THE HERSHEY COMPANY 
This Management's Discussion and Analysis ("MD&A") is intended to provide an
understanding of Hershey's financial condition, results of operations and cash
flows by focusing on changes in certain key measures from year to year. The MD&A
should be read in conjunction with our Unaudited Consolidated Financial
Statements and accompanying notes. This discussion contains a number of
forward-looking statements, all of which are based on current expectations.
Actual results may differ materially. Refer to the Safe Harbor Statement below
as well as the Risk Factors and other information contained in our 2021 Annual
Report on Form 10-K for information concerning the key risks to achieving future
performance goals.
The MD&A is organized in the following sections:
• Overview
• Trends Affecting Our Business
• Consolidated Results of Operations
• Segment Results
• Liquidity and Capital Resources
• Safe Harbor Statement
OVERVIEW
Hershey is a global confectionery leader known for making more moments of goodness through chocolate, sweets, mints and other great tasting snacks. We are the largest producer of quality chocolate inNorth America , a leading snack maker inthe United States ("U.S.") and a global leader in chocolate and non-chocolate confectionery. We market, sell and distribute our products under more than 100 brand names in approximately 80 countries worldwide.
Our principal product offerings include chocolate and non-chocolate confectionery products; gum and mint refreshment products and protein bars; pantry items, such as baking ingredients, toppings and beverages; and snack items such as spreads, bars, and snack bites and mixes, popcorn, pretzels and protein bars.
Business Acquisitions and Divestiture
InDecember 2021 , we completed the acquisition ofPretzels Inc. ("Pretzels"), previously a privately held company that manufactures and sells pretzels and other salty snacks for other branded products and private labels inthe United States . Pretzels is an industry leader in the pretzel category with a product portfolio that includes filled, gluten free and seasoned pretzels, as well as extruded snacks that complementsHershey's snacks portfolio. Based inBluffton, Indiana , Pretzels operates three manufacturing locations inIndiana andKansas . Pretzels providesHershey deep pretzel category and product expertise and the manufacturing capabilities to support brand growth and future pretzel innovation. Additionally, we completed the acquisition ofDot's Pretzels, LLC ("Dot's"), previously a privately held company that produces and sells pretzels and other snack food products to retailers and distributors inthe United States , with Dot's Homestyle Pretzels snacks as its primary product. Dot's is the fastest-growing scale brand in the pretzel category and complementsHershey's snacks portfolio. InJune 2021 , we completed the acquisition of Lily'sSweets, LLC ("Lily's"), previously a privately held company that sells a line of sugar-free and low-sugar confectionery foods to retailers and distributors inthe United States andCanada . Lily's products include dark and milk chocolate style bars, baking chips, peanut butter cups and other confection products that complementHershey's confectionery and confectionery-based portfolio. InJanuary 2021 , we completed the divestiture ofLotte Shanghai Foods Co., Ltd. , which was previously included within the International segment results in our consolidated financial statements. Total proceeds from the divestiture and the impact on our consolidated financial statements were immaterial. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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TRENDS AFFECTING OUR BUSINESS
OnMarch 11, 2020 , theWorld Health Organization designated coronavirus disease 2019 ("COVID-19") as a global pandemic, which has spread worldwide and impacted various markets around the world, including theU.S. Throughout the pandemic we have remained committed to promoting the health and safety of our employees and communities and helping to maintain the global food supply. In 2022, minimal COVID-19 restrictions remained as the availability of vaccinations (including vaccine boosters) continued to increase around the world, albeit with slower than anticipated rollouts and challenges within certain countries. The lifting of restrictions has resulted in daily activities and habits being more representative of pre-pandemic times. However, beginning in 2021, and continuing through the three months endedApril 3, 2022 , the continued strong demand for consumer goods and the effects of COVID-19 mitigation strategies have led to broad-based supply chain disruptions across theU.S. and globally, including inflation on many consumer products, labor shortages and demand outpacing supply. As a result, during the three months endedApril 3, 2022 , we continued to experience corresponding incremental costs and gross margin pressures (see
Results of Operations included in this MD&A). We are continuing to work closely with our business units, contract manufacturers, distributors, contractors and other external business partners to minimize the potential impact on our business.
