HERSHEY CO

Previous wording

On March 31, 2025, we entered into a Merger Agreement to acquire LesserEvil, LLC, a privately held company that produces and sells organic popcorn and puffed snack products to retailers and distributors in the United States and Canada, which complements Hershey’s existing product portfolio. The Company expects the acquisition to close by mid-2025 pending the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Current wording

On March 31, 2025, we entered into a Merger Agreement to acquire LesserEvil, LLC, a privately held company that produces and sells organic popcorn and puffed snack products to retailers and distributors in the United States and Canada, which complements Hershey’s existing product portfolio. The Company expects the acquisition to close by the end of 2025, pending the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and satisfaction of other customary closing conditions.

Previous wording

Throughout the first three months of 2025, we experienced a dynamic macroeconomic environment, including shifts in consumer behavior and continued price volatility related to select commodities, resulting in corresponding incremental costs and gross margin pressures, and net sales and net income declines. Despite specific actions taken to mitigate these gross margin pressures, higher prices for direct materials used to manufacture our products were, and continue to be, the primary incremental cost to our business (see Consolidated Results of Operations included in this MD&A). We utilize many exchange traded commodities for our business that are subject to price volatility, specifically cocoa products, which continued to experience elevated market prices compared to historical levels (see Part I, Item 3 - Quantitative and Qualitative Disclosures about Market Risk included in this Quarterly Report on Form 10-Q).

Current wording

Throughout the first six months of 2025, we saw positive consumer behavior shifts towards our products, as well as increased net sales; however, we continued to experience a dynamic macroeconomic environment, including continued price volatility related to select commodities, resulting in corresponding incremental costs and gross margin pressures, and net income declines. Despite specific actions taken to mitigate these gross margin pressures, higher prices for direct materials used to manufacture our products were, and continue to be, the primary incremental cost to our business (see Consolidated Results of Operations included in this MD&A). We utilize many exchange traded commodities for our business that are subject to price volatility, specifically cocoa products, which continued to experience elevated market prices compared to historical levels (see Part I, Item 3 - Quantitative and Qualitative Disclosures about Market Risk included in this Quarterly Report on Form 10-Q).

Previous wording

Furthermore, certain geopolitical events, specifically changes in global trade policies including recently announced tariffs on U.S. imports and the potential for additional tariffs, have increased global economic and political uncertainty. For the three months ended March 30, 2025, the imposition of tariffs on U.S. imports and retaliatory tariffs, did not have a material impact on our results of operations, commodity prices or supply availability. However, we are 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 we have significant business operations, all of which may result in material adverse effects on our results of operations. The scope and length of tariffs, including their effects on the broader economy and our business, remain uncertain. These outcomes may be influenced by factors such as continued U.S. negotiations with impacted countries, retaliatory measures from other nations, possible tariff exemptions, public sentiment toward U.S. products and companies, and the domestic availability of lower-cost alternatives.

Current wording

Furthermore, certain geopolitical events, specifically changes in global trade policies including recently announced tariffs on U.S. imports and the potential for additional tariffs, have increased global economic and political uncertainty. For the six months ended June 29, 2025, the imposition of tariffs on U.S. imports and retaliatory tariffs, did not have a material impact on our results of operations, commodity prices or supply availability. However, we are 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 we have significant business operations, all of which may result in material adverse effects on our results of operations. The scope and length of tariffs, including their effects on the broader economy and our business, remain uncertain. These outcomes may be influenced by factors such as continued U.S. negotiations with impacted countries, retaliatory measures from other nations, possible tariff exemptions, public sentiment toward U.S. products and companies, and the domestic availability of lower-cost alternatives.

Previous wording

Additionally, with recent leadership changes at the U.S. Department of Health and Human Services and the U.S. Food and Drug Administration (“FDA”), as well as the Make America Healthy Again movement, the food industry is subject to increasing laws and regulations, including nutrition, food date labeling and traceability recordkeeping requirements, as well as changes in consumer expectations and behavior. For example, in April 2025, it was announced that the FDA intends to phase out the approved use of petroleum-based synthetic dyes in food products. While the Company has historically taken measures to remove certain food dyes from our products, and this did not have a material impact on our consolidated results for the three months ended March 30, 2025, the Company anticipates continued developments in food industry legislation and regulatory requirements, which may result in incremental costs to our business. The significance of the impact remains uncertain at this time, as the Company continues to monitor and evaluate the evolving legal and regulatory landscape.

