THE HERSHEY COMPANY (Exact name of registrant as specified in its - PDF document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 2, 2017 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______to_______ Commission file number 1-183 THE HERSHEY COMPANY (Exact name of registrant as specified in its charter) Delaware 23-0691590 (State or other jurisdiction of incorporation (I.R.S. Employer Identification No.) or organization) 100 Crystal A Drive, Hershey, PA 17033 (Address of principal executive offices) (Zip Code) 717-534-4200 (Registrant’s telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer ¨ Smaller reporting company ¨ Non-accelerated filer ¨ Emerging growth company ¨ (Do not check if a smaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date. Common Stock, one dollar par value—152,166,921 shares, as of April 21, 2017. Class B Common Stock, one dollar par value—60,619,777 shares, as of April 21, 2017.

THE HERSHEY COMPANY Quarterly Report on Form 10-Q For the Period Ended April 2, 2017 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION 3 Item 1. Financial Statements 3 Consolidated Statements of Income for the Three Months Ended April 2, 2017 and April 3, 2016 3 Consolidated Statements of Comprehensive Income for the Three Months Ended April 2, 2017 and April 3, 2016 4 Consolidated Balance Sheets as of April 2, 2017 and December 31, 2016 5 Consolidated Statements of Cash Flows for the Three Months Ended April 2, 2017 and April 3, 2016 6 Consolidated Statement of Stockholders' Equity for the Three Months Ended April 2, 2017 7 Notes to Unaudited Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3. Quantitative and Qualitative Disclosures About Market Risk 42 Item 4. Controls and Procedures 42 PART II. OTHER INFORMATION 43 Item1. Legal Proceedings 43 Item 1A. Risk Factors 43 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 43 Item 3. Defaults Upon Senior Securities 43 Item 4. Mine Safety Disclosures 43 Item 5. Other Information 43 Item 6. Exhibits 44 Signatures 45 2

PART I — FINANCIAL INFORMATION Item 1. Financial Statements. THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited) Three Months Ended April 2, 2017 April 3, 2016 Net sales $ 1,879,678 $ 1,828,812 Cost of sales 973,118 1,011,436 Gross profit 906,560 817,376 Selling, marketing and administrative expense 461,900 471,734 Long-lived asset impairment charges 208,712 — Business realignment costs 44,017 6,133 Operating profit 191,931 339,509 Interest expense, net 23,741 21,005 Other (income) expense, net (171) (21,225) Income before income taxes 168,361 339,729 Provision for income taxes 70,113 109,897 Net income including noncontrolling interest 98,248 229,832 Less: Net loss attributable to noncontrolling interest (26,796) — Net income attributable to The Hershey Company $ 125,044 $ 229,832 Net income per share—basic: Common stock $ 0.60 $ 1.09 Class B common stock $ 0.55 $ 0.99 Net income per share—diluted: Common stock $ 0.58 $ 1.06 Class B common stock $ 0.55 $ 0.99 Dividends paid per share: Common stock $ 0.618 $ 0.583 Class B common stock $ 0.562 $ 0.530 See Notes to Unaudited Consolidated Financial Statements. 3

THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three Months Ended April 2, 2017 April 3, 2016 Tax Tax Pre-Tax (Expense) After-Tax Pre-Tax (Expense) After-Tax Amount Benefit Amount Amount Benefit Amount $ $ Net income including noncontrolling interest 98,248 229,832 Other comprehensive income (loss), net of tax: $ $ — $ — Foreign currency translation adjustments 13,951 13,951 $ 12,166 12,166 Pension and post-retirement benefit plans: (196) (122) — — Net actuarial loss and prior service cost 74 — (2,711) (3,579) Reclassification to earnings 7,153 4,442 8,680 5,101 Cash flow hedges: (1,499) (1,320) (33,909) Losses on cash flow hedging derivatives 179 11,765 (22,144) (1,166) (7,909) Reclassification to earnings 3,033 1,867 2,997 (4,912) (3,624) (20,972) $ $ 22,442 $ $ 11,183 Total other comprehensive income (loss), net of tax 18,818 (9,789) $ $ Total comprehensive income including noncontrolling interest 117,066 220,043 (26,456) Comprehensive income (loss) attributable to noncontrolling interest (1,076) $ 143,522 $ 221,119 Comprehensive income attributable to The Hershey Company See Notes to Unaudited Consolidated Financial Statements. 4

THE HERSHEY COMPANY CONSOLIDATED BALANCE SHEETS (in thousands, except share data) April 2, 2017 December 31, 2016 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 235,031 $ 296,967 Accounts receivable—trade, net 595,779 581,381 Inventories 795,404 745,678 Prepaid expenses and other 247,647 192,752 Total current assets 1,873,861 1,816,778 Property, plant and equipment, net 2,050,439 2,177,248 Goodwill 814,882 812,344 Other intangibles 381,716 492,737 Other assets 163,661 168,365 Deferred income taxes 57,826 56,861 $ 5,342,385 $ 5,524,333 Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 499,149 $ 522,536 Accrued liabilities 646,879 750,986 Accrued income taxes 77,244 3,207 Short-term debt 487,487 632,471 Current portion of long-term debt 158 243 Total current liabilities 1,710,917 1,909,443 Long-term debt 2,350,941 2,347,455 Other long-term liabilities 399,575 400,161 Deferred income taxes 35,499 39,587 Total liabilities 4,496,932 4,696,646 Stockholders’ equity: The Hershey Company stockholders’ equity Preferred stock, shares issued: none at April 2, 2017 and December 31, 2016 — — Common stock, shares issued: 299,281,967 at April 2, 2017 and December 31, 2016 299,281 299,281 Class B common stock, shares issued: 60,619,777 at April 2, 2017 and December 31, 2016 60,620 60,620 Additional paid-in capital 878,650 869,857 Retained earnings 6,112,471 6,115,961 Treasury—common stock shares, at cost: 147,150,754 at April 2, 2017 and 147,642,009 at December 31, 2016 (6,163,534) (6,183,975) Accumulated other comprehensive loss (357,410) (375,888) Total—The Hershey Company stockholders’ equity 830,078 785,856 Noncontrolling interests in subsidiaries 15,375 41,831 Total stockholders’ equity 845,453 827,687 $ 5,342,385 $ 5,524,333 Total liabilities and stockholders’ equity See Notes to Unaudited Consolidated Financial Statements. 5