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Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.14pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.18pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.10pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+2
adversely+1
negatively+1
concerns+1
challenges+1
Positive rising
successfully+2
effective+1
Risk Factors (Item 1A)
4,869 words
Item 1A. RISK FACTORS
You should carefully read the following discussion of significant factors, events and uncertainties when evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K. The events and consequences discussed in these risk factors could materially and adversely affect our business, operating results, liquidity, and financial condition. While we believe we have identified and discussed below the key risk factors affecting our business, these risk factors do not identify all the risks we face, and there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be significant that may have a material adverse effect on our business, performance or financial condition in the future.
Risks Related to Our Business and Operations
Our Company’s reputation or brand image might be impacted as a result of issues, concerns or regulatory changes relating to the quality and safety of our products, ingredients or packaging, human and workplace rights, and other environmental, social or governance matters, which in turn could result in litigation or otherwise negatively impact our operating results.
In order to sell our iconic, branded products, we need to maintain a reputation with our customers, consumers, suppliers, vendors and employees, among others. Issues related to the quality and safety of our products, ingredients or packaging could our Company’s image and reputation. We have in the past or removed certain products from store shelves, and may in the future need to do so again in the future. publicity related to these types of , or related to product contamination or product tampering, whether valid or not, could decrease demand for our products or cause production and delivery . In addition, publicity related to our environmental, social or governance practices could also impact our reputation with customers, consumers, suppliers, and vendors.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairment+3
declined+2
losses+1
retaliatory+1
decline+1
Positive rising
benefit+3
gains+1
efficiency+1
strong+1
leadership+1
MD&A (Item 7)
12,505 words
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 MD&A is organized in the following sections:
• Business Model and Growth Strategy
• Overview
• Trends Affecting Our Business
• Consolidated Results of Operations
• Segment Results
• Liquidity 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.
We have been in the past and in the future could potentially be subject to litigation or government actions as a result of issues or concerns relating to the quality and safety of our products, ingredients or packaging, human and workplace rights, and other environmental, social or governance matters, which could result in payments of fines or damages. Costs associated with these potential actions, as well as the potential impact on our reputation or ability to sell our products, could negatively affect our operating results.
Disruption to our manufacturing operations or supply chain could impair our ability to produce or deliver finished products, resulting in a negative impact on our operating results.
Approximately 74% of our manufacturing capacity is located in the United States. Disruption to our global manufacturing operations or our supply chain could result from, among other factors, the following:
• Natural disasters;
• Pandemics, epidemics, coronavirus disease and/or other outbreak of disease;
• Climate change and severity of extreme weather;
• Fires or explosions;
• Terrorism or other acts of violence;
• Labor strikes or other labor activities;
• Unavailability of raw or packaging materials;
• Third party service provider disruptions, such as cyber breaches or system failures;
• Operational and/or financial instability of key suppliers, and other vendors or service providers; and
• Suboptimal production planning which could impact our ability to cost-effectively meet product demand.
We believe that we take adequate precautions to mitigate the impact of possible disruptions. We have strategies and plans in place to manage disruptive events if they were to occur, including our global supply chain strategies and our principle-based global labor relations strategy. If we are unable, or find that it is not financially feasible, to effectively plan for, mitigate or manage operational stability and business resiliency risks, particularly within our international markets and snacks portfolio, due to the potential impacts of such disruptive events on our manufacturing operations or supply chain, our financial condition and results of operations could be negatively impacted if such events were to occur.
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We might not be able to hire, engage, and retain the talented global human capital we need to drive our growth strategies.
Our future success depends upon our ability to identify, hire, develop, engage, and retain talented personnel across the globe. Competition for global talent is intense, and we might not be able to identify and hire the personnel we need to continue to evolve and grow our business. In particular, if we are unable to hire the right individuals to fill new or existing senior management positions as vacancies arise, our business performance may be adversely impacted.
Activities related to identifying, recruiting, hiring, and integrating qualified individuals require significant time and attention. We may also need to invest significant amounts of cash and equity to attract talented new employees, and we may never realize returns on these investments.
In addition to hiring new employees, we must continue to focus on retaining and engaging the talented individuals we need to sustain our core business and lead our developing businesses into new markets, channels and categories. This may require significant investments in training, coaching and other career development and retention activities. If we are not able to effectively retain and grow our talent, our ability to achieve our strategic objectives will be adversely affected, which may negatively impact our financial condition and results of operations.
Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, stockholders and other stakeholders on environmental issues, could negatively affect our business and operations.
Climate and broader environmental-related changes can increase variability in, or otherwise impact, natural disasters, including weather patterns, with the potential for increased frequency and severity of significant weather events, natural hazards, rising mean temperature and sea levels, and long-term changes in precipitation patterns. Climate change or weather-related disruptions to our supply chain can impact the availability and cost of materials needed for manufacturing, which may increase insurance and other operating costs.
Increased focus on the financial impacts of environment and climate change has led to evolving legislative and regulatory efforts to deal with potential causes and adverse impacts of climate change, including regulation of GHG emissions. Laws and regulations related to GHG emissions and other climate or environmental related concerns may adversely affect us, our suppliers and our customers, and may require the Company to invest in additional capital investments to maintain compliance. Our value chain faces similar challenges as our products rely on agricultural ingredients and a global supply chain. Climate and broader changes in the environment pose a significant and increasing risk to global food production systems and to the safety and resilience of the communities where we live, work and source our ingredients. The GHG impacts of land-use change are most pronounced in our cocoa supply chain, where we have already been working for several years to prevent deforestation and build climate and ingredient resilience. Additionally, any non-compliance with legislative and regulatory requirements could negatively impact our reputation and ability to do business.
Investors, customers, advisory services, government regulators, and other market participants may be focused on the environmental or sustainability practices, disclosures and performance of companies. We believe our sustainability practices, disclosures and performance are focused on the most material risks and opportunities to our business and support our environmental goals and continue to evolve to meet the growing needs of our stakeholders. However, if our environmental goals do not meet investor or other external stakeholder expectations and standards, our access to capital may be negatively impacted. An enforcement action for non-compliance with regulations or reporting requirements could harm our reputation, financial position and ability to grow. A failure to meet investor or other external stakeholder expectations or standards may adversely affect our results of operations, ability to manage our liquidity, or ability to implement our strategies.