Current wording

Additionally, with recent leadership changes at the U.S. Department of Health and Human Services and the U.S. Food and Drug Administration (“FDA”), as well as the Make America Healthy Again movement, the food industry is subject to increasing laws and regulations, including nutrition, food date labeling and traceability recordkeeping requirements, as well as changes in consumer expectations and behavior. For example, in April 2025, it was announced that the FDA intends to phase out the approved use of petroleum-based synthetic dyes in food products. As a result, the Company has announced the decision to remove all certified Food, Drug & Cosmetic colors from our great tasting snacks by the end of 2027, as a continued effort to ensure consumers have options to fit their lifestyle while maintaining trust and confidence in our products. This did not have a material impact on our consolidated results for the six months ended June 29, 2025, and based on the Company’s initial assessment, the estimated costs associated with this removal are not expected to have a material impact on our financial position, results of operations or liquidity.

Previous wording

Net sales were $2,805.4 million in the first quarter of 2025 compared to $3,252.7 million in the same period of 2024, a decrease of $447.3 million, or 13.8%. The net sales decrease was driven by a volume decline of approximately 15%, primarily related to everyday core U.S. confection, as a result of accelerated shipments in the first quarter of 2024 in anticipation of our enterprise resource planning (“ERP”) system implementation, which was completed in the beginning of the second quarter of 2024, and declines in our International reportable segment. Foreign currency exchange rates resulted in an unfavorable impact of less than 1%. The net sales decrease was partially offset by a favorable price realization of approximately 2%, driven by higher list prices across our North America Confectionery segment.

Current wording

Net sales were $2,614.7 million in the second quarter of 2025 compared to $2,074.5 million in the same period of 2024, an increase of $540.2 million, or 26.0%. The net sales increase reflects a volume increase of approximately 21%, related to everyday core U.S. confection, as a result of planned inventory decreases in 2024 within the North America Confectionery and International segments after our ERP system implementation, which was completed in the beginning of the second quarter of 2024. Additionally, the timing of the Easter season in 2025 versus 2024, and higher Halloween seasonal orders in the second quarter of 2025, were favorable volume drivers. The net sales increase was further driven by favorable price realization of approximately 5% primarily related to higher list prices across the North America Confectionery and International segments. The net sales increase was partially offset by foreign currency exchange rates, which resulted in an unfavorable impact of less than 1%.

Previous wording

For the first quarter of 2025, our total U.S. retail takeaway declined 6.7% in the expanded multi-outlet combined plus convenience store channels (Circana MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway declined 9.0% and experienced a CMG market share decline of 46 basis points. Declines were primarily driven by the timing of Easter, which shifted into mid-April in 2025, compared to March in 2024. Our Salty consumer takeaway increased 9.6% in the first quarter of 2025 and experienced a Salty market share increase of 37 basis points.

Current wording

For the second quarter of 2025, our total U.S. retail takeaway increased 18.5% in the expanded multi-outlet combined plus convenience store channels (Circana MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway increased 21.8% and experienced a CMG market share increase of 90 basis points. Our Salty consumer takeaway increased 6.1% in the second quarter of 2025 and experienced a Salty market share increase of 26 basis points.

Previous wording

Gross margin was 33.7% in the first quarter of 2025 compared to 51.5% in the same period of 2024, a decrease of 1,790 basis points. The decrease was driven by unfavorable activity on our mark-to-market impact from commodity derivative instruments, lower sales volume, unfavorable commodity costs, and unfavorable mix. The decrease was partially offset by lower supply chain costs and favorable price realization.

Current wording

Gross margin was 30.5% in the second quarter of 2025 compared to 40.2% in the same period of 2024, a decrease of 970 basis points. The decrease was driven by unfavorable commodity costs and higher supply chain costs, partially offset by higher sales volume, favorable price realization, and favorable activity on our mark-to-market impact from commodity derivative instruments.

