HERSHEY CO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

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 Consolidated Financial Statements and
accompanying Notes included in Item 8 of this Annual Report on Form 10-K. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those discussed elsewhere in this Annual Report on Form 10-K, particularly in
Item 1A. "Risk Factors."

The management report is organized according to the following sections:

• Business model and growth strategy

• Overview

• Trends affecting our business

• Consolidated operating results

• Sector results

• Cash and capital resources

• Critical accounting policies and estimates

BUSINESS MODEL AND GROWTH STRATEGY

We are the largest producer of quality chocolate in North America, a leading
snack maker in the United States and a global leader in chocolate and
non-chocolate confectionery. We report our operations through three segments:
(i) North America Confectionery, (ii) North America Salty Snacks and (iii)
International, as discussed in   Note 13   to the Consolidated Financial
Statements.

Our vision is to be a snacking powerhouse. We aspire to be a leader in meeting
consumers' evolving snacking needs while strengthening the capabilities that
drive our growth. We are focused on four strategic imperatives to ensure the
Company's success now and in the future:

•Drive Core Confection Business and Broaden Participation in Snacking. We
continue to be the undisputed leader in U.S. confection by taking actions to
deepen our consumer connections and utilize our beloved brands to deliver
meaningful innovation, while also diversifying our portfolio to capture
profitable and incremental growth across the broader snacking continuum.
•Our products frequently play an important role in special moments among family
and friends. Seasons are an important part of our business model and for
consumers, they are highly anticipated, cherished times, centered around
traditions. For us, it's an opportunity for our brands to be part of many
connections during the year when family and friends gather.
•Innovation is an important lever in this variety-seeking category and we are
leveraging work from our proprietary demand landscape analytical tool to shape
our future innovation and make it more impactful. We are becoming more
disciplined in our focus on platform innovation, which should enable sustainable
growth over time and significant extensions to our core.
•To expand our breadth in snacking, we are focused on expanding the boundaries
of our core confection brands to capture new snacking occasions and increasing
our exposure into new snack categories through acquisitions. Our expansion into
snacking is being fueled by the recent acquisitions of Dot's and Pretzels in
December 2021, which is included in our North America Salty Snacks segment.

•Deliver Profitable International Growth. We are focused on ensuring that we
efficiently allocate our resources to the areas with the highest potential for
profitable growth. We have reset our international investment strategy, while
holding fast to our belief that our targeted emerging market strategy will
deliver long-term, profitable growth. The uncertain macroeconomic environment in
many of these markets is expected to continue and we aim to ensure our
investments in these international markets are appropriate relative to the size
of the opportunity.

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•Expand Competitive Advantage through Differentiated Capabilities. In order to
generate actionable insights, we must acquire, integrate, access and utilize
vast sources of the right data in an effective manner. We are working to
leverage our advanced data and analytical techniques to gain a deep
understanding of our consumers, our customers, our shoppers, our end-to-end
supply chain, our retail environment and key economic drivers at both a macro
and precision level, including digital transformation and new media models. In
addition, we are in the process of transforming our supply chain capabilities
and enterprise resource planning system, which will enable employees to work
more efficiently and effectively.

•Responsibly Manage Our Operations to Ensure the Long-Term Sustainability of Our
Business, Our Planet and Our People. We are a purpose-driven company and for
more than a century, our iconic brands have been built on a foundation of
community investment and connections between people around the world. We could
not have achieved this without our remarkable employees who make our purpose a
reality. We believe our long-standing values make our Company a special place to
work.
•We believe our employees are among our most important resources and are
critical to our continued success. In 2021, we changed our global employee
survey from an annual basis to continuous listening surveys throughout the year.
These shorter and faster surveys reach all of our employees around the world to
hear their thoughts on the Company's direction and their place in it. The change
from an annual survey to continuous touchpoints allows for real-time feedback
and action from the Company and creates stronger employee engagement with the
Company's strategy, initiatives and leadership.
•Our diverse and inclusive culture makes the difference across all areas of the
business. Our gender representation includes women occupying many of the top
positions in the Company, including Chief Executive Officer and Chairman of the
Board, Chief Accounting Officer and Chief Growth Officer, and approximately 50%
representation across the Company. In 2020, we achieved 1:1 aggregate gender pay
and in 2021, we achieved 1:1 aggregate people of color pay equity for salaried
employees in the United States.
•We have made strong progress on our ESG priorities and continue to elevate
these ESG initiatives for a greater global impact. While we focus on
sustainability and social impact across our value chain, we continue to improve
and focus on the lives of cocoa farmers and cocoa communities, the environmental
priorities of climate change and the role of packaging in our business,
responsibly and sustainably sourcing the inputs to our products and increasing
investments in human rights and diversity initiatives and growing diverse
representation across the organization.

PREVIEW

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 in North America, a leading snack
maker in the United States 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 main product offerings include chocolate and non-chocolate confectionery products; refreshing gum and mint products and protein bars; pantry items, such as baking ingredients, garnishes, and beverages; and snacks such as spreads, meat snacks, bars and snack bites and mixes, popcorn and protein bars.

Business acquisitions and divestitures

In December 2021, we completed the acquisition of Pretzels, previously a
privately held company that manufactures and sells pretzels and other salty
snacks for other branded products and private labels in the 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 complements Hershey's snacks portfolio. Based in Bluffton, Indiana,
Pretzels operates three manufacturing locations in Indiana and Kansas. Pretzels
provides Hershey deep pretzel category and product expertise and the
manufacturing capabilities to support brand growth and future pretzel
innovation. Additionally, we completed the acquisition of Dot's, previously a
privately held company that produces and sells pretzels and other snack food
products to retailers and distributors in the 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 complements Hershey's snacks portfolio.
Pretzels and Dot's are expected to generate aggregate annualized net sales over
$300 million.
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In June 2021, we completed the acquisition of Lily's Sweets, LLC ("Lily's"),
previously a privately held company that sells a line of sugar-free and
low-sugar confectionery foods to retailers and distributors in the United States
and Canada. Lily's products include dark and milk chocolate style bars, baking
chips, peanut butter cups and other confection products that complement
Hershey's confectionery and confectionery-based portfolio. Lily's is expected to
generate annualized net sales over $100 million.

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd.
("LSFC"), 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.

During the second quarter of 2020, we completed the divestitures of KRAVE Pure
Foods, Inc. ("Krave"), which was previously included within the North America
Salty Snacks segment, and the Scharffen Berger and Dagoba brands, both of which
were previously included within the North America Confectionery segment results
in our consolidated financial statements.

In September 2019, we completed the acquisition of ONE Brands, LLC ("ONE
Brands"), previously a privately held company that sells a line of low-sugar,
high-protein nutrition bars to retailers and distributors in the United States,
with the ONE bar as its primary product.

TRENDS AFFECTING OUR BUSINESS

On March 11, 2020, the World Health Organization designated COVID-19 as a global
pandemic, which has spread worldwide and impacted various markets around the
world, including the U.S. Various policies and initiatives have been implemented
to reduce the global transmission of COVID-19.

Since the onset of COVID-19, there has been minimal disruption to our supply
chain network. However, during 2021, continued strong demand for consumer goods
and the effects of COVID-19 mitigation strategies have led to broad-based supply
chain disruptions across the U.S. and globally, including inflation on many
consumer products, labor shortages and demand outpacing supply. As a result, we
experienced corresponding incremental costs and gross margin pressures during
the year ended December 31, 2021 (see   Results of Operations   included in this
MD&A). We are working closely with our business units, contract manufacturers,
distributors, contractors and other external business partners to minimize the
potential impact on our business.

