, with current operations and manufacturing in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and distribution and sale of confectionery products in export markets of Asia, Latin America, Middle East, Europe, Africa and other regions.

The Company sells its brands in highly competitive markets with many other global multinational, national, regional and local firms. Some of its competitors are large private companies, as well as large retailers, that have significant resources and substantial international operations. Competition in the Company's product categories is based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing and promotional activity, the ability to identify and satisfy consumer preferences, as well as convenience and service. The Company has also experienced increased competition from other snack items, and through innovation and acquisitions, it is continuing to expand the boundaries of its brands to capture new snacking occasions. The Company's largest customer, McLane Company, Inc., accounted for approximately 27% of consolidated net sales in 2025. McLane Company, Inc. is one of the largest wholesale distributors in the United States to convenience stores, drug stores, wholesale clubs and mass merchandisers, including Wal-Mart Stores, Inc.

The Company generates revenue primarily through the sale of its branded chocolate, sweets, mints, and other snack products to wholesale distributors, chain grocery stores, mass merchandisers, chain drug stores, vending companies, wholesale clubs, convenience stores, dollar stores, concessionaires, and department stores. The majority of customers, with the exception of wholesale distributors, resell products to end-consumers in retail outlets in North America and other locations worldwide. The foundation of the marketing strategy is strong brand equities, product innovation and the consistently superior quality of products. The Company utilizes a variety of promotional programs directed towards customers, as well as advertising and promotional programs for consumers, to stimulate sales of certain products at various times throughout the year. The Company also recognizes a minor amount of royalty income (less than 1% of consolidated net sales) from sales-based licensing arrangements.

Within the North America Confectionery segment, the product portfolio includes a wide variety of chocolate offerings marketed and sold under the renowned brands of Hershey's, Reese's and Kisses, along with other popular chocolate and non-chocolate confectionery brands such as Jolly Rancher, Almond Joy, Brookside, barkTHINS, Cadbury, Good & Plenty, Heath, Kit Kat, Payday, Rolo, Twizzlers, Sour Strips, Whoppers and York. Protein bar products include ONE bar and gum and mint products include Ice Breakers mints and chewing gum, Breath Savers mints and Bubble Yum bubble gum. Pantry items include baking products, toppings and sundae syrups sold under the Hershey's, Reese's, Heath and Lily's brands, as well as Hershey's and Reese's chocolate spreads and snack bites and mixes. This segment also includes retail operations, including Hershey's Chocolate World stores in Hershey, Pennsylvania; New York, New York; Las Vegas, Nevada; 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. North America Confectionery accounted for 81.1% of net sales in 2025, 81.4% in 2024 and 81.7% in 2023.

Within the North America Salty Snacks segment, products include ready-to-eat SkinnyPop and LesserEvil popcorn, baked and trans fat-free Pirates Booty snacks and Dot's Homestyle Pretzels snacks. North America Salty Snacks accounted for 10.9% of net sales in 2025, 10.1% in 2024 and 9.8% in 2023. Within the International segment, the Company manufactures, markets and sells many of the same brands as in North America, as well as other brands that are marketed regionally, such as Pelon Pelo Rico confectionery products in Mexico, IO-IO snack products in Brazil and Sofit beverage products in India. International results accounted for 8.1% of net sales in 2025, 8.5% in 2024 and 8.5% in 2023.

On November 18, 2025, the Company completed the acquisition of LesserEvil, LLC, previously a privately held company that produces and sells organic popcorn and puffed snack products to retailers and distributors in the United States and Canada, for initial cash consideration of $769,090 ¹, with the Company potentially required to pay additional contingent consideration ranging from zero to a maximum of $200,000 ² if certain defined earnings targets are met over a multi-year period. On November 8, 2024, the Company completed the acquisition of the Sour Strips brand from Actual Candy, LLC, an emerging sour candy brand available in a wide range of food distribution channels in the United States. On May 31, 2023, the Company completed the acquisition of certain assets that provide additional manufacturing capacity from Weaver Popcorn Manufacturing, Inc., a leader in the production and co-packing of microwave popcorn and ready-to-eat popcorn, and former co-manufacturer of the Company's SkinnyPop brand, for cash consideration of $165,818 ³. In February 2024, the Board of Directors approved the Advancing Agility & Automation Initiative, a multi-year productivity program to improve supply chain and manufacturing-related spend, optimize selling, general and administrative expenses, leverage new technology and business models to further simplify and automate processes, and generate long-term savings. The Company estimates that the AAA Initiative will result in total pre-tax costs of $200,000 ⁴ to $250,000 ⁵ from inception through 2026. In February 2025, the Company issued $500 million ⁶ of 4.550% Notes due in February 2028, $500 million ⁷ of 4.750% Notes due in February 2030, $500 million ⁸ of 4.950% Notes due in February 2032 and $500 million ⁹ of 5.100% Notes due in February 2035, with proceeds from the issuance, net of discounts and issuance costs, totaling $1,985 million ¹⁰. In June 2025 and August 2025, the Company repaid $300 million ¹¹ of 0.900% Notes and $300 million ¹² of 3.200% Notes, respectively, due upon their maturity. In 2025, the Company purchased the Fulfil brand in North America for $73,597 ¹³. In December 2023, the Board of Directors approved a $500 million ¹⁴ share repurchase authorization, of which approximately $470 million ¹⁵ remains available for repurchases. In February 2023, the Company purchased 1,000,000 ¹⁶ shares of Common Stock from the Hershey Trust Company at a price equal to $239.91 ¹⁷ per share, for a total purchase price of $239.9 million ¹⁸.