The Company publishes its environmental goals, with a particular focus on achieving an absolute reduction in our Scope 1 and 2 GHG emissions, Forest Land and Agriculture (“FLAG”) emissions, and non-FLAG emissions consistent with global environmental standards. The costs of our voluntary commitments may be greater than expected, and there can be no assurance the Company will achieve its goals, or meet the evolving sustainability expectations and standards of our investors or other external stakeholders. Any failure to achieve our goals, a perception of our failure to act responsibly with respect to the environment, or failure to respond to new or evolving legal and regulatory requirements or other sustainability concerns could adversely affect our business, reputation and increase risk of litigation.
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The effects and costs of environmental impacts, or any failure to meet related requirements and expectations, could have a negative impact on our reputation, financial condition and results of operations.
Risks Related to the Industry in Which We Operate
Increases in raw material and energy costs along with the availability of adequate supplies of raw materials could affect future financial results.
We use many different commodities for our business, including cocoa products, sugar, corn products, dairy products, wheat products, peanuts, almonds, natural gas, and diesel fuel.
Commodities are subject to price volatility and changes in supply caused by numerous factors, including:
• Commodity market fluctuations;
• Currency exchange rates;
• Imbalances between supply and demand;
• Rising levels of inflation and interest rates related to domestic and global economic conditions or supply chain issues;
• The effects of climate change and extreme weather on crop yield and quality;
• Speculative influences;
• Trade agreements among producing and consuming nations, including tariffs;
• Supplier compliance with commitments;
• Import/export requirements for raw materials and finished goods;
• Political unrest in producing countries;
• Introduction of living income premiums or similar requirements;
• Changes in governmental agricultural programs and energy policies; and
• Other events beyond our control such as the impacts on the business or supply chain from international conflicts or geopolitical tensions.
Although we use forward contracts and commodity futures and options contracts to hedge commodity prices where possible, commodity price increases ultimately result in corresponding increases in our raw material and energy costs. For the year ended December 31, 2025, in addition to higher commodity costs, our cost of sales increased compared to the same period of 2024 as a result of $491.0 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases. During the year ended 2025, market prices for the majority of our exchange traded commodities remained volatile, including cocoa which has decreased from record highs but remains structurally elevated.
We continue to monitor and use our risk management strategy where possible to hedge commodity prices in order to mitigate corresponding increases in our raw materials and energy costs, however, if we are unable to offset cost increases for major raw materials and energy, there could be a negative impact on our financial condition and results of operations.
Price increases may not be sufficient to offset cost increases and maintain profitability or may result in sales volume declines associated with pricing elasticity.
We may be able to pass some or all raw material, energy, and other input cost increases to customers by increasing the selling prices of our products or decreasing the size of our products; however, higher product prices or decreased product sizes have in the past and may in the future result in a reduction in sales volume and/or consumption. If we are not able to increase our selling prices or reduce product sizes (including if inflation outpaces our pricing elasticity) sufficiently, or in a timely manner, to offset future increased raw material, energy or other input costs, including packaging, freight, tariffs, direct labor, overhead and employee benefits, or if our sales volume decreases significantly, there could be a negative impact on our financial condition and results of operations.
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Market demand for new and existing products could decline.
We operate in highly competitive markets and rely on continued demand for our products. To generate revenues and profits, we must sell products that appeal to our customers and to consumers. Our continued success is impacted by many factors, including the following:
• Effective retail execution;
• Appropriate advertising campaigns and marketing programs;
• Our ability to secure adequate shelf space at retail locations;
• Our ability to drive sustainable innovation and maintain a strong pipeline of new products in the confectionery and broader snacking categories;
• Our ability to react to changes in product category and channel consumption;
• Our response to consumer demographics and trends, including but not limited to, trends relating to store trips and the impact of the growing digital commerce channel; and
• Consumer health and wellness concerns, including weight management (i.e., use of medications, dieting) and the consumption of certain ingredients.
There continues to be competitive product and pricing pressures in the markets where we operate, as well as challenges in maintaining profit margins. We must maintain mutually beneficial relationships with our key customers, including retailers and distributors, to compete effectively. Our largest customer, McLane Company, Inc., accounted for approximately 27% of our consolidated net sales in 2025. McLane Company, Inc. is one of the largest wholesale distributors in the United States to convenience stores, drug stores, wholesale clubs and mass merchandisers, including Wal-Mart Stores, Inc.
Increased marketplace competition could hurt our business.
The global confectionery and snacks packaged goods industry is intensely competitive and consolidation in this industry continues. Some of our competitors are large private companies, as well as large retailers, that have significant resources and substantial international operations. We continue to experience increased levels of in-store activity for other snack items, which has pressured confectionery category growth. In order to protect our existing market share or capture increased market share in this highly competitive retail environment, we may be required to increase expenditures for promotions and advertising, and must continue to introduce and establish new products. Due to inherent risks in the marketplace associated with advertising and new product introductions, including uncertainties about trade and consumer acceptance, increased expenditures may not prove successful in maintaining or enhancing our market share and could result in lower sales and profits. In addition, we may incur increased credit and other business risks because we operate in a highly competitive retail environment.
Furthermore, artificial intelligence (“AI”) technologies have developed rapidly, and our business may be adversely affected if we cannot successfully integrate AI into our business in a timely, cost-effective, and compliant manner. Our competitors may incorporate AI into their business more successfully than us, which could have an adverse effect on our competitive position, reputation and operations.
Risks Related to Strategic Initiatives
Our financial results may be adversely impacted by the failure to successfully execute or integrate acquisitions, divestitures and joint ventures.
From time to time, we may evaluate potential acquisitions, divestitures or joint ventures that align with our strategic objectives. The success of such activity depends, in part, upon our ability to identify suitable buyers, sellers or business partners; perform effective assessments prior to contract execution; negotiate contract terms; and, if applicable, obtain government approval. These activities may present certain financial, managerial, staffing and talent, and operational risks, including diversion of management’s attention from existing core businesses; difficulties integrating or separating businesses from existing operations; and challenges presented by acquisitions or joint ventures which may not achieve sales levels and profitability that justify the investments made. If the acquisitions, divestitures, or joint ventures are not successfully implemented or completed, there could be a negative impact on our financial condition, results of operations and cash flows.