During 2021, many state governments began easing COVID-19 restrictions,
resulting in increased travel during the summer and holiday seasons, full
capacity at major sporting and entertainment events, increased occupancy limits
for indoor gatherings and the removal of face covering requirements (subject to
certain exceptions). This contributed to a resurgence of COVID-19 cases and the
spread of COVID-19 variants, which experts believe has peaked in recent weeks in
many jurisdictions. The availability of vaccinations (including vaccine
boosters) continues to increase around the world, albeit with slower than
anticipated rollouts and challenges within certain countries.

We experienced an increase in our net sales and net income during the year ended
December 31, 2021, which was primarily driven by strong everyday performance on
our core U.S. confection brands and salty snack brands (see   Segment Results
included in this MD&A), partially offset by the aforementioned supply chain
disruptions and gross margin pressures. As of December 31, 2021, 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, 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 to our business, consolidated
results of operations, segment results, liquidity and capital resources.
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CONSOLIDATED OPERATING RESULTS

                                                                                                                  Percent Change
For the years ended December 31,              2021               2020               2019             2021 vs 2020             2020 vs 2019
In millions of dollars except per
share amounts
Net sales                                 $ 8,971.3          $ 8,149.7          $ 7,986.3                   10.1  %                      2.0  %
Cost of sales                               4,922.7            4,448.5            4,363.8                   10.7  %                      1.9  %
Gross profit                                4,048.6            3,701.2            3,622.5                    9.4  %                      2.2  %
Gross margin                                   45.1  %            45.4  %            45.4  %
SM&A expense                                2,001.4            1,890.9            1,905.9                    5.8  %                     (0.8) %
SM&A expense as a percent of net
sales                                          22.3  %              23.2%              23.9%
Long-lived and intangible asset
impairment charges                                -                9.1              112.5                        NM                    (91.9) %
Business realignment costs                      3.5               18.5                8.1                  (80.9) %                    128.1  %
Operating profit                            2,043.7            1,782.7            1,596.0                   14.6  %                     11.7  %
Operating profit margin                        22.8  %            21.9  %            20.0  %
Interest expense, net                         127.4              149.4              144.1                  (14.7) %                      3.6  %
Other (income) expense, net                   119.1              138.3               71.1                  (13.9) %                     94.7  %
Provision for income taxes                    314.4              219.6              234.0                   43.2  %                     (6.2) %
Effective income tax rate                      17.5  %            14.7  %            16.9  %
Net income including noncontrolling
interest                                    1,482.8            1,275.4            1,146.8                   16.3  %                     11.2  %
Less: Net gain (loss) attributable
to noncontrolling interest                      5.3               (3.3)              (2.9)                       NM                     12.1  %
Net income attributable to The
Hershey Company                           $    1,477.5       $    1,278.7       $    1,149.7                15.5  %                     11.2  %
Net income per share-diluted              $       7.11       $       6.11       $       5.46                16.4  %                     11.9  %

Note: Percentage changes may not be calculated directly as shown due to rounding of amounts shown above.

 NM = not meaningful


Net Sales

2021 compared with 2020

Net sales increased 10.1% in 2021 compared with 2020, reflecting a volume
increase of 5.6% due to an increase in everyday core U.S. confection brands and
salty snack brands, a favorable price realization of 3.1% due to higher prices
on certain products, a 1.0% benefit from net acquisitions and divestitures
driven by the 2021 acquisitions of Lily's, Dot's and Pretzels and a favorable
impact from foreign currency exchange rates of 0.4%.

2020 vs. 2019

Net sales increased 2.0% in 2020 compared with 2019, reflecting a favorable
price realization of 2.3% due to higher prices on certain products and a 0.5%
benefit from net acquisitions and divestitures (predominantly driven by the 2019
acquisition of ONE Brands, partially offset by the 2020 divestitures of Krave
and the Scharffen Berger and Dagoba brands). These increases were partially
offset by an unfavorable impact from foreign currency exchange rates of 0.5% and
a volume decrease of 0.3% due to the impact of COVID-19 on sales in our
international markets, as well as declines in owned retail and world travel
retail and elasticity-driven impacts due to price increases on certain products.

Key we Market Metrics

For the full year 2021, our total U.S. retail takeaway increased 8.9% in the
expanded multi-outlet combined plus convenience store channels (IRI MULO +
C-Stores), which includes candy, mint, gum, salty snacks, meat snacks and
grocery items. Our U.S. candy, mint and gum ("CMG") consumer takeaway increased
8.7%, resulting in a CMG market share decline of approximately 32 basis points.
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The CMG consumer takeaway and market share information reflect measured channels
of distribution accounting for approximately 90% of our U.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 by Information 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.

Cost of sales and gross margin

2021 vs. 2020

Cost of sales increased 10.7% in 2021 compared with 2020. The increase was
driven by higher sales volume, higher freight and logistics costs and additional
plant costs. These drivers were partially offset by the incremental $78.8
million of favorable mark-to-market activity on our commodity derivative
instruments intended to economically hedge future years' commodity purchases;
however, our mark-to-market activity was significantly impacted by financial
market volatility during March 2020 amid the COVID-19 outbreak. Additionally,
the increase was partially offset by favorable price realization and supply
chain productivity.

Gross margin decreased by 30 basis points in 2021 compared with 2020. The
decrease was driven by higher freight and logistics costs and additional plant
costs. These factors were partially offset by favorable price realization,
supply chain productivity and the favorable year-over-year mark-to-market impact
from commodity derivative instruments.

2020 vs. 2019

Cost of sales increased 1.9% in 2020 compared with 2019. The increase in cost of
sales was attributed to higher freight and logistics costs and additional plant
costs, specifically, PPE costs, increased sanitation and wage incentives
associated with COVID-19. Additionally, the increase was driven by an
incremental $28.9 million of unfavorable mark-to-market activity on our
commodity derivative instruments. These derivative instruments are intended to
economically hedge future years' commodity purchases; however, they were
significantly impacted by financial market volatility during 2020. These drivers
were partially offset by favorable price realization and favorable supply chain
productivity.

Gross margin remained the same in 2020 compared with 2019. Increases were driven
by the higher freight and logistics costs, additional plant costs, and
unfavorable year-over-year mark-to-market impact from commodity derivative
instruments. These factors were offset by favorable price realization and supply
chain productivity.

Sales, Marketing and Administration

2021 vs. 2020

Selling, marketing and administrative ("SM&A") expenses increased $110.4
million, or 5.8%, in 2021 driven by increased corporate expenses. Total
advertising and related consumer marketing expenses decreased 0.2% driven by
lower advertising in our North America Confectionery segment. SM&A expenses,
excluding advertising and related consumer marketing, increased approximately
9.2% in 2021 driven by higher compensation costs and investments in capabilities
and technology.

2020 compared with 2019

SM&A expenses decreased $15.0 million or 0.8% in 2020. Total advertising and
related consumer marketing expenses decreased 2.0% driven by media cost
efficiencies and select brand investment optimization related to COVID-19 in our
International segment. SM&A expenses, excluding advertising and related consumer
marketing, decreased approximately 0.1% in 2020 due to savings in travel and
meeting expenses related to COVID-19 travel restrictions and project timing
shifts.


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Impairment charges for long-lived and intangible assets

In 2021, we recorded no impairments charges. In 2020 and 2019, we recorded the
following impairment charges:
For the year ended December 31,                                       2020  

2019

In millions of dollars
Adjustment to disposal group (1)                                     $ 6.2      $   2.7
Other asset write-down (2)                                             2.9  

Customer relationship and trademark intangible assets (3)                -  

100.1

Other long-lived assets not held for sale (4)                            -  

9.7

Long-lived and intangible asset impairment charges                   $ 9.1  

$112.5


(1)In connection with our LSFC disposal group, which was previously classified
as held for sale during 2020 and 2019, we recorded impairment charges to adjust
long-lived asset values. The fair value of the disposal group was supported by
potential sales prices with third-party buyers. The sale of the LSFC joint
venture was completed in January 2021.