Net sales were $11,692,576 ¹⁹ in 2025 compared to $11,202,263 ²⁰ in 2024, an increase of 4.4% ²¹. Net income was $883,259 ²² in 2025 compared to $2,221,239 ²³ in 2024, a decrease of 60.2% ²⁴. Diluted EPS was $4.34 ²⁵ in 2025 compared to $10.92 ²⁶ in 2024, a decrease of 60.3% ²⁷. Gross margin was 33.5% ²⁸ in 2025 compared with 47.3% ²⁹ in 2024, a decrease of approximately 1,380 basis points ³⁰. Operating profit was $1,441,528 ³¹ in 2025 compared to $2,898,232 ³² in 2024, a decrease of 50.3% ³³. Operating profit margin was 12.3% ³⁴ in 2025 compared with 25.9% ³⁵ in 2024. Net cash provided by operating activities was $2,277,367 ³⁶ in 2025 compared to $2,531,596 ³⁷ in 2024.

The Company expects 2026 capital expenditures, including capitalized software, to approximate $425 million ³⁸ to $475 million ³⁹, as capital spending as a percentage of sales is expected to remain at historical levels. The Company intends to use its existing cash and internally generated funds to meet its 2026 capital requirements.

The Company is focused on four strategic imperatives to ensure its success now and in the future: Drive Core Confection Business and Broaden Participation in Snacking, Deliver Profitable International Growth, Expand Competitive Advantage through Differentiated Capabilities, and Responsibly Manage Operations to Ensure the Long-Term Sustainability of the Business, Planet and People. To expand breadth in snacking and become a leading snacking powerhouse, the Company is focused on continuing to expand the boundaries of its core confection brands to capture new snacking occasions and increasing its exposure into new snack categories through acquisitions. The Company has reset its international investment strategy, while holding fast to its belief that its targeted emerging market strategy will deliver long-term, profitable growth. The uncertain macroeconomic environment in many of these markets is expected to continue and the Company aims to ensure its investments in these international markets are appropriate relative to the size of the opportunity.

The Company is working to leverage its advanced data and analytical techniques to gain a deep understanding of its consumers, customers, shoppers, end-to-end supply chain, retail environment and key economic drivers at both a macro and precision level, including digital transformation and new media models. The Company is in the process of transforming its supply chain capabilities and enterprise resource planning system, which will enable employees to work more efficiently and effectively. The Company operationalized the final phase of its multi-year implementation of a new global enterprise resource planning system in April 2024, by implementing the new system in the North America Confectionery segment and select business units included in the International segment. The ERP system implementation process has required, and will continue to require, the investment of significant personnel and financial resources as the Company supports post-implementation efforts and system functionality.

The Company's Advancing Agility & Automation Initiative is a multi-year productivity program to improve supply chain and manufacturing-related spend, optimize selling, general and administrative expenses, leverage new technology and business models to further simplify and automate processes, and generate long-term savings. At the conclusion of the program in 2026, ongoing annual savings are expected to be approximately $400,000 ⁴⁰. The Company estimates that the AAA Initiative will result in total pre-tax costs of $200,000 ⁴¹ to $250,000 ⁴² from inception through 2026, with cash costs estimated to be $175,000 ⁴³ to $225,000 ⁴⁴. The Company's supply chain posture involves manufacturing primarily for stock and typically filling customer orders within a few days of receipt. Approximately 74% of the Company's manufacturing capacity is located in the United States. The Company's principal properties include manufacturing facilities in Hershey, Lancaster, and Hazleton, Pennsylvania; Robinson, Illinois; Stuarts Draft, Virginia; Edgerton, Kansas; Bluffton, Indiana; Plymouth, Indiana; Lawrence, Kansas; and Whitestown, Indiana, as well as distribution centers and corporate administrative and retail locations. Outside the United States, the Company owns manufacturing facilities in Monterrey and El Salto, Mexico, and Johor, Malaysia, and a distribution center in Brantford, Ontario, Canada.