In November 2025, we completed the acquisition of LesserEvil, LLC, previously a privately held company that produces and sells organic popcorn and puffed snack products to retailers and distributors in the United States and
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Canada. The acquisition complements Hershey’s existing portfolio and increases manufacturing capacity. In 2024, we completed the acquisition of the Sour Strips brand from Actual Candy, LLC. Sour Strips is an emerging sour candy brand. In 2023, we completed the acquisition of certain assets that provide additional manufacturing capacity from Weaver Popcorn, a manufacturer of SkinnyPop popcorn, which helped us strengthen our supply chain capabilities. While we believe significant operating synergies can be obtained in connection with these acquisitions, achievement of these synergies will be driven by our ability to successfully leverage Hershey’s resources, expertise, capability-building, distribution locations and customer base. If we are unable to successfully couple Hershey’s scale and expertise in brand building with the existing operations of our acquired brands, it may impact our ability to expand our snacking footprint at our desired pace.
Our international operations may not achieve projected growth objectives, which could adversely impact our overall business and results of operations.
In 2025, 2024 and 2023, respectively, we derived approximately 12.3%, 12.8% and 12.7% of our net sales from customers located outside of the United States. Additionally, approximately 16% of our total long-lived assets were located outside of the United States as of December 31, 2025. As part of our strategy, we have made investments outside of the United States, particularly in Canada, Malaysia, Mexico, Brazil, and India. As a result, we are subject to risks and uncertainties relating to international sales and operations, including:
• The inability to manage operational stability and business resiliency within our international markets due to unforeseen global economic and environmental changes resulting in business interruption, supply constraints, inflation, deflation or decreased demand;
• The inability to establish, develop and achieve market acceptance of our global brands in international markets;
• Difficulties and costs associated with compliance and enforcement of remedies under a wide variety of complex laws, treaties and regulations;
• Unexpected changes in regulatory environments;
• Political and economic instability, including the possibility of civil unrest, terrorism, mass violence or armed conflict;
• Nationalization of our properties by foreign governments;
• Tax rates that may exceed those in the United States and earnings that may be subject to withholding requirements and incremental taxes upon repatriation;
• Potentially negative consequences from changes in tax laws;
• The imposition of tariffs on U.S. imports and retaliatory tariffs in response, quotas, trade barriers, other trade protection measures and import or export licensing requirements;
• Increased costs, disruptions in shipping or reduced availability of freight transportation;
• The impact of currency exchange rate fluctuations between the U.S. dollar and foreign currencies;
• Failure to gain sufficient profitable scale in certain international markets resulting in an inability to cover manufacturing fixed costs or resulting in losses from impairment or sale of assets; and
• Failure to recruit, retain and build a talented and engaged global workforce.
Some of the risks of operating internationally have negatively affected our financial condition and results of operations, including the imposition of tariffs on U.S. imports and associated retaliatory tariffs. If we are not able to achieve our projected international growth objectives and mitigate the numerous risks and uncertainties associated with our international operations, there could be a negative impact on our financial condition and results of operations.
We may not fully realize the expected cost savings and/or operating efficiencies associated with our strategic initiatives or restructuring programs, which may have an adverse impact on our business.
We depend on our ability to evolve and grow, and as changes in our business environment occur, we may adjust our business plans by introducing new strategic initiatives or restructuring programs to meet these changes. Recently introduced strategic initiatives include our efforts to continue to expand our presence in digital commerce, to transform our manufacturing, commercial and corporate operations through digital technologies and to enhance our data analytics capabilities to develop new commercial insights. If we are not able to capture our share of the expanding digital commerce market, if we do not adequately leverage technology to improve operating efficiencies or if we are unable to develop the data analytics capabilities needed to generate actionable commercial insights, our business performance may be impacted, which may negatively impact our financial condition and results of operations.
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Additionally, from time to time we implement business realignment activities to support key strategic initiatives designed to maintain sustainable long-term growth. For instance, in February 2024, the Board of Directors approved the AAA Initiative, which is a multi-year productivity program to improve supply chain and manufacturing-related spend, optimize selling, general and administrative expenses, leverage new technology and business models to further simplify and automate processes, and generate long-term savings. We cannot guarantee that we will be able to successfully implement these strategic initiatives and restructuring programs, that we will achieve or sustain the intended benefits under these programs, or that the benefits, even if achieved, will be adequate to meet our long-term growth and profitability expectations, which could in turn adversely affect our business.
Risks Related to Governmental and Regulatory Changes
Changes in governmental laws, regulations and policies, including taxes and tariffs, could increase our costs and liabilities or impact demand for our products.
Changes in U.S. and non-U.S. laws, regulations and policies and the manner in which they are interpreted or applied may alter our business environment. These negative impacts could result from changes in food and drug laws, laws related to advertising and marketing practices, accounting standards, taxation compliance and requirements, tariffs on U.S. imports and retaliatory tariffs in response, competition laws, employment laws, import/export requirements, AI, and environmental laws, among others. It is possible that we could become subject to additional liabilities in the future resulting from changes in laws and regulations that could result in an adverse effect on our financial condition and results of operations.
For example, the European Union’s Deforestation Regulation (“EUDR”) will require the Company to conduct extensive diligence on seven commodities, including cocoa, palm oil and soy, as well as products derived from these commodities, such as chocolate, and the value chain, to ensure the goods do not result from recent deforestation, forest degradation, or breaches of local laws in order to sell such products in the European Union market or exported from it. The EUDR is scheduled to be effective in December 2026, following a two-year postponement. The EUDR, and other current or proposed regulations in markets in which we operate, are likely to increase our compliance costs, could depress sales in such markets if our products are not in compliance by applicable effective dates, and can result in fines and penalties or reputational harm if we do not fully comply.
Additionally, compliance with new and evolving laws, regulations or industry standards relating to AI may require significant investment and resources, and may limit our ability to use AI, which may result in reputational harm, legal liability or other adverse effects on our operations and overall business.
Our operations are impacted by consumer spending levels and impulse purchases, which are affected by general macroeconomic conditions, consumer confidence, employment levels, the availability of consumer credit and interest rates on that credit, consumer debt levels, energy costs and other factors. Volatility in food and energy costs, sustained global recessions, broad political instability, rising unemployment, pandemic, or other outbreaks of disease, climate change, weather, natural and other disasters, changing consumer demand, and declines in personal spending can adversely impact our revenues, profitability, and financial condition.