In addition to COVID-19 and broad-based supply chain disruptions, certain geopolitical events, specifically the conflict betweenRussia andUkraine , have increased global economic and political uncertainty. For the three months endedApril 3, 2022 , this conflict did not have a material impact on our commodity prices or supply availability. However, we are continuing to monitor for any significant escalation or expansion of economic or supply chain disruptions or broader inflationary costs, which may result in material adverse effects on our results of operations.
We experienced an increase in our net sales and net income during the three
months ended
Segment Results included in this MD&A), partially offset by the aforementioned supply chain disruptions and gross margin pressures. As ofApril 3, 2022 , we believe we have sufficient liquidity to satisfy our key strategic initiatives and other material cash requirements; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can operate effectively during the current economic environment. We continue to monitor our discretionary spending across the organization (see Liquidity and Capital Resources included in this MD&A). Based on the length and severity of COVID-19 and the conflict betweenRussia andUkraine , including broad-based supply chain disruptions, rising levels of inflation, new trends in outbreaks and hotspots, the spread of COVID-19 variants, resurgences and the continued distribution of vaccinations, we may experience continued volatility in retail foot traffic, consumer shopping and consumption behavior and may experience increasing supply chain costs and higher inflation. We will continue to evaluate the nature and extent of these potential and evolving impacts on our business, consolidated results of operations, segment results, liquidity and capital resources. Table of Contents The Hershey Company | Q1 2022 Form 10-Q |
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CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended
April 3, 2022 April 4, 2021 Percent Change
In millions of dollars except per share amounts
Net sales $ 2,666.2 $ 2,295.9 16.1 %
Cost of sales 1,420.7 1,247.0 13.9 %
Gross profit 1,245.5 1,048.9 18.7 %
Gross margin 46.7 % 45.7 %
Selling, marketing & administrative ("SM&A")
expenses 524.2 494.7 6.0 %
SM&A expense as a percent of net sales 19.7 % 21.5 %
Business realignment activities 0.3 1.2 (77.9) %
Operating profit 721.0 553.0 30.4 %
Operating profit margin 27.0 % 24.1 %
Interest expense, net 33.2 36.4 (8.9) %
Other (income) expense, net 10.4 2.4 331.1 %
Provision for income taxes 143.9 117.3 22.7 %
Effective income tax rate 21.2% 22.8%
Net income including noncontrolling interest 533.5 396.9 34.4 %
Less: Net gain attributable to noncontrolling
interest - 1.1 NM
Net income attributable to The Hershey Company $ 533.5 $ 395.8 34.8 %
Net income per share-diluted $ 2.57 $ 1.90 35.3 %
NOTE: Percentage changes may not compute directly as shown due to rounding of amounts presented above. NM = not meaningful
Results of Operations - First Quarter 2022 vs. First Quarter 2021
Net sales increased 16.1% in the first quarter of 2022 compared to the same period of 2021, reflecting a favorable price realization of 6.9% primarily due to higher list prices across our reportable segments, a volume increase of 4.6% driven by increases in everyday coreU.S. confection brands, salty snack brands and our international markets. There was a 4.6% benefit from the 2021 acquisitions of Pretzels, Dot's and Lily's.