Previous wording

We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies. Excluding the portion recorded within Cost of Sales and SM&A expenses (as noted above), we recorded $16.4 million business realignment costs during the first quarter of 2025. The costs in the first quarter of 2025 related to the Advancing Agility & Automation (“AAA”) Initiative, which commenced in 2024, focused on leveraging new technology to improve supply chain and manufacturing-related spend, and optimize selling, general and administrative expenses. There were no business realignments costs in the first quarter of 2024. 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.

Current wording

We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies. Excluding the portion recorded within Cost of Sales and SM&A expenses (as noted above), we recorded business realignment costs of $0.3 million during the second quarter of 2025 versus $4.9 million in the second quarter of 2024. The costs related to the AAA Initiative, which commenced in 2024, focused on leveraging new technology to improve supply chain and manufacturing-related spend, and optimize selling, general and administrative expenses. 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.

Previous wording

Operating profit was $369.2 million in the first quarter of 2025 compared to $1,058.1 million in the same period of 2024, a decrease of $688.9 million, or 65.1%. The decrease was primarily due to lower gross profit and higher business realignment costs, partially offset by lower SM&A expenses, as noted above. Operating profit margin decreased to 13.2% in 2025 from 32.5% in 2024 driven by the same factors noted above that resulted in lower gross margin for the period.

Current wording

Operating profit was $192.8 million in the second quarter of 2025 compared to $287.9 million in the same period of 2024, a decrease of $95.1 million, or 33.0%. The decrease was primarily due to lower gross profit and higher SM&A expenses, partially offset by lower business realignment expenses, as noted above. Operating profit margin decreased to 7.4% in 2025 from 13.9% in 2024 driven by the same factors noted above that resulted in lower gross margin for the period.

Previous wording

Net interest expense was $44.6 million in the first quarter of 2025 compared to $39.8 million in the same period of 2024, an increase of $4.8 million, or 12.1%. The increase was primarily due to higher long-term debt balances in 2025 versus 2024, driven by the February 2025 debt issuance.

Current wording

Net interest expense was $46.0 million in the second quarter of 2025 compared to $41.4 million in the same period of 2024, an increase of $4.6 million, or 11.3%. The increase was primarily due to higher long-term debt balances in 2025, driven by the February 2025 debt issuance, versus 2024.

Previous wording

Other (income) expense, net was $0.9 million in the first quarter of 2025 versus net expense of $32.0 million in the first quarter of 2024, a decrease of $31.1 million, or 97.0%. The decrease in net expense was primarily driven by $31.4 million of lower write-downs on equity investments qualifying for tax credits in 2025 versus the first quarter of 2024, partially offset by an increase of $0.7 million of non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

Current wording

Other (income) expense, net was net income of $2.3 million in the second quarter of 2025 versus net expense of $0.6 million in the second quarter of 2024, a net income increase of $2.9 million, or 507.0%. The increase in net income was driven by a gain of $3.6 million on a previously held investment in 2025 versus the second quarter of 2024, partially offset by an increase of $0.7 million of non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

Previous wording

Net income was $224.2 million in the first quarter of 2025 compared to $797.5 million in the same period of 2024, a decrease of $573.3 million, or 71.9%. EPS-diluted was $1.10 in the first quarter of 2025 compared to $3.89 in the first quarter of 2024, a decrease of $2.79, or 71.7%. The decrease in both net income and EPS-diluted was driven by lower gross profit, higher business realignment costs and higher interest expense, partially offset by lower other income and expenses, lower income taxes and lower SM&A expenses. Our 2025 EPS-diluted benefited from lower weighted-average shares outstanding.

Current wording

Net income was $62.7 million in the second quarter of 2025 compared to $180.9 million in the same period of 2024, a decrease of $118.2 million, or 65.3%. EPS-diluted was $0.31 in the second quarter of 2025 compared to $0.89 in the second quarter of 2024, a decrease of $0.58, or 65.2%. The decrease in both net income and EPS-diluted was driven by lower gross profit, higher SM&A expenses, higher interest expense, and higher income taxes, partially offset by lower business realignment costs and lower other income and expenses.

