HERSHEY CO

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.

At September 29, 2024, our cash and cash equivalents totaled $615.0 million, an increase of $213.0 million compared to the 2023 year-end balance. Additional detail regarding the net uses of cash are outlined in the following discussion. Additionally, at September 29, 2024, we had outstanding short- and long-term debt totaling $5.3 billion, of which $904.8 million was classified as the current portion of long-term debt. Of the $904.8 million, $300 million of 2.050% Notes are due upon maturity on November 15, 2024, $300 million of 0.900% Notes are due upon maturity on June 1, 2025, and $300 million of 3.200% Notes are due upon maturity on August 21, 2025. We believe we can satisfy these debt obligations with cash generated from our operations, issuing new debt, and/or by borrowing on our unsecured credit facility.

Approximately 85% of the balance of our cash and cash equivalents at September 29, 2024 was held by subsidiaries domiciled outside of the United States. A majority of our cash and cash equivalents balance is distributable to the United States without material tax implications, such as withholding tax. We intend to continue to reinvest the remainder of this balance outside of the United States for which there would be a material tax implication to distributing for the foreseeable future and, therefore, have not recognized additional tax expense on these earnings. We believe that our existing sources of liquidity are adequate to meet anticipated funding needs at comparable risk-based interest rates for the foreseeable future. Acquisition spending and/or share repurchases could potentially increase our debt. Operating cash flow and access to capital markets are expected to satisfy our various short- and long-term cash flow requirements, including acquisitions and capital expenditures.

Cash Flow Summary

The following table is derived from our Consolidated Statements of Cash Flows:

Operating activities

We generated cash of $1,590.0 million from operating activities in the first nine months of 2024, an increase of $24.4 million compared to $1,565.6 million in the same period of 2023. This increase in net cash provided by operating activities was mainly driven by the following factors:

•In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, consumed cash of $183.9 million in 2024, compared to $449.6 million in 2023. This $265.7 million fluctuation was mainly driven by a decrease in cash used by accounts receivable due to a decrease in sales of everyday core U.S. confection brands, a decrease in accounts payable and accrued liabilities due to the timing of vendor and supplier payments, and lower inventory levels.

•Timing of income tax payments contributed to an increase in operating cash of $138.5 million in 2024, compared to an increase of $83.2 million in 2023. This $55.3 million fluctuation was primarily due to the variance in actual tax expense for 2024 relative to the timing of quarterly estimated tax payments. We paid cash of $180.3 million for income taxes during 2024 compared to $264.5 million in the same period of 2023.

•Other assets and liabilities consumed cash of $51.8 million in 2024, compared to $93.7 million in 2023. This $42.0 million fluctuation was primarily due to our 2023 purchase of an irrevocable group annuity contract to settle a portion of our post retirement benefit obligation, partially offset by the timing of certain prepaid expenses and other current assets.

•The increase in cash provided by operating activities was partially offset by the following net cash outflows:

◦Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, a write-down of equity investments, unrealized gains and losses on derivative contracts and other charges) resulted in $349.5 million of lower cash flow in 2024 relative to 2023.

Investing activities

We used cash of $549.3 million for investing activities in the first nine months of 2024, a decrease of $186.2 million compared to $735.5 million in the same period of 2023. This decrease 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, innovation and cost savings, were $471.4 million in the first nine months of 2024 compared to $548.6 million in the same period of 2023. The decrease in our 2024 capital expenditures is largely driven by the wind down of our key strategic initiatives, including completion of the upgrade of a new ERP system across the enterprise in 2024. We expect 2024 capital expenditures, including capitalized software, to approximate $575 million to $600 million, a slight decrease from our previously estimated range of $600 million to $625 million. We intend to use our existing cash and internally generated funds to meet our 2024 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 $78.2 million in the first nine months of 2024, compared to $18.1 million in the same period of 2023.

•Business Acquisition. In 2024, we had no acquisition activity. In May 2023, we acquired Weaver for a cash purchase price of $165.8 million. Further details regarding our business acquisition activity is provided in Note 2 to the Unaudited Consolidated Financial Statements.

•Other investing activities. In the first nine months of 2024 and 2023, our other investing activities were minimal.

Financing activities

We used cash of $847.0 million for financing activities in the first nine months of 2024, an increase of $62.6 million compared to $784.4 million in the same period of 2023. This increase 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 nine months of 2024, we generated cash of $482.3 million predominately through the issuance of short-term commercial paper and an increase in short-term foreign bank borrowings. During the first nine months of 2023, we generated cash of $126.1 million predominately through the issuance of short-term commercial paper, as well as an increase in short-term foreign bank borrowings.

•Long-term debt borrowings and repayments. During the first nine months of 2024, we had no long-term debt borrowings or repayments activity. During the first nine months of 2023, we issued $350 million of 4.250% Notes due in May 2028 and $400 million of 4.500% Notes due in May 2033 (the “2023 Notes”). Proceeds from the issuance of the 2023 Notes, net of discounts and issuance costs, totaled $744,092. Additionally, in May 2023 we repaid $250 million of 2.625% Notes and $500 million of 3.375% Notes due upon their maturity.

•Dividend payments. Total dividend payments to holders of our Common Stock and Class B Common Stock were $814.3 million during the first nine months of 2024, an increase of $163.0 million compared to $651.3 million in the same period of 2023. Details regarding our 2024 cash dividends paid to stockholders are as follows:

•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:

(1) In February 2023, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the Milton Hershey School Trust (the “School Trust”), pursuant to which the Company purchased 1,000,000 shares of the Company’s Common Stock from the Milton Hershey School Trust at a price equal to $239.91 per share, for a total purchase price of $239.9 million.

(2) In July 2018, our Board of Directors approved a $500 million share repurchase authorization to repurchase shares of our Common Stock. As a result of the February 2023 Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, the July 2018 share repurchase authorization was completed. In May 2021, our Board of Directors approved an additional $500 million share repurchase authorization, which was completed as of March 31, 2024. In December 2023, our Board of Directors approved an additional $500 million share repurchase authorization. This program commenced after the existing May 2021 authorization was completed and is to be utilized at management’s discretion. As a result of the share repurchase authorization, approximately $470 million remains available for repurchases under our December 2023 share repurchase authorization. We are authorized to purchase our outstanding shares in open market and privately negotiated transactions. The program has no expiration date and acquired shares of Common Stock will be held as treasury shares. Purchases under approved share repurchase authorizations are in addition to our practice of buying back shares sufficient to offset those issued under incentive compensation plans.

•Proceeds from exercised stock options and employee tax withholding. During the first nine months of 2024, we received $13.8 million from employee exercises of stock options and paid $30.5 million of employee taxes withheld from share-based awards. During the first nine months of 2023, we received $24.3 million from employee exercises of stock options and paid $34.1 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.

Critical Accounting Estimates

For information regarding the Company’s critical accounting estimates, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Annual Report on Form 10-K. There have been no material changes to the Company’s critical accounting estimates since December 31, 2023.