Changes in financial market conditions may make it difficult to access credit markets on commercially acceptable terms, which may reduce liquidity or increase borrowing costs for our Company, our customers and our suppliers. A significant reduction in liquidity could increase counterparty risk associated with certain suppliers and service providers, resulting in disruption to our supply chain and/or higher costs, and could impact our customers, resulting in a reduction in our revenue, or a possible increase in bad debt expense.
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Risks Related to Digital Transformation, Cybersecurity and Data Privacy
Disruptions, failures or security breaches of our information technology infrastructure could have a negative impact on our operations.
Information technology is critically important to our business operations. We use information technology to manage all business processes including manufacturing, financial, logistics, sales, marketing and administrative functions. These processes collect, interpret, and distribute business data and communicate internally and externally with employees, suppliers, customers, and other third parties.
We, and our third-party service providers, are regularly the target of rapidly evolving cyber threats, including denial of service attacks, ransomware, spyware, misinformation, phishing/smishing/vishing attacks, business compromise attacks, typosquatting, automated attacks, employee errors, negligence or malfeasance, the use of malicious codes or worms, payment fraud, and other unauthorized occurrences on, or conducted through, our or our third-party service providers' information systems and networks. Therefore, we continuously monitor and update our information technology networks and infrastructure to prevent, detect, address, and mitigate the risk of unauthorized access, misuse, computer viruses, and other events that could have a security impact. We invest in industry standard security technology to protect the Company’s data and business processes against risk of data security breach and cyber attack. Our data security management program includes identity, trust, vulnerability, and threat management business processes as well as adoption of standard data protection policies. We measure our data security effectiveness through industry-accepted methods and remediate significant findings. Additionally, we certify our major technology suppliers and any outsourced services through accepted security certification standards. We maintain and routinely test backup systems and disaster recovery, along with external network security penetration testing by an independent third party as part of our business resiliency preparedness. We also have processes in place to prevent disruptions resulting from our implementation of new software and systems. Employees are trained annually on cybersecurity wellness and our acceptable use policy and we have implemented phishing simulations to increase awareness and compliance. We also currently maintain a cyber insurance policy that provides coverage for security breaches; however, such insurance may not be sufficient in type or amount to cover us againstclaims related to security breaches, cyber-attacks, and other related breaches.
We have been subject to cyber attacks, ransomware, and other security breaches, though these incidents historically have not had a significant impact on our business operations. The techniques that are used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and may be difficult to detect for long periods of time, and the sophistication of efforts by hackers to gainunauthorized access to information systems has continued to increase in recent years and may continue to do so. AI technologies may amplify certain existing technology-related risks such as cybersecurity threats, data privacy concerns, and intellectual property challenges. Despite continued vigilance in these areas, disruptions in or failures of information technology systems are possible and could have a negative impact on our operations or business reputation. Failure of our systems, including failures due to cyber attacks, ransomware or other security breaches that would prevent the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and could have negative consequences to our Company, our employees and those with whom we do business. This in turn could have a negative impact on our financial condition and results or operations. In addition, the cost to remediate any damages to our information technology systems suffered as a result of a cyber attack, ransomware or other security breach could be significant.
Complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations.
We rely extensively on information systems and technology to manage our business and summarize operating results. We operationalized the final phase of our multi-year implementation of a new global enterprise resource planning (“ERP”) system in April 2024, by implementing the new system in the North America Confectionery segment and select business units included in our International segment. This ERP system replaced our legacy operating and financial systems and is designed to accurately maintain the Company’s financial records, enhance operational functionality and provide timely information to the Company’s management team related to the operation of the business. The ERP system implementation process has required, and will continue to require, the investment of significant personnel and financial resources as we support post-implementation efforts and system functionality. We may not be able to successfully support post-implementation efforts without experiencing delays, increased costs, and other difficulties. Any disruptions or difficulties in using our ERP system could result in harm to our business,
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including our ability to forecast, manufacture or facilitate the shipment of our product, record net sales and collect our outstanding receivables. If we are unable to successfully manage post-implementation efforts related to our new ERP system as planned, our financial positions, results of operations and cash flows could be negatively impacted. Additionally, if the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be further delayed.
Our vision is to lead the future of snacking. 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, as 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 and become a leading snacking powerhouse, we are focused on continuing to expand the boundaries of our core confection brands to capture new snacking occasions and increasing our exposure into new snack categories through acquisitions.
• 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.
• 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
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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. We utilize continuous listening surveys that are distributed throughout the year to all employees globally to hear their thoughts on the Company’s direction and their place in it. These continuous touchpoints allow for real-time feedback and action from the Company. These surveys are further supplemented with quarterly and informative enterprise summits and team “Ask Me Anything” meetings, which, in conjunction with the continuous listening surveys, generate stronger employee engagement with the Company’s strategy, initiatives and leadership. In 2025, we maintained equitable pay achievements, including aggregate salary U.S. gender pay equity.
◦ We continue to make progress on our sustainability strategy and continue to elevate these important initiatives for a greater global impact. Through our focus on sustainability and social impact across our value chain, we continue to embed resilience into our enterprise, including how we source ingredients, operate with efficiency, and produce a portfolio of products for a range of consumer needs. We operate our business with all stakeholders in mind and with a view toward long-term sustainability and value creation.
OVERVIEW
Hershey is a global confectionery leader known for making more moments of goodness through chocolate, sweets, mints and other great tasting snacks. We are the largest producer of quality chocolate 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 85 brand names in approximately 65 countries worldwide.
Our principal product offerings include chocolate and non-chocolate confectionery products; gum and mint refreshment products and protein bars; pantry items, such as baking ingredients, toppings and beverages; and snack items such as spreads, bars, and snack bites and mixes, popcorn and pretzels.
Business Acquisitions
On November 18, 2025, we completed the acquisition of LesserEvil, LLC (“LesserEvil”), previously a privately held company that produces and sells organic popcorn and puffed snack products to retailers and distributors in the United States and Canada. The acquisition complements Hershey’s existing portfolio and increases manufacturing capacity.
On November 8, 2024, we completed the acquisition of the Sour Strips brand from Actual Candy, LLC. Sour Strips is
an emerging sour candy brand and is available in a wide range of food distribution channels in the United States.