Previous wording

Cost of sales were $1,861.2 million in the first quarter 2025 compared to $1,576.6 million in the same period 2024, an increase of $284.6 million, or 18.0%. The increase was driven by $618.9 million of higher costs, primarily due to unfavorable commodity costs from cocoa and $251.6 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases (See Part I, Item 3 - Quantitative and Qualitative Disclosures About Market Risk included in this Quarterly Report on Form 10-Q for more information). The increase was partially offset by $334.3 million, primarily related to lower sales volume and lower supply chain costs, in line with the declines in net sales noted above.

Current wording

Cost of sales were $3,679.6 million in the first six months of 2025 compared to $2,817.4 million in the same period of 2024, an increase of $862.2 million, or 30.6%. The increase was driven by $980.1 million of higher costs, primarily related to $244.9 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases (See Part I, Item 3 - Quantitative and Qualitative Disclosures About Market Risk included in this Quarterly Report on Form 10-Q for more information) and unfavorable commodity costs from cocoa. The increase was partially offset by $118.6 million of lower costs, primarily driven by lower supply chain costs and lower business realignment costs.

Previous wording

SM&A expenses were $558.7 million in the first quarter of 2025 compared to $618.0 million in the same period of 2024, a decrease of $59.3 million, or 9.6%. Total advertising and related consumer marketing expenses decreased 14.2% driven primarily by a decrease in the North America Confectionery segment, partially offset by an increase in North America Salty Snacks. SM&A expenses, excluding advertising and related consumer marketing, decreased 7.0% in the first quarter of 2025 driven by lower compensation costs across our reportable segments, as well as $4.6 million of incremental business realignment costs.

Current wording

SM&A expenses were $1,161.9 million in the first six months of 2025 compared to $1,159.0 million in the same period of 2024, an increase of $2.9 million, or 0.3%. Total advertising and related consumer marketing expenses increased 6.0%, driven by increases in the North America Confectionery and North America Salty Snacks segments. SM&A expenses, excluding advertising and related consumer marketing, decreased approximately 2.5% in the first six months of 2025 driven primarily by a decrease of $15.7 million of incremental business realignment costs, partially offset by higher compensation costs.

Previous wording

The effective income tax rate was 30.7% for the first quarter of 2025 compared with 19.1% for the first quarter of 2024. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by foreign tax differential and state taxes. Relative to the 21% statutory rate, the 2024 effective tax rate was impacted by investment tax credits partially offset by state taxes.

Current wording

Our effective income tax rate was 39.3% for the first six months of 2025 compared with 20.6% for the first six months of 2024. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by tax reserves, foreign rate differential and state taxes. Relative to the 21% statutory rate, the 2024 effective tax rate was impacted by investment tax credits partially offset by state taxes.

Previous wording

The North America Confectionery segment is responsible for our chocolate and non-chocolate confectionery market position in the United States and Canada. 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, 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 trademarks and products to third parties around the world. North America Confectionery results, which accounted for 82.0% and 83.2% of our net sales for the three months ended March 30, 2025 and March 31, 2024, respectively, were as follows:

Current wording

The North America Confectionery segment is responsible for our chocolate and non-chocolate confectionery market position in the United States and Canada. 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, 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 trademarks and products to third parties around the world. North America Confectionery results, which accounted for 24.2% and 29.4% of our net sales for the three months ended June 29, 2025 and June 30, 2024, respectively, were as follows:

Previous wording

Net sales of our North America Confectionery segment were $2,300.1 million in the first quarter of 2025 compared to $2,707.3 million in the same period of 2024, a decrease of $407.16 million, or 15.0%. The decrease was driven by volume declines of approximately 18%, primarily due to a decrease in everyday core U.S. confection as a result of accelerated shipments in the first quarter of 2024 in anticipation of our ERP system implementation, which was completed in the beginning of the second quarter of 2024. The decrease was partially offset by favorable price realization of approximately 3%, primarily due to list price increases on certain products across our portfolio.

Current wording

Net sales of our North America Confectionery segment were $2,085.5 million in the second quarter of 2025 compared to $1,579.8 million in the same period of 2024, an increase of $505.7 million, or 32.0%. The increase was driven by volume increases of approximately 25%, primarily due to the planned inventory decreases in 2024 after our ERP system implementation, which was completed in the second quarter of 2024. Additionally, the timing of the Easter season in 2025 versus 2024, and higher Halloween seasonal orders in the second quarter of 2025, were favorable volume drivers. The increase was further driven by a favorable price realization of approximately 6%, primarily due to list price increases on certain products across our portfolio.