(2) As part of a previous sale, the Company wrote down certain receivables deemed irrecoverable.

(3)During the fourth quarter of 2019, we recorded impairment charges to write
down customer relationship and trademark intangible assets associated with
Krave. These charges were determined by comparing the fair value of the asset
group to its carrying value. We used various valuation techniques to determine
fair value, with the primary techniques being discounted cash flow analysis and
relief-from-royalty valuation approaches, which use significant unobservable
inputs, or Level 3 inputs, as defined by the fair value hierarchy.

(4)During 2019, we recorded impairment charges predominantly comprised of select
long-lived assets that had not yet met the held for sale criteria. The fair
value of these assets was supported by potential sales prices with third-party
buyers and market analysis.

The assessment of the valuation of goodwill and other long-lived assets is based
on management estimates and assumptions, as discussed in our critical accounting
policies included in Item 7 of this Annual Report on Form 10-K. These estimates
and assumptions are subject to change due to changing economic and competitive
conditions.

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 2021, 2020 and 2019 , we recorded business realignment costs of $3.5 million,
$18.5 million and $8.1 million, respectively. The 2021 and 2020 costs related
primarily to the International Optimization Program, a program focused on
optimizing our China operating model to improve our operational efficiency and
provide for a strong, sustainable and simplified base going forward. The 2019
costs related primarily to the Margin for Growth Program, a program focused on
improving global efficiency and effectiveness, optimizing the Company's supply
chain, streamlining the Company's operating model and reducing administrative
expenses to generate long-term savings. Costs associated with business
realignment activities are classified in our Consolidated Statements of Income
as described in   Note 9   to the Consolidated Financial Statements.

Operating profit and operating profit margin

2021 vs. 2020

Operating profit increased 14.6% in 2021 compared with 2020 due primarily to
higher gross profit, lower business realignment costs and lower impairment
charges, partially offset by higher SM&A in the 2021 period, as noted above.
Operating profit margin increased to 22.8% in 2021 from 21.9% in 2020 driven by
these same factors.

2020 compared with 2019

Operating profit increased 11.7% in 2020 compared with 2019 due primarily to
higher gross profit, lower SM&A and lower impairment charges, partially offset
by higher business realignment costs in the 2020 period, as noted above.
Operating profit margin increased to 21.9% in 2020 from 20.0% in 2019 driven by
these same factors.
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Interest expense, net

2021 vs. 2020

Net interest expense was $22.0 million lower in 2021 than in 2020. This decrease is attributable to lower average long-term debt balances in 2021 compared to 2020, $435 million long-term debt repayments with variable maturity dates in 2021.

2020 vs. 2019

Net interest expense was $5.2 million higher in 2020 than in 2019. The increase
was due to higher long-term debt balances in 2020 versus 2019, specifically due
to $1.0 billion of notes issued in October 2019 and $1.0 billion of notes issued
in May 2020.

Other (Income) Expense, Net

2021 compared with 2020

Other (income) expense, net totaled an expense of $119.1 million in 2021 versus
an expense of $138.3 million in 2020. The decrease in the net expense was
primarily due to lower write-downs on equity investments qualifying for historic
and renewable energy tax credits, in addition to lower non-service cost
components of net periodic benefit cost relating to pension and other
post-retirement benefit plans during 2021 compared to the 2020 period.

2020 vs. 2019

Other (income) expense, net totaled an expense of $138.3 million in 2020 versus
an expense of $71.1 million in 2019. The increase in the net expense was
primarily due to higher write-downs on equity investments qualifying for federal
solar tax credits, partially offset by lower non-service cost components of net
periodic benefit cost relating to pension and other post-retirement benefit
plans during 2020 compared to the 2019 period.

Income taxes and effective tax rate

2021 vs. 2020

Our effective income tax rate was 17.5% for 2021 compared with 14.7% for 2020.
Relative to the 21% statutory rate, the 2021 effective tax rate benefited from
investment tax credits, partially offset by incremental tax reserves incurred as
a result of an adverse ruling in connection with a non-U.S. tax litigation
matter, as well as state taxes. The 2020 effective rate, relative to the 21%
statutory rate, benefited from investment tax credits and the benefit of
employee share-based payments, partially offset by state taxes.

2020 vs. 2019

Our effective income tax rate was 14.7% for 2020 compared with 16.9% for 2019.
Relative to the 21% statutory rate, the 2020 effective tax rate benefited from
investment tax credits and the benefit of employee share-based payments,
partially offset by state taxes. The 2019 effective rate, relative to the 21%
statutory rate, was impacted by changes to foreign valuation allowances, a
favorable foreign rate differential, investment tax credits and the benefit of
employee share-based payments, which were partially offset by the impact of
state taxes.



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Net income attributable to The Hershey Company and diluted earnings per share

2021 vs. 2020

Net income increased $198.8 million, or 15.5%, while EPS-diluted increased
$1.00, or 16.4%, in 2021 compared with 2020. The increase in both net income and
EPS-diluted was driven primarily by higher gross profit, partially offset by
higher SM&A and higher income taxes in 2021. Our 2021 EPS-diluted also benefited
from lower weighted-average shares outstanding as a result of share repurchases
pursuant to our Board-approved repurchase programs.

2020 vs. 2019

Net income increased $129.0 million, or 11.2%, while EPS-diluted increased
$0.65, or 11.9%, in 2020 compared with 2019. The increase in both net income and
EPS-diluted was driven primarily by higher gross profit, lower SM&A, lower
impairment charges, and lower income taxes in 2020, partially offset by higher
other income and expenses, higher business realignment costs, and higher
interest expense. Our 2020 EPS-diluted also benefited from lower
weighted-average shares outstanding as a result of share repurchases pursuant to
our Board-approved repurchase programs.
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SECTOR RESULTS

Since December 31, 2014, the Company has reported its operations through two
segments: (i) North America and (ii) International and Other. After the
completion of the Company's acquisitions of Dot's and Pretzels in December 2021,
as described in   Note 2   to the Consolidated Financial Statements, management
of the Company has elected to begin reporting its operations through three
reportable segments. Therefore, effective in the fourth quarter of 2021, the
Company realigned its former two reportable segments into three reportable
segments: (i) North America Confectionery, (ii) North America Salty Snacks and
(iii) International. We have retroactively reflected these changes in all
historical periods presented.

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:

For the years ended December 31,                               2021                2020                2019
In millions of dollars
Net Sales:
North America Confectionery                                $  7,682.4          $  7,084.9          $  6,815.1
North America Salty Snacks                                      555.4               438.2               410.0
International                                                   733.5               626.6               761.2
Total                                                      $  8,971.3          $  8,149.7          $  7,986.3

Segment Income:
North America Confectionery                                $  2,475.9          $  2,274.6          $  2,120.2
North America Salty Snacks                                      100.7                75.8                50.8
International                                                    74.2                   -                50.6
Total segment income                                          2,650.8             2,350.4             2,221.6
Unallocated corporate expense (1)                               614.9               520.7               532.6
Unallocated mark-to-market (gains) losses on
commodity derivatives (2)                                       (24.4)                6.4               (28.6)
Long-lived and intangible asset impairment charges                  -                 9.1               112.5
Costs associated with business realignment
activities                                                       16.6                31.5                 9.2

Operating profit                                              2,043.7             1,782.7             1,595.9
Interest expense, net                                           127.4               149.4               144.1
Other (income) expense, net                                     119.1               138.3                71.0
Income before income taxes                                 $  1,797.2       

$1,495.0 $1,380.8


(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 losses (gains) on the mark-to-market of positions on commodity derivatives recognized in losses (gains) on unallocated derivatives. See note 13 to the consolidated financial statements.