Key
For the first quarter of 2022, our totalU.S. retail takeaway declined 1.4% in the expanded multi-outlet combined plus convenience store channels (IRI MULO +C-Stores ), which includes candy, mint, gum, salty snacks and grocery items. OurU.S. candy, mint and gum ("CMG") consumer takeaway decreased 4.4% and experienced a CMG market share loss of approximately 156 basis points as a result of capacity constraints limiting the Company's ability to fully service consumer demand. The CMG consumer takeaway and market share information reflects measured channels of distribution accounting for approximately 90% of ourU.S. confectionery retail business. These channels of distribution primarily include food, drug, mass merchandisers, and convenience store channels, plus Wal-Mart Stores, Inc., partial dollar, club and military channels. These metrics are based on measured market scanned purchases as reported byInformation Resources, Incorporated ("IRI"), the Company's market insights and analytics provider, and provide a means to assess our retail takeaway and market position relative to the overall category. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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Cost of Sales and Gross Margin
Cost of sales increased 13.9% in the first quarter of 2022 compared to the same period of 2021. The increase was driven by higher sales volume, higher freight and logistics costs, as well as higher supply chain inflation costs. The increase was partially offset by favorable price realization, supply chain productivity, as well as the incremental$37.1 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years' commodity purchases. Gross margin increased by 100 basis points in the first quarter of 2022 compared to the same period of 2021. The increase was driven by favorable price realization, volume increases and favorable year-over-year mark-to-market impact from commodity derivative instruments. These factors were offset by higher freight and logistics costs, higher supply chain inflation costs, as well as unfavorable product mix. SM&A Expenses SM&A expenses increased$29.5 million , or 6.0%, in the first quarter of 2022. Total advertising and related consumer marketing expenses decreased 0.7% driven by lower advertising in the North America Confectionery segment in response to sustained consumer demand and capacity constraints on select brands, offset by an increase in the North America Salty Snacks segment to raise brand awareness. SM&A expenses, excluding advertising and related consumer marketing, increased approximately 9.9% in the first quarter of 2022 driven by an increase in acquisition and integration related costs, as well as higher compensation costs and investments in capabilities and technology.
Business Realignment Activities
We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies. In the first quarter of 2022, we recorded business realignment costs of$0.3 million versus costs of$1.2 million in the first quarter of 2021 related to the International Optimization Program. This program is focused on optimizing ourChina operating model to improve our operational efficiency and provide for a strong, sustainable and simplified base going forward. Costs associated with business realignment activities are classified in our Consolidated Statements of Income as described in Note 9 to the Unaudited Consolidated Financial Statements.
Operating Profit and Operating Profit Margin
Operating profit increased 30.4% in the first quarter of 2022 compared to the same period of 2021 predominantly due to higher gross profit, partially offset by higher SM&A expenses, as noted above. Operating profit margin increased to 27.0% in 2022 from 24.1% in 2021 driven by these same factors.
Interest Expense, Net
Net interest expense was$3.2 million lower in the first quarter of 2022 compared to the same period of 2021. The decrease was primarily due to lower long-term debt balances in 2022 versus 2021, specifically resulting from the repayment of$350 million of 3.100% Notes upon their maturity inMay 2021 . This decrease was partially offset by higher short-term debt balances in 2022 versus 2021, specifically outstanding commercial paper borrowings.
Other (Income) Expense, Net
Other (income) expense, net was$10.4 million in the first quarter of 2022 versus net expense of$2.4 million in the first quarter of 2021. The increase in net expense was primarily due to higher write-downs on equity investments qualifying for tax credits in 2022 versus 2021, offset by lower non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.
Income Taxes and Effective Tax Rate
The effective income tax rate was 21.2% for the first quarter of 2022 compared with 22.8% for the first quarter of 2021. Relative to the 21% statutory rate, the 2022 and 2021 effective tax rates, were impacted by state taxes, partially offset by investment tax credits and the benefit of employee share-based payments. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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Net Income Attributable to
Net income increased$137.7 million , or 34.8%, while EPS-diluted increased$0.67 , or 35.3%, in the first quarter of 2022 compared to the same period of 2021. The increase in both net income and EPS diluted was driven primarily by higher gross profit and lower income taxes, partially offset by higher SM&A expenses, as noted above. Our 2022 EPS-diluted benefited from lower weighted-average shares outstanding as a result of share repurchases. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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SEGMENT RESULTS
The summary that follows provides a discussion of the results of operations of
our three reportable segments: North America Confectionery, North America Salty
Snacks and International. For segment reporting purposes, we use "segment
income" to evaluate segment performance and allocate resources. Segment income
excludes unallocated general corporate administrative expenses, unallocated
mark-to-market gains and losses on commodity derivatives, business realignment
and impairment charges, acquisition-related costs and other unusual gains or
losses that are not part of our measurement of segment performance. These items
of our operating income are largely managed centrally at the corporate level and
are excluded from the measure of segment income reviewed by the CODM and used
for resource allocation and internal management reporting and performance
evaluation. Segment income and segment income margin, which are presented in the
segment discussion that follows, are non-GAAP measures and do not purport to be
alternatives to operating income as a measure of operating performance. We
believe that these measures are useful to investors and other users of our
financial information in evaluating ongoing operating profitability as well as
in evaluating operating performance in relation to our competitors, as they
exclude the activities that are not directly attributable to our ongoing segment
operations.