Previous wording

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 9.9% and 8.5% of our net sales for the three months ended March 30, 2025 and March 31, 2024, respectively, were as follows:

Current wording

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 21.1% and 18.0% of our net sales for the three months ended June 29, 2025 and June 30, 2024, respectively, were as follows:

Previous wording

Net sales of our North America Salty Snacks segment were $277.8 million in the first quarter of 2025 compared to $275.1 million in the same period of 2024, an increase of $2.7 million, or 1.0%. The increase was due to volume increases of approximately 4%, primarily driven by Dot’s Homestyle Pretzels. The increase was partially offset by unfavorable price realization of approximately 3% across our portfolio.

Current wording

Net sales of our North America Salty Snacks segment were $315.5 million in the second quarter of 2025 compared to $289.9 million in the same period of 2024, an increase of $25.6 million, or 8.8%. The increase was predominantly due to favorable price realization of approximately 5%, primarily driven by promotion rates, as well as volume increases of approximately 4%, primarily driven by Dot’s Homestyle Pretzels.

Previous wording

The International segment includes all other countries where we currently manufacture, import, market, sell or distribute chocolate and non-chocolate confectionery and other products. We currently have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Latin America, as well as Europe, Asia, the Middle East and Africa (“MEA”) and other regions. International results, which accounted for 8.1% and 8.3% of our net sales for the three months ended March 30, 2025 and March 31, 2024, respectively, were as follows:

Current wording

The International segment includes all other countries where we currently manufacture, import, market, sell or distribute chocolate and non-chocolate confectionery and other products. We currently have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Latin America, as well as Europe, Asia-Pacific (“APAC”), the Middle East and Africa (“MEA”) and other regions. International results, which accounted for 9.3% and 12.2% of our net sales for the three months ended June 29, 2025 and June 30, 2024, respectively, were as follows:

Previous wording

Net sales of our International segment were $227.5 million in the first quarter of 2025 compared to $270.3 million in the same period of 2024, a decrease $42.9 million, or 15.9%. The decrease was due to volume declines of approximately 8% across the segment, as well as an unfavorable impact from foreign currency exchange rates of approximately 8%, primarily driven by Mexico, Brazil and Latin America. The decrease was partially offset by favorable price realization of approximately 1%, primarily driven by Mexico, Brazil and Latin America.

Current wording

Net sales of our International segment were $213.7 million in the second quarter of 2025 compared to $204.8 million in the same period of 2024, an increase of $8.9 million, or 4.4%. The increase was due to volume increases of approximately 9%, primarily attributable to MEA, and World Travel Retail, as well as favorable price realization of approximately 1%, driven by Mexico, Brazil and Latin America. The increase was partially offset by unfavorable impact from foreign currency exchange rates of approximately 6%, driven by Mexico, Brazil and Latin America.

Previous wording

In the first quarter of 2025, unallocated corporate expense totaled $160.4 million, as compared to $172.9 million in the first quarter of 2024, a decrease of $12.5 million, or 7.2%. The decrease was primarily driven by lower compensation and benefits costs, decreased investments in capabilities and technology, as a result of the completion of the upgrade of our new ERP system across the enterprise in 2024 and lower acquisition and integration related costs.

Current wording

In the second quarter of 2025, unallocated corporate expense totaled $181.5 million, as compared to $161.5 million in the second quarter of 2024, an increase of $20.0 million, or 12.4%. The increase was primarily driven by higher compensation and benefits costs, partially offset by decreased investments in capabilities and technology, as a result of the completion of the upgrade of the Company’s ERP system across the enterprise in 2024, and lower acquisition and integration costs.

Previous wording

At March 30, 2025, our cash and cash equivalents totaled $1.5 billion, an increase of $784.5 million compared to the 2024 year-end balance. Additional detail regarding the net uses of cash are outlined in the following discussion. Additionally, at March 30, 2025, we had outstanding short- and long-term debt totaling $5.9 billion, of which $603.6 million was classified as the current portion of long-term debt. Of the $603.6 million, $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.