On May 31, 2023, we completed the acquisition of certain assets that provide additional manufacturing capacity from Weaver Popcorn Manufacturing, Inc. (“Weaver”), a leader in the production and co-packing of microwave popcorn and ready-to-eat popcorn, and former co-manufacturer of the Company’s SkinnyPop brand.
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TRENDS AFFECTING OUR BUSINESS
Throughout 2025, we experienced net sales growth, positive changes in consumer behavior, and price elasticity despite the persistent dynamic macro environment. However, increasing inflationary pressures, including ongoing price volatility for select commodities and higher manufacturing costs, continued to challenge the business. Despite a strategic pricing action in the third quarter combined with other specific actions taken to mitigate these gross margin pressures, our direct inputs continue to be the primary incremental cost to our business (see Consolidated Results of Operations included in this MD&A). We utilize many exchange traded commodities for our business that are subject to price volatility, specifically cocoa products, which continued to experience elevated market prices compared to historical levels (see Item 7A - Quantitative and Qualitative Disclosures about Market Risk included in this Annual Report on Form 10-K).
Furthermore, changes in global trade policies, including tariffs on U.S. imports, continue to increase global economic and political uncertainty. For the year ended December 31, 2025, the imposition of tariffs on U.S. imports and retaliatory tariffs, had a material negative impact on our results of operations and commodity prices. We are continuing to monitor the ongoing negotiations related to tariffs, specifically, goods imported into the U.S. from Canada, Mexico and other countries, as well as export markets, in which we have significant business operations, all of which may result in material adverse effects on our results of operations. The scope and length of tariffs, including their effects on the broader economy and our business, remain uncertain. These outcomes may be influenced by factors such as continued U.S. negotiations with impacted countries, retaliatory measures from other nations, possible tariff exemptions, public sentiment toward U.S. products and companies, and the domestic availability of lower-cost alternatives.
Additionally, evolving priorities of the U.S. administration, such as leadership changes at the U.S. Department of Health and Human Services and the U.S. Food and Drug Administration (“FDA”) in early 2025, as well as the Make America Healthy Again movement, subject the food industry to increasing laws and regulations, including nutrition, food date labeling and traceability recordkeeping requirements, as well as changes in consumer expectations and behavior. For example, in April 2025, the FDA announced that it would be phasing out the approved use of petroleum-based synthetic dyes in food products. Therefore, in an effort to be responsive to the evolving regulatory environment and to ensure consumers have options to fit their lifestyle while maintaining trust and confidence in our products, we announced our decision to remove all certified Food, Drug & Cosmetic colors from our great tasting snacks by the end of 2027. The estimated costs associated with this removal are not expected to have a material impact on our financial position, results of operations or liquidity.
As of December 31, 2025, we believe we have sufficient liquidity to satisfy our key strategic initiatives and other material cash requirements in both the short-term and in the long-term; 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 the fluctuating macroeconomic environment, including price volatility for our commodities, the possibility of a recession, changes in consumer shopping and consumption behavior, and changes in geopolitical events, including the imposition of tariffs and retaliatory tariffs, we may continue to experience increasing supply chain costs, higher inflation and other impacts to our business. We will continue to evaluate the nature and extent of these evolving impacts on our business, consolidated results of operations, segment results, liquidity and capital resources.
Note: Percentage changes may not compute directly as shown due to rounding of amounts presented above.
NM = not meaningful
Net Sales
2025 compared with 2024
Net sales were $11,692.6 million in 2025 compared to $11,202.3 million in 2024, an increase of $490.3 million, or 4.4%. The net sales increase reflects a favorable price realization of approximately 6% primarily due to higher list prices across all three segments, as well as a benefit of approximately 1% from the 2024 acquisition of Sour Strips and the 2025 acquisition of LesserEvil. The increase was partially offset by a volume decrease of approximately 1%, primarily driven by price elasticity impacts within the North America Confectionery and International segments, partially offset by strong results in North America Salty Snacks. The increase was further offset by an unfavorable foreign currency exchange impact of less than 1%.
2024 compared with 2023
Net sales were $11,202.3 million in 2024 compared to $11,165.0 million in 2023, an increase of $37.3 million, or 0.3%. The net sales increase reflects a favorable price realization of approximately 3% primarily due to higher list prices in the North America Confectionery and International segments, partially offset by declines in North America Salty Snacks. The increase was partially offset by a volume decrease of approximately 2% due to declines in the North America Confectionery and International segments, partially offset by an increase in North America Salty Snacks. The increase was further offset by a minimal unfavorable impact from foreign currency exchange rates.
Key U.S. Marketplace Metrics
For the full year 2025, our total U.S. retail takeaway increased 5.4% in the expanded multi-outlet combined plus convenience store channels (MULO+ w/ Convenience), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway increased 4.9% and experienced a CMG market share decline of approximately 10 basis points. Our Salty consumer takeaway increased 11.3% and experienced a Salty market share increase of approximately 40 basis points.
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The consumer takeaway and market share information reflect measured channels of distribution accounting for approximately 90% of our U.S. confectionery and salty snack retail businesses. 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 Circana, 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
2025 compared with 2024
Cost of sales were $7,769.9 million in 2025 compared to $5,901.4 million in 2024, an increase of $1,868.5 million, or 31.7%. The increase was driven by $1,965.1 million of unfavorable costs, primarily related to $736.6 million in higher commodity costs, $287.2 million in higher supply chain costs, including tariffs, as well as $491.0 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases (See Item 7A - Quantitative and Qualitative Disclosures About Market Risk for more information). The increase was partially offset by $96.6 million of favorable cost savings due to lower sales volume and lower business realignment costs.
Gross margin was 33.5% in 2025 compared with 47.3% in 2024, a decrease of approximately 1,380 basis points. The decrease was driven by higher commodity and tariff costs, unfavorable mark-to-market activity on our commodity derivative instruments and lower volume, which more than offset the benefits from net price realization, supply chain productivity, and net savings related to our Advancing Agility & Automation Initiative (“AAA Initiative”).
2024 compared with 2023
Cost of sales were $5,901.4 million in 2024 compared with $6,167.2 million in 2023, a decrease of $265.8 million, or 4.3%. The decrease included $637.9 million of favorable costs, by an incremental $563.0 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases and lower costs, primarily related to lower sales volume, in line with the declines in net sales noted above. The decrease was partially offset by $372.1 million of higher costs, primarily driven by higher commodity costs from cocoa, higher supply chain costs, unfavorable mix and incremental business realignment costs.