Our segment results, including a reconciliation to our consolidated results,
were as follows:
Three Months Ended
April 3, 2022 April 4, 2021
In millions of dollars
Net Sales:
North America Confectionery $ 2,217.0 $ 1,985.4
North America Salty Snacks 226.1 121.4
International 223.1 189.1
Total $ 2,666.2 $ 2,295.9
Segment Income:
North America Confectionery $ 781.9 $ 642.6
North America Salty Snacks 21.3 25.4
International 42.0 27.4
Total segment income 845.2 695.4
Unallocated corporate expense (1) 150.3 137.8
Unallocated mark-to-market gains on commodity derivatives (2)
(27.4) (2.3)
Costs associated with business realignment activities 1.3 6.9
Operating profit 721.0 553.0
Interest expense, net 33.2 36.4
Other (income) expense, net 10.4 2.4
Income before income taxes $
677.4
(1)Includes centrally-managed (a) corporate functional costs relating to legal, treasury, finance and human resources, (b) expenses associated with the oversight and administration of our global operations, including warehousing, distribution and manufacturing, information systems and global shared services, (c) non-cash stock-based compensation expense, (d) acquisition-related costs and (e) 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 (gains) losses. See Note 13 to the Unaudited Consolidated Financial Statements.
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North America Confectionery
The North America Confectionery segment is responsible for our chocolate and non-chocolate confectionery market position inthe United States andCanada . This includes developing and growing our business in chocolate and non-chocolate confectionery, gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines. While a less significant component, this segment also includes our retail operations, includingHershey's Chocolate World stores inHershey, Pennsylvania ;New York, New York ;Las Vegas, Nevada ;Niagara Falls (Ontario ) andSingapore , as well as operations associated with licensing the use of certain trademarks and products to third parties around the world. North America Confectionery results, which accounted for 83.1% and 86.5% of our net sales for the three months endedApril 3, 2022 andApril 4, 2021 , respectively, were as follows: Three Months Ended April 3, 2022 April 4, 2021 Percent Change In millions of dollars Net sales$ 2,217.0 $ 1,985.4 11.7 % Segment income 781.9 642.6 21.7 % Segment margin 35.3 % 32.4 %
Results of Operations - First Quarter 2022 vs. First Quarter 2021
Net sales of our North America Confectionery segment increased$231.6 million or 11.7% in the first quarter of 2022 compared to the same period of 2021, reflecting a favorable price realization of 6.8% due to list price increases on certain products across our portfolio, a volume increase of 3.8% due to an increase in everyday coreU.S. confection brands and a 1.1% increase from the 2021 acquisition of Lily's. Our North America Confectionery segment also includes licensing and owned retail. This includes ourHershey's Chocolate World stores inthe United States (3 locations),Niagara Falls (Ontario ) andSingapore . Our net sales increased approximately 21.5% during the first quarter of 2022 compared to the same period of 2021. Our North America Confectionery segment income increased$139.3 million or 21.7% in the first quarter of 2022 compared to the same period of 2021, primarily due to favorable price realization and volume increases, partially offset by higher freight and logistics costs, higher supply chain inflation costs, as well as, unfavorable product mix. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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North America Salty Snacks
The North America Salty Snacks segment is responsible for our grocery and snacks market positions, including our salty snacking products. North America Salty Snacks results, which accounted for 8.5% and 5.3% of our net sales for the three months endedApril 3, 2022 andApril 4, 2021 , respectively, were as follows: Three Months Ended April 3, 2022 April 4, 2021 Percent Change In millions of dollars Net sales$ 226.1 $ 121.4 86.2 % Segment income 21.3 25.4 (16.1) % Segment margin 9.4 % 20.9 %
Results of Operations - First Quarter 2022 vs. First Quarter 2021
Net sales of our North America Salty Snacks segment increased$104.7 million or 86.2% in the first quarter of 2022 compared to the same period of 2021, reflecting a 69.0% benefit from the 2021 acquisitions of Dot's and Pretzels, a favorable price realization of 13.2% due to higher prices on certain products and related trade promotions and a volume increase of 4.0% primarily related to SkinnyPop and Pirates Booty snacks. Our North America Salty Snacks segment income decreased$4.1 million or 16.1% in the first quarter of 2022 compared to the same period of 2021 due to unfavorable product mix, as well as higher supply chain inflation costs and increased advertising and related consumer marketing costs, partially offset by favorable price realization and volume increases.