Current wording

At June 29, 2025, our cash and cash equivalents totaled $0.9 billion, an increase of $181.6 million compared to the 2024 year-end balance. Additional detail regarding the net uses of cash are outlined in the following discussion. Additionally, at June 29, 2025, we had outstanding short- and long-term debt totaling $5.6 billion, of which $303.0 million was classified as the current portion of long-term debt. Of the $303.0 million, $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.

Previous wording

Approximately 55% of the balance of our cash and cash equivalents at March 30, 2025 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.

Current wording

Approximately 70% of the balance of our cash and cash equivalents at June 29, 2025 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.

Previous wording

We generated cash of $396.7 million from operating activities in the first three months of 2025, a decrease of $172.5 million compared to $569.2 million in the same period of 2024. This decrease in net cash provided by operating activities was mainly driven by the following factors:

Current wording

We generated cash of $508.9 million from operating activities in the first six months of 2025, a decrease of $385.8 million compared to $894.7 million in the same period of 2024. This decrease in net cash provided by operating activities was mainly driven by the following factors:

Previous wording

•Other assets and liabilities consumed cash of $369.9 million in 2025, compared to $22.3 million in 2024. This $347.6 million fluctuation was primarily driven by the timing of certain prepaid expenses and other current assets.

Current wording

•Other assets and liabilities consumed cash of $495.8 million in 2025, compared to $94.9 million in 2024. This $400.9 million fluctuation was primarily driven by the timing of certain prepaid expenses and other current assets.

Previous wording

◦In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, generated cash of $55.4 million in 2025, compared to consumed cash of $237.7 million in 2024. This $293.0 million fluctuation was mainly driven by accounts receivable due to a decrease in sales, a decrease in accounts payable and accrued liabilities due to the timing of vendor and supplier payments, partially offset by higher inventory levels.

Current wording

•In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, generated cash of $204.3 million in 2025, compared to consumed cash of $141.2 million in 2024. This $63.1 million fluctuation was mainly driven by a decrease in accounts payable and accrued liabilities due to the timing of vendor and supplier payments and a decrease in accounts receivable, partially offset by higher inventory levels.

Previous wording

•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 $49.8 million of lower cash flow in 2025 relative to 2024.

Current wording

•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 $20.0 million of lower cash flow in 2025 relative to 2024.

Previous wording

•Timing of income tax payments generated cash of $80.2 million in 2025, compared to $147.5 million in 2024. This $67.4 million fluctuation was primarily due to the variance in actual tax expense for 2025 relative to the timing of quarterly estimated tax payments. We paid cash of $38.9 million for income taxes during 2025 compared to $31.3 million in the same period of 2024.

Current wording

◦Timing of income tax payments generated cash of $162.8 million in 2025, compared to $63.6 million in 2024. This $99.2 million fluctuation was primarily due to the variance in actual tax expense for 2025 relative to the timing of quarterly estimated tax payments. We paid cash of $65.5 million for income taxes during 2025 compared to $165.5 million in the same period of 2024.

Previous wording

We used cash of $147.0 million for investing activities in the first three months of 2025, a decrease of $80.6 million compared to $227.6 million in the same period of 2024. This decrease in net cash used in investing activities was mainly driven by the following factors:

Current wording

We used cash of $301.8 million for investing activities in the first six months of 2025, a decrease of $87.9 million compared to $389.7 million in the same period of 2024. This decrease in net cash used in investing activities was mainly driven by the following factors:

Previous wording

•Capital spending. Capital expenditures, including capitalized software, capacity expansion, innovation and cost savings, were $145.5 million in the first three months of 2025 compared to $213.3 million in the same period of 2024. The decrease in our 2025 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 2025 capital expenditures, including capitalized software, to approximate $425 million to $450 million, as capital spending as a percentage of sales is expected to return to historical levels. We intend to use our existing cash and internally generated funds to meet our 2025 capital requirements.

Current wording

•Capital spending. Capital expenditures, including capitalized software, primarily to support our ERP system implementation, capacity expansion, innovation and cost savings, were $230.6 million in the first six months of 2025 compared to $343.5 million in the same period of 2024. The decrease in our 2025 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 2025 capital expenditures, including capitalized software, to approximate $425 million to $450 million, as capital spending as a percentage of sales is expected to return to historical levels. We intend to use our existing cash and internally generated funds to meet our 2025 capital requirements.