Gross margin was 47.3% in 2024 compared with 44.8% in 2023, an increase of 250 basis points. The increase was driven by favorable year-over-year mark-to-market impact from commodity derivative instruments, favorable price realization and volume declines. The increase was partially offset by higher commodity costs, unfavorable product mix and increased business realignment costs.
SM&A Expenses
2025 compared with 2024
SM&A expenses were $2,460.6 million in 2025 compared to $2,373.6 million in 2024, an increase of $87.0 million, or 3.7%. The increase was driven by higher compensation and benefit costs and investments in advertising and related consumer marketing expenses. Total advertising and related consumer marketing expenses increased 3.7%, driven by North America Salty Snacks. SM&A expenses, excluding advertising and related consumer marketing, increased approximately 4.2% in 2025 driven by higher compensation costs, partially offset by net savings related to our AAA Initiative.
2024 compared with 2023
SM&A expenses were $2,373.6 million in 2024 compared to $2,436.5 million in 2023, a decrease of $62.9 million, or 2.6%. The decrease was driven by lower corporate expenses. Total advertising and related consumer marketing expenses declined 0.1% driven by North America Confectionery, significantly offset by increased spending in North America Salty Snacks. SM&A expenses, excluding advertising and related consumer marketing, decreased approximately 3.8% in 2024 driven by lower compensation and benefit costs across segments.
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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. Excluding the portion recorded within Cost of Sales and SM&A expenses (as noted above), in 2025, 2024 and 2023, we recorded business realignment costs of $20.6 million, $29.1 million and $0.4 million, respectively. The 2025 and 2024 costs related to the AAA Initiative that the Board of Directors approved in February 2024. The AAA Initiative, is a multi-year productivity program to improve supply chain and manufacturing-related spend, optimize selling, general and administrative expenses, leverage new technology and business models to further simplify and automate processes, and generate long-term savings. The 2023 costs related 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. This program was completed in 2023. 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
2025 compared with 2024
Operating profit was $1,441.5 million in 2025 compared to $2,898.2 million in 2024, a decrease of $1,456.7 million, or 50.3%. The decrease was predominantly due to lower gross profit and higher SM&A expenses, partially offset by lower business realignment expenses, as noted above. Operating profit margin decreased to 12.3% in 2025 from 25.9% in 2024 by the same factors noted above in gross margin.
2024 compared with 2023
Operating profit was $2,898.2 million in 2024 compared to $2,560.9 million in 2023, an increase of $337.3 million, or 13.2%. The increase was predominantly due to higher gross profit and lower SM&A expenses partially offset by higher business realignment costs, as noted above in gross margin. Operating profit margin increased to 25.9% in 2024 from 22.9% in 2023 by the same factors noted above in gross margin.
Interest Expense, Net
2025 compared with 2024
Net interest expense was $190.2 million in 2025 compared to $165.7 million in 2024, an increase of $24.5 million, or 14.8%. The increase was primarily due to higher long-term debt balances in 2025 compared to 2024, driven by the February 2025 debt issuance. The increase was partially offset by a decrease in short-term interest expense and an increase in interest income.
2024 compared with 2023
Net interest expense was $165.7 million in 2024 compared to $151.8 million in 2023, an increase of $13.9 million, or 9.1%. The increase was primarily due to higher short-term debt balances in 2024 versus 2023, specifically related to outstanding commercial paper. The increase in the expense was partially offset by a decrease in short-term foreign bank borrowings and an increase in interest income.
Other (Income) Expense, Net
2025 compared with 2024
Other (income) expense, net totaled an expense of $37.1 million in 2025 versus an expense of $258.6 million in 2024, a decrease of $221.5 million, or 85.7%. The decrease in the net expense was primarily driven by a decrease of $218.8 million write-downs on equity investments qualifying for tax credits in 2025 versus 2024 and a decrease of $2.2 million in non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.
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2024 compared with 2023
Other (income) expense, net totaled an expense of $258.6 million in 2024 versus an expense of $237.2 million in 2023, an increase of $21.4 million, or 9.0%. The increase in the net expense was primarily driven by an increase of $32.8 million of higher write-downs on equity investments qualifying for tax credits in 2024 versus 2023, partially offset by a decrease of $10.6 million of lower non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.
Income Taxes and Effective Tax Rate
2025 compared with 2024
Our effective income tax rate was 27.3% for 2025 compared with 10.2% for 2024. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by state taxes and tax reserves. Relative to the 21% statutory rate, the 2024 effective rate benefited from investment tax credits, partially offset by state taxes.
2024 compared with 2023
Our effective income tax rate was 10.2% for 2024 compared with 14.3% for 2023. Relative to the 21% statutory rate, both the 2024 and 2023 effective tax rates, relative to the 21% statutory rate, benefited from investment tax credits, partially offset by state taxes.
Net Income and Earnings Per Share-diluted
2025 compared with 2024
Net income was $883.3 million in 2025 compared to $2,221.2 million in 2024, a decrease of $1,337.9 million, or 60.2%. Earnings Per Share (“EPS”)-diluted was $4.34 in 2025 compared to $10.92 in 2024, a decrease of $6.58, or 60.3%. The decrease in both net income and EPS-diluted was driven by lower gross profit, higher SM&A expenses, higher interest expense, and higher income taxes, partially offset by lower business realignment costs and lower other expenses.
2024 compared with 2023
Net income was $2,221.2 million in 2024 compared to $1,861.8 million in 2023, an increase of $359.4 million, or 19.3%. EPS-diluted was $10.92 in 2024 compared to $9.06 in 2023, an increase of $1.86, or 20.5%. The increase in both net income and EPS-diluted was driven primarily by higher gross profit, lower SM&A expenses and lower income taxes, partially offset by higher business realignment costs and higher other income and expenses. Our 2024 EPS-diluted benefited from lower weighted-average shares outstanding as a result of share repurchases pursuant to our Board-approved repurchase programs.
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SEGMENT RESULTS
The summary that follows provides a discussion of the results of operations of our three 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 our Chief Operating Decision Maker, Kirk Tanner, President, and Chief Executive Officer, 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. Refer to Note 13 Segment Information in our audited consolidated financial statements for reconciliations of net sales for our reportable segments to consolidated total net sales and of segment operating income to consolidated income before taxes.