International
The International segment includes all other countries where we currently manufacture, import, market, sell or distribute chocolate and non-chocolate confectionery and other products. Currently, this includes our operations inAsia ,Latin America ,Europe ,Africa and theMiddle East , along with exports to these regions. International results, which accounted for 8.4% and 8.2% of our net sales for the three months endedApril 3, 2022 andApril 4, 2021 , respectively, were as follows: Three Months Ended April 3, 2022 April 4, 2021 Percent Change In millions of dollars Net sales$ 223.1 $ 189.1 17.9 % Segment income 42.0 27.4 53.4 % Segment margin 18.8 % 14.5 %
Results of Operations - First Quarter 2022 vs. First Quarter 2021
Net sales of our International segment increased$34.0 million or 17.9% in the first quarter of 2022 compared to the same period of 2021, reflecting a volume increase of 11.9% and a favorable price realization of 5.8%. The volume increase was primarily attributable to solid marketplace growth inBrazil ,Mexico , andIndia , where net sales increased by 34.9%, 29.5%, and 14.5%, respectively. These increases also benefited from a favorable impact from foreign currency exchange rates of 0.2%. Our International segment generated income of$42.0 million in the first quarter of 2022 compared to$27.4 million in the first quarter of 2021 with the improvement primarily resulting from execution of our International Optimization Program inChina , as we streamline and optimize ourChina operating model, as well as volume increases and favorable price realization. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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Unallocated Corporate Expense
Unallocated corporate expense 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,(d) acquisition-related costs and (e) other gains or losses that are not integral to segment performance.
In the first quarter of 2022, unallocated corporate expense totaled
LIQUIDITY AND CAPITAL RESOURCES
Historically, our primary source of liquidity has been cash generated from operations. Domestic seasonal working capital needs, which typically peak during the summer months, are generally met by utilizing cash on hand, bank borrowings or the issuance of commercial paper. Commercial paper may also be issued, from time to time, to finance ongoing business transactions, such as the repayment of long-term debt, business acquisitions and for other general corporate purposes. AtApril 3, 2022 , our cash and cash equivalents totaled$338.1 million , an increase of$8.8 million compared to the 2021 year-end balance. We believe we have sufficient liquidity to satisfy our cash needs; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during the ongoing COVID-19 pandemic. Additional detail regarding the net uses of cash are outlined in the following discussion. Approximately 80% of the balance of our cash and cash equivalents atApril 3, 2022 was held by subsidiaries domiciled outside ofthe United States . We intend to continue to reinvest the remainder of the earnings outside ofthe United States for which there would be a material tax implication to distributing, such as withholding tax, for the foreseeable future and, therefore, have not recognized additional tax expense on these earnings. We believe we have sufficient liquidity to satisfy our cash needs for at least the next twelve months, including our cash needs inthe United States .