Previous wording

•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 received payments of approximately $3.6 million in the first three months of 2025, compared to investing $13.9 million in the same period of 2024.

Current wording

•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 received payments of approximately $9.0 million in the first six months of 2025, compared to investing $46.1 million in the same period of 2024.

Previous wording

•Other investing activities. In the first three months of 2025 and 2024, our other investing activities were minimal.

Current wording

•Other investing activities. In the first six months of 2025 and 2024, our other investing activities were minimal.

Previous wording

We generated cash of $537.1 million for financing activities in the first three months of 2025, a increase of $758.8 million compared to cash used of $221.7 million in the same period of 2024. This increase in net cash generated in financing activities was mainly driven by the following factors:

Current wording

We used cash of $22.5 million for financing activities in the first six months of 2025, a decrease of $430.4 million compared to cash used of $452.9 million in the same period of 2024. This decrease in net cash used in financing activities was mainly driven by the following factors:

Previous wording

•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 2025, we used cash of $1.2 billion to reduce short-term commercial paper borrowings and short-term foreign bank borrowings. During the first three months of 2024, we generated cash of $569.9 million predominately through the issuance of short-term commercial paper, as well as an increase in short-term foreign bank borrowings.

Current wording

•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 six months of 2025, we used cash of $1.2 billion to reduce short-term commercial paper borrowings and short-term foreign bank borrowings. During the first six months of 2024, we generated cash of $610.0 million predominately through the issuance of short-term commercial paper, partially offset by a decrease in short-term foreign bank borrowings.

Previous wording

•Long-term debt borrowings and repayments. During the first three months of 2025, we issued $500 million of 4.550% Notes due in February 2028, $500 million of 4.750% Notes due in February 2030, $500 million of 4.950% Notes due in February 2032 and $500 million of 5.100% Notes due in February 2035 (together, the “2025 Notes”). Proceeds from the issuance of the 2025 Notes, net of discounts and issuance costs, totaled $2.0 billion. We had minimal repayment activity. During the first three months of 2024, long-term debt borrowings and repayments were minimal.

Current wording

•Long-term debt borrowings and repayments. During the first six months of 2025, we issued $500 million of 4.550% Notes due in February 2028, $500 million of 4.750% Notes due in February 2030, $500 million of 4.950% Notes due in February 2032 and $500 million of 5.100% Notes due in February 2035 (together, the “2025 Notes”). Proceeds from the issuance of the 2025 Notes, net of discounts and issuance costs, totaled $2.0 billion. Additionally, in June 2025, we repaid $300 million of 0.900% Notes due upon maturity. During the first six months of 2024, we had no long-term debt borrowings or repayments activity.

Previous wording

•Dividend payments. Total dividend payments to holders of our Common Stock and Class B Common Stock were $271.6 million during the first three months of 2025, a decrease of $1.8 million compared to $273.4 million in the same period of 2024. Details regarding our 2025 cash dividends paid to stockholders are as follows:

Current wording

•Dividend payments. Total dividend payments to holders of our Common Stock and Class B Common Stock were $542.8 million during the first six months of 2025, a decrease of $1.1 million compared to $543.9 million in the same period of 2024. Details regarding our 2025 cash dividends paid to stockholders are as follows:

Previous wording

•Proceeds from exercised stock options and employee tax withholding. During the first three months of 2025, we received $2.7 million from employee exercises of stock options and paid $12.6 million of employee taxes withheld from share-based awards. During the first three months of 2024, we received $4.1 million from employee exercises of stock options and paid $26.4 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.

Current wording

•Proceeds from exercised stock options and employee tax withholding. During the first six months of 2025, we received $6.9 million from employee exercises of stock options and paid $16.2 million of employee taxes withheld from share-based awards. During the first six months of 2024, we received $8.2 million from employee exercises of stock options and paid $30.0 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.

Previous wording

•Such other matters as discussed in our 2024 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, including Part II, Item 1A, ”Risk Factors.”

Current wording

•Such other matters as discussed in our 2024 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarter ending March 30, 2025, and this Quarterly Report on Form 10-Q, including Part II, Item 1A, ”Risk Factors.”