Our segment results, including a reconciliation to our consolidated results, were as follows:
For the years ended December 31,
In millions of dollars
Net Sales:
North America Confectionery
North America Salty Snacks
International
Total
Segment Income:
North America Confectionery
North America Salty Snacks
International
Total segment income
Unallocated corporate expense (1)
Unallocated mark-to-market losses (gains) on commodity derivatives (2)
Costs associated with business realignment activities
Operating profit
Interest expense, net
Other (income) expense, net
Income before income taxes
(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 mark-to-market valuation of commodity derivative positions recognized in unallocated derivative losses (gains). See Note 13 to the Consolidated Financial Statements.
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North America Confectionery
The North America Confectionery segment is responsible for our chocolate and non-chocolate confectionery market position 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 81.1%, 81.4% and 81.7% of our net sales in 2025, 2024 and 2023, respectively. North America Confectionery results for the years ended December 31, 2025, 2024 and 2023 were as follows:
Percent Change
For the years ended December 31,
In millions of dollars
Net sales
Segment income
Segment margin
2025 compared with 2024
Net sales of our North America Confectionery segment were $9,479.7 million in 2025 compared to $9,118.6 million in 2024, an increase of $361.1 million. The increase was driven by favorable price realization of approximately 6%, primarily due to the pricing action announced in July 2025. Volume declined approximately 2%, driven by price elasticity impacts in everyday core U.S. confection. Additionally, the 2024 acquisition of Sour Strips contributed a benefit of less than 1% and the impact from unfavorable foreign currency exchange rates was immaterial.
Our North America Confectionery segment income was $2,493.8 million in 2025 compared to $2,945.7 million in 2024, a decrease of $451.9 million, or 15.3%. The decrease was driven primarily by higher commodity and tariff costs and unfavorable mix, partially offset by net price realization, supply chain productivity, net savings related to our AAA Initiative and reduced advertising and related consumer marketing expenses.
2024 compared with 2023
Net sales of our North America Confectionery segment were $9,118.6 million in 2024 compared to $9,123.1 million in 2023, a decrease of $4.5 million. The decrease was driven by volume declines of approximately 4% driven by a decrease in everyday core U.S. confection brands. The decrease was partially offset by a favorable price realization of approximately 4% due to price increases on certain products across our portfolio, and a minimal benefit from the 2024 acquisition of Sour Strips. There was no impact from foreign currency exchange rates.
Our net sales for licensing and owned retail increased approximately 3.5% during 2024 compared to 2023.
Our North America Confectionery segment income was $2,945.7 million in 2024 compared to $3,117.0 million in 2023, a decrease of $171.3 million, or 5.5%. The decrease was primarily due to higher commodity costs, higher supply chain costs, and unfavorable product mix. The decrease was partially offset by favorable price realization, lower volume, and lower advertising and related consumer marketing costs.
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North America Salty Snacks
The North America Salty Snacks segment is responsible for our grocery and snacks market positions, including our salty snacking products. North America Salty Snacks accounted for 10.9%, 10.1% and 9.8% of our net sales in 2025, 2024 and 2023, respectively. North America Salty Snacks results for the years ended December 31, 2025, 2024 and 2023 were as follows:
Percent Change
For the years ended December 31,
In millions of dollars
Net sales
Segment income
Segment margin
2025 compared with 2024
Net sales for our North America Salty Snacks segment were $1,271.3 million in 2025 compared to $1,135.7 million in 2024, an increase of $135.6 million, or 11.9% . The increase reflected a volume increase of approximately 8%, primarily related to Dot’s Homestyle Pretzels and SkinnyPop , partially offset by a reduction of net sales to private label customers. Price realization increased approximately 1% as a result of lower trade promotional activities. Additionally, the 2025 acquisition of LesserEvil contributed a benefit of approximately 2%.
Our North America Salty Snacks segm ent income was $241.8 million in 2025 compared to $199.4 million in 2024, an increase of $42.4 million, or 21.3%. The increase was primarily due to volume increases and net savings related to our AAA Initiative, partially offset by higher advertising and related consumer marketing expenses.
2024 compared with 2023
Net sales for our North America Salty Snacks segment were $1,135.7 million in 2024 compared to $1,092.7 million in 2023, an increase of $43.0 million, or 3.9%. The increase reflected a volume increase of approximately 5% primarily related to Dot’s Homestyle Pretzels snacks. The increase was partially offset by unfavorable price realization of approximately 1%, driven primarily by SkinnyPop and Dot’s Homestyle Pretzels snacks.
Our North America Salty Snacks segment income was $199.4 million in 2024 compared to $158.3 million in 2023, an increase of $41.1 million, or 26.0%. The increase was primarily driven by higher volume, favorable commodity costs, and lower supply chain costs. The increase was partially offset by higher advertising and related consumer marketing costs and unfavorable price realization.
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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. We currently have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Latin America, as well as Europe, Asia-Pacific (“APAC”), the Middle East and Africa (“MEA”) and other regions. International results accounted for 8.1%, 8.5% and 8.5% of our net sales in 2025, 2024 and 2023, respectively. International results for the years ended December 31, 2025, 2024 and 2023 were as follows:
Percent Change
For the years ended December 31,
In millions of dollars
Net sales
Segment income
Segment margin
2025 compared with 2024
Net sales of our International s egment were $941.6 million in 2025 compared to $948.0 million in 2024, a decrease of $6.4 million, or 0.7%. The decrease reflected an unfavorable impact from foreign currency exchange rates of approximately 3%, primarily driven by Mexico and Brazil, and a volume decrease of approximately 1%. The decline was partially offset by favorable price realization of approximately 3%, primarily due to strategic pricing actions across key markets. The net sales decrease was primarily attributable to Brazil and Latin America, and APAC and India, where sales declined 4.3% and 4.5%, respectively, partially offset by favorability in Europe, MEA, and World Travel Retail, where net sales increased 10.8%.
Our International segment income was $3.3 million in 2025 compared to $111.5 million in 2024, a decrease of $108.2 million, or 97.0%, driven by higher commodity and manufacturing costs, which more than offset favorable price realization, supply chain productivity, and net savings related to our AAA Initiative.