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Confectionery North America

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 accounted for 85.6%, 86.9% and
85.3% of our net sales in 2021, 2020 and 2019, respectively. North America
Confectionery results for the years ended December 31, 2021, 2020 and 2019 were
as follows:
                                                                                                             Percent Change
For the years ended December 31,             2021               2020               2019            2021 vs 2020          2020 vs 2019
In millions of dollars
Net sales                                $ 7,682.4          $ 7,084.9          $ 6,815.1                   8.4  %               4.0  %
Segment income                             2,475.9            2,274.6            2,120.2                   8.8  %               7.3  %
Segment margin                                32.2  %            32.1  %            31.1  %


2021 compared with 2020

Net sales of our North America Confectionery segment increased $597.5 million,
or 8.4%, in 2021 compared to 2020, reflecting a volume increase of 5.1% due to
an increase in everyday core U.S. confection brands, a favorable price
realization of 2.1% due to higher prices on certain products, a 0.9% benefit
from the 2021 acquisition of Lily's and a favorable impact from foreign currency
exchange rates of 0.3%.

Our North America Confectionery segment also includes licensing and owned
retail. At the onset of the pandemic, all Hershey's Chocolate World stores were
temporarily closed and subsequently re-opened in July 2020 with increased safety
measures. This included the United States (3 locations), Niagara Falls (Ontario)
and Singapore. As a result, our net sales increased approximately 37.4% during
2021 compared to 2020.

Our North America Confectionery segment income increased $201.3 million, or
8.8%, in 2021 compared to 2020, primarily due to favorable price realization and
volume increases, partially offset by higher supply chain-related costs, higher
freight and logistics costs, as well as unfavorable product mix.

2020 vs. 2019

Net sales of our North America Confectionery segment increased $269.8 million,
or 4.0%, in 2020 compared to 2019, reflecting favorable price realization of
2.8% attributed to higher prices on certain products, a 0.9% benefit from net
acquisitions and divestitures (predominantly driven by the 2019 acquisition of
ONE Brands, partially offset by the 2020 divestitures of the Scharffen Berger
and Dagoba brands), and a volume increase of 0.3% due to an increase in everyday
core U.S. confection brands.

Our North America Confectionery segment also includes licensing and owned
retail. At the onset of the pandemic, all Hershey's Chocolate World stores were
temporarily closed and subsequently re-opened in July 2020 with increased safety
measures. This included the United States (3 locations), Niagara Falls (Ontario)
and Singapore. As a result, our net sales decreased approximately 25.8% during
2020 compared to 2019.

Our North America Confectionery segment income increased $154.4 million, or
7.3%, in 2020 compared to 2019, primarily due to favorable price realization and
volume increases, partially offset by higher supply chain-related costs,
specifically, PPE costs, increased sanitation and wage incentives associated
with COVID-19.



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North American savory 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 accounted for 6.2%, 5.4% and 5.1% of our net sales in 2021, 2020 and
2019, respectively. North America Salty Snacks results for the years ended
December 31, 2021, 2020 and 2019 were as follows:

                                                                                                          Percent Change
For the years ended December 31,            2021              2020              2019            2021 vs 2020          2020 vs 2019
In millions of dollars
Net sales                                $  555.4          $  438.2          $  410.0                  26.7  %                6.9  %
Segment income                              100.7              75.8              50.8                  32.8  %               49.2  %
Segment margin                               18.1  %           17.3  %           12.4  %


2021 compared with 2020

Net sales for our North America Salty Snacks segment increased $117.2 million,
or 26.7%, in 2021 compared to 2020, reflecting a volume increase of 16.9%
primarily related to SkinnyPop and Pirates Booty snacks, a favorable price
realization of 5.7% due to higher prices on certain products and a 4.1% benefit
from net acquisitions and divestitures driven by the 2021 acquisitions of Dot's
and Pretzels.

Our North America Salty Snacks segment income increased $24.9 million, or 32.8%,
in 2021 compared to 2020, primarily due to favorable price realization and
volume increases, partially offset by higher supply chain-related costs, higher
freight and logistics costs, as well as unfavorable product mix.

2020 vs. 2019

Net sales for our North America Salty Snacks segment increased $28.2 million, or
6.9%, in 2020 compared to 2019, reflecting a volume increase of 10.6%, primarily
related to SkinnyPop and Pirates Booty snacks, partially offset by a 3.7%
negative impact from the 2020 Krave divestiture.

Revenues from our North America Salty Snacks segment increased $25 millioni.e. 49.2%, in 2020 compared to 2019, thanks to favorable volume increases.

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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 in
Asia markets, Latin America, Europe, Africa and the Middle East, along with
exports to these regions. International accounted for 8.2%, 7.7% and 9.5% of our
net sales in 2021, 2020 and 2019, respectively. International results for the
years ended December 31, 2021, 2020 and 2019 were as follows:

                                                                                                             Percent Change
For the years ended December 31,            2021              2020              2019            2021 vs 2020             2020 vs 2019
In millions of dollars
Net sales                                $  733.5          $  626.6          $  761.2                  17.1  %                    (17.7) %
Segment income                               74.2                 -              50.6                       NM                          NM
Segment margin                               10.1  %              -  %            6.6  %


NM = not meaningful

2021 compared with 2020

Net sales of our International segment increased $106.9 million, or 17.1%, in
2021 compared to 2020, reflecting a favorable price realization of 12.1%, a
volume increase of 4.2% and a favorable impact from foreign currency exchange
rates of 0.8%. The volume increase was primarily attributed to solid marketplace
growth in Mexico, India, and Brazil, where net sales increased by 39.0%, 23.9%
and 21.3%, respectively. Our International segment also includes world travel
retail, where net sales increased approximately 27.1%. These increases also
benefited from a favorable impact from foreign currency exchange rates of 1.0%.

Our International segment income increased $74.2 million in 2021 compared to
2020 with the improvement primarily resulting from execution of our
International Optimization Program in China, as we streamline and optimize our
China operating model, as well as volume increases and favorable price
realization.

2020 vs. 2019

Net sales of our International segment decreased $134.6 million, or 17.7%, in
2020 compared to 2019, reflecting a volume decline of 11.0%, an unfavorable
impact from foreign currency exchange rates of 4.9% and an unfavorable price
realization of 1.8%. The volume declines were attributed to significant sales
declines in Mexico, China and world travel retail, where net sales decreased by
24.6%, 46.0% and 43.3%, respectively due to the implementation of quarantine
protocols by local governments to mitigate the spread of COVID-19. Furthermore,
net sales declines in China were also attributable to the commencement of the
International Optimization Program.

Our International segment income decreased $50.6 million in 2020 compared to
2019. This decrease was driven by the lower level of net sales associated with
the COVID-19 disruption.
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Unrestricted business expenses

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 and (d) other gains or losses that are not integral to segment
performance.

Unallocated social charges total $614.9 million in 2021 compared to
$520.7 million in 2020. The increase is primarily due to higher incentive compensation, higher group insurance costs due to COVID-19-related delays in preventive care, and additional investments in capacity and technology .

Unallocated social charges total $520.7 million in 2020 compared to
$532.6 million in 2019, primarily due to travel and meeting cost savings related to COVID-19 travel restrictions and project schedule changes.