Cash Flow Summary
The following table is derived from our Consolidated Statements of Cash Flows:
Three Months Ended
In millions of dollars April 3, 2022 April 4, 2021
Net cash provided by (used in):
Operating activities $ 656.5 $ 609.6
Investing activities (164.0) (137.0)
Financing activities (463.5) (491.8)
Effect of exchange rate changes on cash and cash
equivalents (20.2) (3.9)
Less: Cash classified as assets held for sale - 11.4
Increase (decrease) in cash and cash equivalents $ 8.8 $ (11.7)
Operating activities
We generated cash of$656.5 million from operating activities in the first three months of 2022, an increase of$46.9 million compared to$609.6 million in the same period of 2021. This increase in net cash provided by operating activities was mainly driven by the following factors: •Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, a write-down of equity investments and other charges) resulted in$166.9 million of higher cash flow in 2022 relative to 2021. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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•The increase in cash provided by operating activities was partially offset by the following net cash outflows:
•Net working capital (comprised of trade accounts receivable, inventory, accounts payable and accrued liabilities) consumed cash of$128.9 million in 2022, compared to$25.7 million in 2021. This$103.2 million fluctuation was mainly driven by a higher year-over-year build up ofU.S. inventories to satisfy product requirements and maintain sufficient levels to accommodate customer requirements and an increase in cash used by accounts receivable due to a longer Easter season in 2022 as compared to prior year, partially offset by the timing of vendor and supplier payments and higher accrued incentive compensation related to annual performance that was paid in the first quarter of 2022.
Investing activities
We used cash of$164.0 million for investing activities in the first three months of 2022, an increase of$27.0 million compared to$137.0 million in the same period of 2021. This increase in net cash used in investing activities was mainly driven by the following factors: •Capital spending. Capital expenditures, including capitalized software, primarily to support our ERP system implementation, capacity expansion projects, innovation and cost savings, were$141.1 million in the first three months of 2022 compared to$114.5 million in the same period of 2021. We expect our full year 2022 capital expenditures, including capitalized software, to approximate$600 million , the high end of our previously announced range of$550 million to$600 million . Our 2022 capital expenditures are largely driven by our key strategic initiatives, including expanding the agility and capacity of the Company's supply chain and building digital infrastructure across the enterprise. We intend to use our existing cash and internally generated funds to meet our 2022 capital requirements. •Investments in partnerships qualifying for tax credits. We make investments in partnership entities that in turn make equity investments in projects eligible to receive federal historic and renewable energy tax credits. We invested approximately$22.5 million in the first three months of 2022, compared to$25.1 million in the same period of 2021.
Financing activities
We used cash of$463.5 million for financing activities in the first three months of 2022, a decrease of$28.3 million compared to$491.8 million in the same period of 2021. This decrease in net cash used in financing activities was mainly driven by the following factors: •Short-term borrowings, net. In addition to utilizing cash on hand, we use short-term borrowings (commercial paper and bank borrowings) to fund seasonal working capital requirements and ongoing business needs. During the first three months of 2022, we used cash of$65.6 million to reduce a portion of our short-term commercial paper borrowings originally used to fund our 2021 acquisitions of Dot's and Pretzels, partially offset by an increase in short-term foreign bank borrowings. During the first three months of 2021, we used cash of$6.1 million to reduce a portion of our short-term foreign bank borrowings.