The Company expects 2026 capital expenditures, including capitalized software, to approximate $425 million ⁴⁵ to $475 million ⁴⁶. In December 2023, the Board of Directors approved a $500 million ⁴⁷ share repurchase authorization, of which approximately $470 million ⁴⁸ remains available for repurchases. The Company paid $1,085,296 ⁴⁹ in cash dividends on its Common Stock and Class B Stock in 2025. The annual dividend rate on Common Stock in 2025 was $5.480 ⁵⁰ per share. On February 4, 2026, the Board declared a quarterly dividend of $1.452 ⁵¹ per share of Common Stock payable on March 16, 2026, to stockholders of record as of February 17, 2026, which is the Company's 384th ⁵² consecutive quarterly Common Stock dividend. A quarterly dividend of $1.320 ⁵³ per share of Class B Stock also was declared.

Increasing inflationary pressures, including ongoing price volatility for select commodities and higher manufacturing costs, continued to challenge the business in 2025. For the year ended December 31, 2025, in addition to higher commodity costs, cost of sales increased compared to the same period of 2024 as a result of $491,000 ⁵⁴ of unfavorable mark-to-market activity on commodity derivative instruments intended to economically hedge future years' commodity purchases. During 2025, market prices for the majority of exchange traded commodities remained volatile, including cocoa which has decreased from record highs but remains structurally elevated. Changes in global trade policies, including tariffs on U.S. imports, continue to increase global economic and political uncertainty. For the year ended December 31, 2025, the imposition of tariffs on U.S. imports and retaliatory tariffs had a material negative impact on the Company's results of operations and commodity prices. The Company is continuing to monitor the ongoing negotiations related to tariffs, specifically, goods imported into the U.S. from Canada, Mexico and other countries, as well as export markets, in which the Company has significant business operations, all of which may result in material adverse effects on its results of operations.

The Company's international operations are subject to risks and uncertainties relating to international sales and operations, including the inability to manage operational stability and business resiliency within international markets due to unforeseen global economic and environmental changes resulting in business interruption, supply constraints, inflation, deflation or decreased demand; the inability to establish, develop and achieve market acceptance of global brands in international markets; difficulties and costs associated with compliance and enforcement of remedies under a wide variety of complex laws, treaties and regulations; unexpected changes in regulatory environments; political and economic instability; nationalization of properties by foreign governments; tax rates that may exceed those in the United States; potentially negative consequences from changes in tax laws; the imposition of tariffs on U.S. imports and retaliatory tariffs in response; increased costs, disruptions in shipping or reduced availability of freight transportation; the impact of currency exchange rate fluctuations; failure to gain sufficient profitable scale in certain international markets; and failure to recruit, retain and build a talented and engaged global workforce. The Company derived approximately 12.3% of its net sales from customers located outside of the United States in 2025, and approximately 16% of its total long-lived assets were located outside of the United States as of December 31, 2025.

The Company faces significant risk from increases in raw material and energy costs, as for the year ended December 31, 2025, cost of sales increased by $1,868,500 ⁵⁵ or 31.7% ⁵⁶, driven by $736,600 ⁵⁷ in higher commodity costs and $491,000 ⁵⁸ of unfavorable mark-to-market activity on commodity derivative instruments. Cocoa prices remain structurally elevated, and the Company may not be able to offset cost increases through pricing actions without experiencing sales volume declines. The Company's largest customer, McLane Company, Inc., accounted for approximately 27% ⁵⁹ of consolidated net sales in 2025, creating a material customer concentration risk. The Company's international operations, which derived approximately 12.3% ⁶⁰ of net sales from customers outside the United States, are subject to risks including the imposition of tariffs on U.S. imports and retaliatory tariffs, which had a material negative impact on results of operations in 2025. The Company may not fully realize the expected cost savings from its Advancing Agility & Automation Initiative, which is estimated to result in total pre-tax costs of $200,000 ⁶¹ to $250,000 ⁶² from inception through 2026, and failure to achieve intended benefits could adversely affect the business.

Management's message emphasizes the Company's vision to lead the future of snacking and its focus on four strategic imperatives: driving the core confection business and broadening participation in snacking, delivering profitable international growth, expanding competitive advantage through differentiated capabilities, and responsibly managing operations to ensure long-term sustainability. Management highlights that throughout 2025, the Company experienced net sales growth, positive changes in consumer behavior, and price elasticity despite the persistent dynamic macro environment, but that increasing inflationary pressures, including ongoing price volatility for select commodities and higher manufacturing costs, continued to challenge the business. Management notes that despite a strategic pricing action in the third quarter combined with other specific actions taken to mitigate gross margin pressures, direct inputs continue to be the primary incremental cost to the business. Management states that the Company expects 2026 capital expenditures, including capitalized software, to approximate $425 million ⁶³ to $475 million ⁶⁴, as capital spending as a percentage of sales is expected to remain at historical levels. Management also states that at the conclusion of the Advancing Agility & Automation Initiative in 2026, ongoing annual savings are expected to be approximately $400,000 ⁶⁵.