CASH AND CAPITAL RESOURCES

We assess our liquidity in terms of our ability to generate cash to fund our
operating, investing and financing activities. Significant factors affecting
liquidity include cash flows generated from operating activities, capital
expenditures, acquisitions, dividends, repurchases of outstanding shares, the
adequacy of available commercial paper and bank lines of credit, and the ability
to attract long-term capital with satisfactory terms. We generate substantial
amounts of cash from operations and remain in a strong financial position, with
sufficient liquidity available for capital reinvestment, strategic acquisitions
and the payment of dividends.

Cash flow summary

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

In millions of dollars                                        2021                2020               2019
Net cash provided by (used in):
Operating activities                                      $     2,082.9       $    1,699.6       $     1,763.9
Investing activities                                        (2,222.8)            (531.3)             (780.5)
Financing activities                                          (681.1)            (499.2)           (1,081.4)
Effect of exchange rate changes on cash and cash
equivalents                                                     (5.1)              (7.0)                3.3
Less: Cash classified as assets held for sale                   11.4              (11.4)                  -

(Decrease) increase in cash and cash equivalents $(814.7)

  $   650.7          $    (94.7)


Operating activities

Our principal source of liquidity is cash flow from operations. Our net income
and, consequently, our cash provided by operations are impacted by sales volume,
seasonal sales patterns, timing of new product introductions, profit margins and
price changes. Sales are typically higher during the third and fourth quarters
of the year due to seasonal and holiday-related sales patterns. Generally,
working capital needs peak during the summer months. We meet these needs
primarily with cash on hand, bank borrowings or the issuance of commercial
paper.

We generated cash of $2.1 billion from operating activities in 2021, an increase
of $383.3 million compared to $1.7 billion in 2020. This increase in net cash
provided by operating activities was mainly driven by the following factors:

•Net working capital (comprised of trade accounts receivable, inventory,
accounts payable and accrued liabilities) generated cash of $47 million in 2021
and consumed cash of $166 million in 2020. This $213 million fluctuation was
mainly driven by strong demand of U.S. inventories, specifically our everyday
core U.S. confection brands and salty snack brands.

•Net income adjusted for non-cash charges to operations (including depreciation,
amortization, stock-based compensation, deferred income taxes, long-lived and
intangible asset charges, write-down of equity investments and other charges)
resulted in $185 million of higher cash flow in 2021 relative to 2020.


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Cash flow from operating activities in 2020 decreased $64.3 million compared to 2019. This increase is explained by the following factors:

•Net working capital (comprised of trade accounts receivable, inventory,
accounts payable and accrued liabilities) consumed cash of $166 million in 2020
and generated cash of $60 million in 2019. This $226 million fluctuation was
mainly driven by a higher year-over-year build up of U.S. inventories to satisfy
product requirements and maintain sufficient levels to accommodate customer
requirements, as well as an increase in cash used by accounts receivable due to
an increase in sales of U.S. seasonal products.

•The decrease in cash flow from operating activities was partially offset by the following net cash inflows:

•Net income adjusted for non-cash charges to operations (including depreciation,
amortization, stock-based compensation, deferred income taxes, long-lived and
intangible asset charges, write-down of equity investments and other charges)
resulted in $207 million of higher cash flow in 2020 relative to 2019.

Pension and Post-Retirement Activity. We recorded net periodic benefit costs of
$28.4 million, $34.5 million and $41.4 million in 2021, 2020 and 2019,
respectively, relating to our benefit plans (including our defined benefit and
other post retirement plans). The main drivers of fluctuations in expense from
year to year are assumptions in formulating our long-term estimates, including
discount rates used to value plan obligations, expected returns on plan assets,
the service and interest costs and the amortization of actuarial gains and
losses.

The funded status of our qualified defined benefit pension plans is dependent
upon many factors, including returns on invested assets, the level of market
interest rates and the level of funding. We contribute cash to our plans at our
discretion, subject to applicable regulations and minimum contribution
requirements. Cash contributions to our pension and post retirement plans
totaled $51.1 million, $11.7 million and $20.1 million in 2021, 2020 and 2019,
respectively.

Investing activities

Our principal uses of cash for investment purposes relate to purchases of
property, plant and equipment and capitalized software, as well as acquisitions
of businesses, partially offset by proceeds from sales of property, plant and
equipment. We used cash of $2.2 billion for investing activities in 2021
compared to $531.3 million in 2020, with the increase in cash spend driven by
higher levels of acquisition activity. We used cash of $780.5 million for
investing activities in 2019, and the decrease in 2020 in cash spend was driven
by no acquisition activity.

The main investing activities include the following:

•Capital spending. Capital expenditures, including capitalized software,
primarily to support our ERP system implementation, capacity expansion,
innovation and cost savings, were $495.9 million in 2021, $441.6 million in 2020
and $318.2 million in 2019. Our 2021 expenditures increased compared to 2020 due
to progress on capacity expansion projects and our ERP system implementation.
Our 2020 expenditures were substantially higher than 2019 expenditures due to
progress on our key strategic initiatives. We expect 2022 capital expenditures,
including capitalized software, to approximate $550 million to $600 million. The
increase in our 2022 capital expenditures is 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 energy tax credits. We invested approximately
$128.4 million in 2021, $87.2 million in 2020 and $80.2 million in 2019 in
projects qualifying for tax credits.

•Business acquisitions. In 2021, we spent an aggregate $1.6 billion to acquire
Lily's (June 2021), as well as Dot's and Pretzels (December 2021). In 2020, we
had no acquisition activity. In 2019, we spent $402.2 million to acquire ONE
Brands.


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•Other investing activities. In 2021 and 2020, our other investing activities
were minimal. In 2019, we generated $20.1 million of proceeds from the sale of
property, plant and equipment and other long-lived assets. This included the
sale of select Pennsylvania facilities and land for sales proceeds of
approximately $27.6 million, resulting in a gain on the sale of $11.3 million.

Fundraising activities

Our cash flow from financing activities generally relates to the use of cash for
purchases of our Common Stock and payment of dividends, offset by net borrowing
activity and proceeds from the exercise of stock options. Financing activities
in 2021 used cash of $681.1 million, compared to cash used of $499.2 million in
2020. We used cash of $1.1 billion for financing activities in 2019, primarily
to fund acquisition activity.

The majority of our fundraising activity has been attributed to the following:

•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. In 2021, we generated
cash flow of $869.0 million predominantly through the issuance of short-term
commercial paper. In 2020, we generated cash flow of $41.8 million due to an
increase in short-term foreign bank borrowings. In 2019, we used $1.2 billion to
reduce short-term commercial paper borrowings and short-term foreign bank
borrowings. We utilized the proceeds from the issuance of long-term debt in
October 2019 to repay outstanding commercial paper used to fund the ONE Brands
acquisition.

•Long-term debt borrowings and repayments.  In February 2021 and May 2021, we
repaid $84.7 million of 8.800% Debentures and $350 million of 3.100% Notes due
upon their maturities, respectively. In May 2020, we issued $300 million of
0.900% Notes due in 2025, $350 million of 1.700% Notes due in 2030 and $350
million of 2.650% Notes due in 2050 (the "2020 Notes"). Proceeds from the
issuance of the 2020 Notes, net of discounts and issuance costs, totaled $989.9
million. Additionally, in May 2020 and December 2020, we repaid $350 million of
2.900% Notes and $350 million of 4.125% Notes due upon their maturities,
respectively. In October 2019, we issued $300 million of 2.05% Notes due in
2024, $300 million of 2.45% Notes due in 2029 and $400 million of 3.125% Notes
due in 2049 (the "2019 Notes"). Proceeds from the issuance of the 2019 Notes,
net of discounts and issuance costs, totaled $989.6 million.