•Long-term debt borrowings and repayments. During the first three months of
2022, long-term debt activity was minimal. During the first three months of
2021, we repaid
•Dividend payments. Total dividend payments to holders of our Common Stock and Class B Common Stock were$181.1 million during the first three months of 2022, an increase of$18.4 million compared to$162.7 million in the same period of 2021. Details regarding our 2022 cash dividends paid to stockholders are as follows: Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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Quarter Ended
In millions of dollars except per share amounts
$ 0.901
Dividends paid per share - Class B common stock $ 0.819
Total cash dividends paid $ 181.1
Declaration date February 2, 2022
Record date February 18, 2022
Payment date March 15, 2022
•Share repurchases. We repurchase shares of Common Stock to offset the dilutive
impact of treasury shares issued under our equity compensation plans. The value
of these share repurchases in a given period varies based on the volume of stock
options exercised and our market price. In addition, we periodically repurchase
shares of Common Stock pursuant to Board-authorized programs intended to drive
additional stockholder value. Details regarding our share repurchases are as
follows:
Quarter Ended
In millions April 3, 2022 April 4, 2021
Milton Hershey School Trust repurchase $ 203.4 $ -
Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation
- 240.4
Cash used for total share repurchases $
203.4
InFebruary 2022 , the Company entered into a Stock Purchase Agreement withHershey Trust Company , as trustee for theMilton Hershey School Trust , pursuant to which the Company purchased 1,000,000 shares of the Company's Common Stock from theMilton Hershey School Trust at a price equal to$203.35 per share, for a total purchase price of$203.4 million . InJuly 2018 , our Board of Directors approved a$500 million share repurchase authorization. As ofApril 3, 2022 , approximately$110 million remained available for repurchases of our Common Stock under this program. The share repurchase program does not have an expiration date. InMay 2021 , our Board of Directors approved an additional$500 million share repurchase authorization. This program is to commence after the existing 2018 authorization is completed and is to be utilized at management's discretion. We expect 2022 share repurchases to be in line with our traditional buyback strategy. •Proceeds from exercised stock options and employee tax withholding. During the first three months of 2022, we received$16.7 million from employee exercises of stock options and paid$29.0 million of employee taxes withheld from share-based awards. During the first three months of 2021, we received$15.1 million from employee exercises of stock options and paid$11.9 million of employee taxes withheld from share-based awards. Variances are driven primarily by the number of shares exercised and the share price at the date of grant.
Recent Accounting Pronouncements
Information on recently adopted and issued accounting standards is included in
Note 1 to the Unaudited Consolidated Financial Statements. Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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Safe Harbor Statement
We are subject to changing economic, competitive, regulatory and technological risks and uncertainties that could have a material impact on our business, financial condition or results of operations. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we note the following factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions that we have discussed directly or implied in this Quarterly Report on Form 10-Q. 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. The factors that could cause our actual results to differ materially from the results projected in our forward-looking statements include, but are not limited to the following: •Our business and financial results may be negatively impacted by the failure to successfully manage a disruption in consumer and trade patterns, as well as operational challenges associated with the actual or perceived effects of a disease outbreak, including epidemics, pandemics or similar widespread public health concerns, such as the COVID-19 pandemic; •Our Company's reputation or brand image might be impacted as a result of issues or concerns relating to the quality and safety of our products, ingredients or packaging, human and workplace rights, and other environmental, social or governance matters, which in turn could result in litigation or otherwise negatively impact our operating results; •Disruption to our manufacturing operations or supply chain could impair our ability to produce or deliver finished products, resulting in a negative impact on our operating results;
•We might not be able to hire, engage and retain the talented global workforce we need to drive our growth strategies;
•Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, stockholders and other stakeholders on climate change issues, could negatively affect our business and operations;
•Increases in raw material and energy costs along with the availability of adequate supplies of raw materials could affect future financial results;
•Price increases may not be sufficient to offset cost increases and maintain profitability or may result in sales volume declines associated with pricing elasticity;
•Market demand for new and existing products could decline;
•Increased marketplace competition could hurt our business;
•Our financial results may be adversely impacted by the failure to successfully execute or integrate acquisitions, divestitures and joint ventures;
•Our international operations may not achieve projected growth objectives, which could adversely impact our overall business and results of operations;
•We may not fully realize the expected cost savings and/or operating efficiencies associated with our strategic initiatives or restructuring programs, which may have an adverse impact on our business;
•Changes in governmental laws and regulations could increase our costs and liabilities or impact demand for our products;
Table of ContentsThe Hershey Company | Q1 2022 Form 10-Q |
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•Political, economic and/or financial market conditions, including impacts on
our business arising from the conflict between
•Disruptions, failures or security breaches of our information technology infrastructure could have a negative impact on our operations;
•Complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations; and
•Such other matters as discussed in our 2021 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, including Part II, Item 1A, "Risk Factors."
We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date this Quarterly Report on Form 10-Q is filed.
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