•Dividend payments. Total dividend payments to holders of our Common Stock and
Class B Common Stock were $686.0 million in 2021, $640.7 million in 2020 and
$610.3 million in 2019. Dividends per share of Common Stock increased 8.1% to
$3.410 per share in 2021 compared to $3.154 per share in 2020, while dividends
per share of Class B Common Stock increased 8.2% in 2021. Details regarding our
2021 cash dividends paid to stockholders are as follows:

                                                                             Quarter Ended
In millions of dollars
except per share amounts            April 4, 2021             July 4, 2021             October 3, 2021             December 31, 2021
Dividends paid per share -
Common stock                     $           0.804          $        0.804          $             0.901          $            0.901
Dividends paid per share -
Class B common stock             $           0.731          $        0.731          $             0.819          $            0.819
Total cash dividends paid        $           162.7          $        161.6          $             180.9          $            180.8
Declaration date                     February 2, 2021          April 27,
2021                July 23, 2021            October 27, 2021
Record date                         February 19, 2021            May 21, 2021              August 20, 2021           November 19, 2021
Payment date                           March 15, 2021           June 15, 2021           September 15, 2021           December 15, 2021


•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:
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In millions                                                     2021              2020              2019
Shares repurchased in the open market under
pre-approved share repurchase programs                       $  150.0       

$150.0 $150.0
Shares repurchased to replace treasury shares issued for stock options and incentive compensation

                       308.0              61.2             377.2
Cash used for total share repurchases                        $  458.0          $  211.2          $  527.2
Total shares repurchased under pre-approved share
repurchase programs                                                  0.9               1.0               1.4


In July 2018, our Board of Directors approved a $500 million share repurchase
authorization. As of December 31, 2021, approximately $110 million remained
available for repurchases of our Common Stock under this program. The share
repurchase program does not have an expiration date. In May 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 the exercise of stock options, including tax benefits. We
received $33.2 million from employee exercises of stock options, net of employee
taxes withheld from share-based awards in 2021. We received $25.5 million and
$240.8 million in 2020 and 2019, respectively. Variances are driven primarily by
the number of shares exercised and the share price at the date of grant.

Financial condition

At December 31, 2021, our cash and cash equivalents totaled $329.3 million. At
December 31, 2020, our cash and cash equivalents totaled $1.1 billion. Our cash
and cash equivalents at the end of 2021 decreased $814.7 million compared to the
2020 year-end balance as a result of the uses of net cash outlined in the
previous discussion.

Approximately 60% of the balance of our cash and cash equivalents at
December 31, 2021 was held by subsidiaries domiciled outside of the United
States. During 2021, previously undistributed earnings of certain international
subsidiaries were no longer considered indefinitely reinvested; however, the
Company had previously recognized a one-time U.S. repatriation tax due under
U.S. tax reform, and as a result, only an immaterial amount of withholding tax
was recognized. For the remainder of the Company's cash held by international
subsidiaries, we intend to continue to reinvest the undistributed earnings
indefinitely. We believe we have sufficient liquidity to satisfy our cash needs
for at least the next 12 months, including our cash needs in the United States.

We maintain debt levels we consider prudent based on our cash flow, interest
coverage ratio and percentage of debt to capital. We use debt financing to lower
our overall cost of capital which increases our return on stockholders' equity.
Our total short- and long-term debt was $5.0 billion at December 31, 2021 and
$4.6 billion at December 31, 2020. Our total debt increased in 2021 mainly due
to the issuance of short-term commercial paper used to fund our 2021
acquisitions of Lily's, Dot's and Pretzels, partially offset by the repayment of
$84.7 million Debentures that matured in February 2021 and $350 million Notes
that matured in May 2021.

As a source of short-term financing, we maintain a $1.5 billion unsecured
revolving credit facility with the option to increase borrowings by an
additional $500 million with the consent of the lenders. As of December 31,
2021, the termination date of this agreement is July 2, 2024, however, we may
extend the termination date for up to two additional one-year periods upon
notice to the administrative agent under the facility. We may use these funds
for general corporate purposes, including commercial paper backstop and business
acquisitions. As of December 31, 2021, we had $680 million of available capacity
under the agreement. The unsecured revolving credit agreement contains certain
financial and other covenants, customary representations, warranties and events
of default. We were in compliance with all covenants as of December 31, 2021.

In addition to the revolving credit facility, we maintain lines of credit in
various currencies with domestic and international commercial banks. As of
December 31, 2021, we had available capacity of $164 million under these lines
of credit.

Furthermore, we have a current shelf registration statement filed with the SEC
that allows for the issuance of an indeterminate amount of debt securities.
Proceeds from the debt issuances and any other offerings under the current
registration statement may be used for general corporate requirements, including
reducing existing borrowings,
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funding capital additions and funding contributions to our pension plans, future business acquisitions and working capital requirements.

Our ability to obtain debt financing at comparable risk-based interest rates is
partly a function of our existing cash-flow-to-debt and debt-to-capitalization
levels as well as our current credit rating.

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.

Capital structure

We have two classes of shares outstanding – Common Shares and Class B-share. Holders of Ordinary and Class Shares B-share generally vote together regardless of class on matters before shareholders, including the election of directors. Common stock holders have 1 vote per share. Class Holders B-share has 10 votes per share. Common stockholders, voting separately as a class, are entitled to elect one-sixth of our board. With respect to dividend rights, holders of common stock are entitled to cash dividends 10% greater than those declared and paid on the class B-share.

Hershey Trust Company, as trustee for the trust established by Milton S. and
Catherine S. Hershey that has as its sole beneficiary Milton Hershey School,
maintains voting control over The Hershey Company. In addition, three
representatives of Hershey Trust Company currently serve as members of the
Company's Board. In performing their responsibilities on the Company's Board,
these representatives may from time to time exercise influence with regard to
the ongoing business decisions of our Board or management. Hershey Trust
Company, as trustee for the Trust, in its role as controlling stockholder of the
Company, has indicated it intends to retain its controlling interest in The
Hershey Company. The Company's Board, and not the Hershey Trust Company board,
is solely responsible and accountable for the Company's management and
performance.

Pennsylvania law requires that the Office of Attorney General be provided
advance notice of any transaction that would result in Hershey Trust Company, as
trustee for the Trust, no longer having voting control of the Company. The law
provides specific statutory authority for the Attorney General to intercede and
petition the court having jurisdiction over Hershey Trust Company, as trustee
for the Trust, to stop such a transaction if the Attorney General can prove that
the transaction is unnecessary for the future economic viability of the Company
and is inconsistent with investment and management considerations under
fiduciary obligations. This legislation makes it more difficult for a third
party to acquire a majority of our outstanding voting stock and thereby may
delay or prevent a change in control of the Company.

Material cash needs

The following table summarizes our future material cash requirements as of
December 31, 2021:

                                                                                 Payments due by Period
                                                              Less than 1
In millions of dollars                       Total               year              1-3 years           3-5 years           More than 5 years
Short-term debt (primarily U.S.
commercial paper)                         $   939.4          $    939.4          $        -          $        -          $                -
Long-term notes (excluding finance
lease obligations)                          4,043.6                   -             1,050.0             1,100.0                     1,893.6
Interest expense (1)                        1,193.4               112.5               186.3               143.4                       751.2
Operating lease obligations (2)               448.0                46.3                72.6                44.7                       284.4
Finance lease obligations (3)                 170.8                 7.3                 9.4                 8.0                       146.1
Unconditional purchase obligations
(4)                                         2,205.4             1,742.1               438.3                25.0                           -
Total obligations                         $    9,000.6       $     2,847.6       $     1,756.6       $     1,321.1       $             3,075.3

(1) Includes net interest payments on fixed rate debt associated with long-term notes.

(2) Includes the minimum rental commitments (including imputed interest) under
non-cancelable operating leases primarily for offices, retail stores, warehouses
and distribution facilities.

(3) Includes the minimum rental commitments (including imputed interest) under
non-cancelable finance leases primarily for offices and warehouse facilities, as
well as vehicles.
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(4) Purchase obligations consist primarily of fixed commitments for the purchase
of raw materials to be utilized in the normal course of business. Amounts
presented included fixed price forward contracts and unpriced contracts that
were valued using market prices as of December 31, 2021. The amounts presented
in the table do not include items already recorded in accounts payable or
accrued liabilities at year-end 2021, nor does the table reflect cash flows we
are likely to incur based on our plans, but are not obligated to incur. Such
amounts are part of normal operations and are reflected in historical operating
cash flow trends. We do not believe such purchase obligations will adversely
affect our liquidity position.

In entering into contractual obligations, we have assumed the risk that might
arise from the possible inability of counterparties to meet the terms of their
contracts. We mitigate this risk by performing financial assessments prior to
contract execution, conducting periodic evaluations of counterparty performance
and maintaining a diverse portfolio of qualified counterparties. Our risk is
limited to replacing the contracts at prevailing market rates. We do not expect
any significant losses resulting from counterparty defaults.

These obligations impact our liquidity and capital resource needs. To meet those
cash requirements, we intend to use our existing cash and internally generated
funds. To the extent necessary, we may also borrow under our existing unsecured
revolving credit facility or under other short-term borrowings, and depending on
market conditions and upon the significance of the cost of a particular Note
maturity or acquisition to our then-available sources of funds, to obtain
additional short- and long-term financing. We believe that cash provided from
these sources will be adequate to meet our future short- and long-term cash
requirements.

Asset retirement obligations

We have a number of facilities that contain varying amounts of asbestos in
certain locations within the facilities. Our asbestos management program is
compliant with current applicable regulations, which require that we handle or
dispose of asbestos in a specified manner if such facilities undergo major
renovations or are demolished. We do not have sufficient information to estimate
the fair value of any asset retirement obligations related to these facilities.
We cannot specify the settlement date or range of potential settlement dates
and, therefore, sufficient information is not available to apply an expected
present value technique. We expect to maintain the facilities with repairs and
maintenance activities that would not involve or require the removal of
significant quantities of asbestos.

Tax obligations

Liabilities for unrecognized income tax benefits are excluded from the table
above as we are unable to reasonably predict the ultimate amount or timing of a
settlement of these potential liabilities. See   Note 10   to the Consolidated
Financial Statements for more information.

Recent accounting pronouncements

Information on recently adopted and issued accounting standards is included in

Note 1 to the consolidated financial statements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements requires management to use judgment and
make estimates and assumptions. We believe that our most critical accounting
policies and estimates relate to the following:

• Accrued expenses for trade promotion activities • Pension plans and other post-retirement benefits • Business acquisitions, valuation and impairment of Good will and other intangible assets • Income taxes

Management has discussed the development, selection and disclosure of critical
accounting policies and estimates with the Audit Committee of our Board. While
we base estimates and assumptions on our knowledge of current events and actions
we may undertake in the future, actual results may ultimately differ from these
estimates and assumptions. Other significant accounting policies are outlined in

Note 1 to the consolidated financial statements.

Accruals for trade promotion activities

We promote our products with advertising, trade promotions and consumer
incentives. These programs include, but are not limited to, discounts, coupons,
rebates, in-store display incentives and volume-based incentives. We expense
advertising costs and other direct marketing expenses as incurred. We recognize
the costs of trade promotion and consumer incentive activities as a reduction to
net sales along with a corresponding accrued liability based on estimates at the
time of revenue recognition. These estimates are based on our analysis of the
programs offered, historical trends, expectations regarding customer and
consumer participation, sales and payment trends and our experience with payment
patterns associated with similar programs offered in the past. The estimated
costs of these programs are reasonably likely to change in future periods due to
changes in trends with regard to customer and consumer participation,
particularly for new programs and for programs related to the introduction of
new products. Differences between estimated expense and actual program
performance are recognized as a change in estimate in a subsequent period and
are normally not significant. During 2021, 2020, and 2019, actual annual
promotional costs have not deviated from the estimated amount by more than 3%.
Our trade promotion and consumer incentive accrued liabilities totaled $174.0
million and $195.6 million at December 31, 2021 and 2020, respectively.

Pension plans and other post-retirement benefits

We sponsor various defined benefit pension plans. The primary plans are The
Hershey Company Retirement Plan and The Hershey Company Retirement Plan for
Hourly Employees, which are cash balance plans that provide pension benefits for
most U.S. employees hired prior to January 1, 2007. We also sponsor two primary
other post-employment benefit ("OPEB") plans, consisting of a health care plan
and life insurance plan for retirees. The health care plan is contributory, with
participants' contributions adjusted annually, and the life insurance plan is
non-contributory.

For accounting purposes, the defined benefit pension and OPEB plans require
assumptions to estimate the projected and accumulated benefit obligations,
including the following variables: discount rate; expected salary increases;
certain employee-related factors, such as turnover, retirement age and
mortality; expected return on assets; and health care cost trend rates. These
and other assumptions affect the annual expense and obligations recognized for
the underlying plans. Our assumptions reflect our historical experiences and
management's best judgment regarding future expectations. Our related accounting
policies, accounting balances and plan assumptions are discussed in   Note 11
to the Consolidated Financial Statements.

Pension plans

Changes in certain assumptions could significantly affect pension expense and
benefit obligations, particularly the estimated long-term rate of return on plan
assets and the discount rates used to calculate such obligations:

•Long-term rate of return on plan assets. The expected long-term rate of return
is evaluated on an annual basis. We consider a number of factors when setting
assumptions with respect to the long-term rate of return, including current and
expected asset allocation and historical and expected returns on the plan asset
categories. Actual asset allocations are regularly reviewed and periodically
rebalanced to the targeted allocations when considered appropriate. Investment
gains or losses represent the difference between the expected return estimated
using the
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long-term rate of return and the actual return realized. For 2021, we increased
the expected return on plan assets assumption to 4.9% from the 4.8% assumption
used during 2020. The historical average return (compounded annually) over the
20 years prior to December 31, 2021 was approximately 6.3%.

As of December 31, 2021, our primary plans had cumulative unrecognized
investment and actuarial losses of approximately $201 million. We amortize the
unrecognized net actuarial gains and losses in excess of the corridor amount,
which is the greater of 10% of a respective plan's projected benefit obligation
or the fair market value of plan assets. These unrecognized net losses may
increase future pension expense if not offset by (i) actual investment returns
that exceed the expected long-term rate of investment returns, (ii) other
factors, including reduced pension liabilities arising from higher discount
rates used to calculate pension obligations or (iii) other actuarial gains when
actual plan experience is favorable as compared to the assumed experience. A 100
basis point decrease or increase in the long-term rate of return on pension
assets would correspondingly increase or decrease annual net periodic pension
benefit expense by approximately $10 million.

•Discount rate. We utilize a full yield curve approach in the estimation of
service and interest costs by applying the specific spot rates along the yield
curve used in the determination of the benefit obligation to the relevant
projected cash flows. This approach provides a more precise measurement of
service and interest costs by improving the correlation between the projected
cash flows to the corresponding spot rates along the yield curve. This approach
does not affect the measurement of our pension and other post-retirement benefit
liabilities but generally results in lower benefit expense in periods when the
yield curve is upward sloping.

A 100 basis point decrease (increase) in the weighted-average pension discount
rate would increase (decrease) annual net periodic pension benefit expense by
approximately $6 million and the December 31, 2021 pension liability would
increase by approximately $97 million or decrease by approximately $83 million,
respectively.

Pension income for defined benefit pension plans is expected to be approximately
$2 million in 2021. Pension expense beyond 2022 will depend on future investment
performance, our contributions to the pension trusts, changes in discount rates
and various other factors related to the covered employees in the plans.

Other post-employment benefit plans

Significant changes in assumptions could affect consolidated expenses and benefit obligations, in particular the discount rates used to calculate these obligations:

•Discount rate. The determination of the discount rate used to calculate the
benefit obligations of the OPEB plans is discussed in the pension plans section
above. A 100 basis point decrease (increase) in the discount rate assumption for
these plans would not be material to the OPEB plans' consolidated expense and
the December 31, 2021 benefit liability would increase by approximately $23
million or decrease by approximately $19 million, respectively.

Business acquisitions, valuation and impairment of Good will and other intangible assets

We use the acquisition method of accounting for business acquisitions. Under the
acquisition method, the results of operations of the acquired business have been
included in the consolidated financial statements since the respective dates of
the acquisitions. The assets acquired and liabilities assumed are recorded at
their respective estimated fair values at the date of the acquisition. Any
excess of the purchase price over the estimated fair values of the identifiable
net assets acquired is recorded as goodwill. Significant judgment is often
required in estimating the fair value of assets acquired, particularly
intangible assets. As a result, we normally obtain the assistance of a
third-party valuation specialist in estimating fair values of tangible and
intangible assets. The fair value estimates are based on available historical
information and on expectations and assumptions about the future, considering
the perspective of marketplace participants. While management believes those
expectations and assumptions are reasonable, they are inherently uncertain.
Unanticipated market or macroeconomic events and circumstances may occur, which
could affect the accuracy or validity of the estimates and assumptions.

Goodwill and indefinite-lived intangible assets are not amortized, but instead,
are evaluated for impairment annually or more often if indicators of a potential
impairment are present. Our annual impairment tests are conducted at the
beginning of the fourth quarter.

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We test goodwill for impairment by performing either a qualitative or
quantitative assessment. If we choose to perform a qualitative assessment, we
evaluate economic, industry and company-specific factors in assessing the fair
value of the related reporting unit. If we determine that it is more likely than
not that the fair value of the reporting unit is less than its carrying value, a
quantitative test is then performed. Otherwise, no further testing is required.
For those reporting units tested using a quantitative approach, we compare the
fair value of each reporting unit with the carrying amount of the reporting
unit, including goodwill. If the estimated fair value of the reporting unit is
less than the carrying amount of the reporting unit, impairment is indicated,
requiring recognition of a goodwill impairment charge for the differential (up
to the carrying value of goodwill). We test individual indefinite-lived
intangible assets by comparing the estimated fair values with the book values of
each asset.

We determine the fair value of our reporting units and indefinite-lived
intangible assets using an income approach. Under the income approach, we
calculate the fair value of our reporting units and indefinite-lived intangible
assets based on the present value of estimated future cash flows. Considerable
management judgment is necessary to evaluate the impact of operating and
macroeconomic changes and to estimate the future cash flows used to measure fair
value. Our estimates of future cash flows consider past performance, current and
anticipated market conditions and internal projections and operating plans which
incorporate estimates for sales growth and profitability, and cash flows
associated with taxes and capital spending. Additional assumptions include
forecasted growth rates, estimated discount rates, which may be risk-adjusted
for the operating market of the reporting unit, and estimated royalty rates that
would be charged for comparable branded licenses. We believe such assumptions
also reflect current and anticipated market conditions and are consistent with
those that would be used by other marketplace participants for similar valuation
purposes. Such assumptions are subject to change due to changing economic and
competitive conditions.

We also have intangible assets, consisting primarily of certain trademarks,
customer-related intangible assets and patents obtained through business
acquisitions, that are expected to have determinable useful lives. The costs of
finite-lived intangible assets are amortized to expense over their estimated
lives. Our estimates of the useful lives of finite-lived intangible assets
consider judgments regarding the future effects of obsolescence, demand,
competition and other economic factors. We conduct impairment tests when events
or changes in circumstances indicate that the carrying value of these
finite-lived assets may not be recoverable. Undiscounted cash flow analyses are
used to determine if an impairment exists. If an impairment is determined to
exist, the loss is calculated based on the estimated fair value of the assets.

Impairment test results

At December 31, 2021, the net book value of our goodwill totaled $2,633.2
million. As it relates to our 2021 annual testing performed at the beginning of
the fourth quarter, we tested all of our reporting units using a qualitative
assessment and determined that no quantitative testing was deemed necessary.
Based on our testing, all of our reporting units had an excess fair value well
over the their respective carrying values. There were no other events or
circumstances that would indicate that impairment may exist. We had no goodwill
impairment charges in 2021, 2020 or 2019.

In 2019, sales and operating performance associated with our Krave business were
below expectations. In the fourth quarter of 2019, as part of a strategic review
initiated by our leadership team, we updated our strategic forecast which
projected underperformance related to the Krave business primarily due to
mainstream brands driving category volume and an increase in the overall
competitive landscape. We deemed this to be a triggering event requiring us to
test our Krave long-lived asset group for impairment. Based on our assessment,
we determined that the carrying value was not recoverable and calculated an
impairment loss as the excess of the asset group's carrying value over its fair
value. Therefore, as a result of this testing, during the fourth quarter of
2019, we recorded an impairment charge totaling $100.1 million to write down the
long-lived asset group, which predominantly consisted of customer relationship
and trademark intangible assets.


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Income taxes

We base our deferred income taxes, accrued income taxes and provision for income
taxes upon income, statutory tax rates, the legal structure of our Company,
interpretation of tax laws and tax planning opportunities available to us in the
various jurisdictions in which we operate. We file income tax returns in the
U.S. federal jurisdiction and various state and foreign jurisdictions. We are
regularly audited by federal, state and foreign tax authorities; a number of
years may elapse before an uncertain tax position, for which we have
unrecognized tax benefits, is audited and finally resolved. From time to time,
these audits result in assessments of additional tax. We maintain reserves for
such assessments.

We apply a more-likely-than-not threshold to the recognition and derecognition
of uncertain tax positions. Accordingly, we recognize the amount of tax benefit
that has a greater than 50% likelihood of being ultimately realized upon
settlement. Future changes in judgments and estimates related to the expected
ultimate resolution of uncertain tax positions will affect income in the quarter
of such change. While it is often difficult to predict the final outcome or the
timing of resolution of any particular uncertain tax position, we believe that
our unrecognized tax benefits reflect the most likely outcome. Accrued interest
and penalties related to unrecognized tax benefits are included in income tax
expense. We adjust these unrecognized tax benefits, as well as the related
interest, in light of changing facts and circumstances, such as receiving audit
assessments or clearing of an item for which a reserve has been established.
Settlement of any particular position could require the use of cash. Favorable
resolution would be recognized as a reduction to our effective income tax rate
in the period of resolution.

We believe it is more likely than not that the results of future operations will
generate sufficient taxable income to realize the deferred tax assets, net of
valuation allowances. Our valuation allowances are primarily related to U.S.
capital loss carryforwards and various foreign jurisdictions' net operating loss
carryforwards and other deferred tax assets for which we do not expect to
realize a benefit.


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