2024 compared with 2023
Net sales of our International segment were $948.0 million in 2024 compared to $949.2 million in 2023, a decrease of $1.2 million, or 0.1%. The decrease reflected an unfavorable impact from foreign currency exchange rates of approximately 1%, primarily driven by Mexico and Brazil, and a volume decrease of approximately 1%. The decline was partially offset by a favorable price realization of approximately 2%, driven by price increases across the segment. The net sales decrease was primarily attributable Mexico, Brazil and Latin America, where sales declined 5.7%, partially offset by net sales increases in Europe, MEA, and World Travel Retail, where net sales increased 13.1%.
Our International segment income was $111.5 million in 2024 compared to $148.3 million in 2023, a decrease of $36.8 million, or 24.8%, primarily resulting from higher commodity costs and unfavorable foreign currency exchange rates, partially offset by favorable price realization and decreased supply chain costs.
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Unallocated Corporate Expense
Unallocated corporate expense includes centrally-managed (a) corporate functional costs relating to legal, treasury, finance and human resources, (b) expenses associated with the oversight and administration of our global operations, including warehousing, distribution and manufacturing, information systems and global shared services, (c) non-cash stock-based compensation expense and (d) other gains or losses that are not integral to segment performance.
Unallocated corporate expense totaled $807.9 million in 2025 as compared to $701.2 million in 2024, an increase of $106.7, or 15.2%. The increase was primarily driven by higher incentive compensation costs and other non-people operating costs, partially offset by decreased investments in capabilities and technology, as a result of the completion of the upgrade of a new ERP system across the enterprise in 2024.
Unallocated corporate expense totaled $701.2 million in 2024 as compared to $800.4 million in 2023, a decrease of $99.2 million, or 12.4%. The decrease was primarily driven by lower compensation and benefit costs, decreased investments in capabilities and technology, as a result of the completion of the upgrade of a new ERP system across the enterprise in 2024, and lower acquisition and integration related costs.
LIQUIDITY 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 derived from our Consolidated Statements of Cash Flows:
In millions of dollars
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
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 $2.3 billion from operating activities in 2025, a decrease of $254.2 million compared to $2.5 billion in 2024. The decrease in net cash provided by operating activities was mainly driven by the following factors:
• Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, goodwill impairment charges, write-down of equity investments, unrealized gains and losses on derivative contracts and other charges) resulted in $363.0 million of lower cash flow in 2025 relative to 2024.
• Other assets and liabilities consumed cash of $155.6 million in 2025, compared to $138.2 million in 2024. This $17.4 million fluctuation was primarily due to the timing of certain prepaid expenses and other current assets.
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• The decrease in cash provided by operating activities was partially offset by the following net cash inflows:
◦ Timing of income tax payments contributed to an increase in operating cash of $82.2 million in 2025, compared to cash consumed of $17.1 million in 2024. This $99.3 million fluctuation was primarily due to the variance in actual tax expense for 2025 relative to the timing of quarterly estimated tax payments. We paid cash of $140.6 million for income taxes during 2025, compared to $201.8 million in the same period of 2024.
◦ In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, generated cash of $129.1 million in 2025, compared to generating cash of $102.2 million in 2024. This $27.0 million increase was mainly driven by an increase in accounts payable and accrued liabilities due to the timing of vendor and supplier payments, partially offset by higher inventory levels.
We generated cash of $2.5 billion from operating activities in 2024, an increase of $208.4 million compared to $2.3 billion in 2023. The increase in net cash provided by operating activities was mainly driven by the following factors:
• In the aggregate, select net working capital items, specifically, trade accounts receivable, inventory, accounts payable and accrued liabilities, generated cash of $102.2 million in 2024, compared to consuming cash of $209.0 million in 2023. This $311.2 million fluctuation was mainly driven by a decrease in cash used by accounts receivable due to a decrease in sales of everyday core U.S. confection brands, a decrease in accounts payable and accrued liabilities due to the timing of vendor and supplier payments, and lower inventory levels.
• Timing of income tax payments contributed to a decrease in operating cash of $17.1 million in 2024, compared to a decrease of $32.5 million in 2023. This $15.4 million fluctuation was primarily due to the variance in actual tax expense for 2024 relative to the timing of quarterly estimated tax payments. We paid cash of $201.8 million for income taxes during 2024 compared to $303.9 million in the same period of 2023.
• The increase in cash provided by operating activities was partially offset by the following net cash outflows:
◦ Net income adjusted for non-cash charges to operations (including depreciation, amortization, stock-based compensation, deferred income taxes, write-down of equity investments, unrealized gains and losses on derivative contracts and other charges) resulted in $92.4 million of lower cash flow in 2024 relative to 2023.
◦ Other assets and liabilities consumed cash of $138.2 million in 2024, compared to $100.4 million in 2023. This $37.8 million fluctuation was primarily due to our 2023 purchase of an irrevocable group annuity contract to settle a portion of our post retirement benefit obligation, partially offset by the timing of certain prepaid expenses and other current assets.
Pension and Post-Retirement Activity. We recorded net periodic benefit costs of $29.2 million, $32.8 million and $43.2 million in 2025, 2024 and 2023, 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 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 $15.7 million, $15.6 million and $27.6 million in 2025, 2024 and 2023, respectively.
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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 $1.3 billion for investing activities in 2025 compared to $960.3 million in 2024, with the increase in cash spend driven by the acquisition of LesserEvil. We used cash of $1.2 billion for investing activities in 2023, with the decrease in 2024 in cash spend driven by a decrease of investments in capabilities and technology, as well as a lower level of acquisition activity.
Primary investing activities include the following:
• Capital spending . Capital expenditures, including capitalized software, capacity expansion, innovation and cost savings, were $454.6 million in 2025, $605.9 million in 2024 and $771.1 million in 2023. The decrease in our 2025 capital expenditures is largely driven by the wind down of our key strategic initiatives, including completion of the upgrade of a new ERP system across the enterprise in 2024. We expect 2026 capital expenditures, including capitalized software, to approximate $425 million to $475 million, as capital spending as a percentage of sales is expected to remain at historical levels. We intend to use our existing cash and internally generated funds to meet our 2026 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 received payments of approximately $11.9 million in 2025, compared to investing $285.5 million in 2024 and $256.8 million in 2023.
• Business acquisitions . In 2025, we spent $756.1 million to acquire LesserEvil. In 2024, we spent $75.5 million to acquire the Sour Strips brand from Actual Candy, LLC. Further details regarding our business acquisition activity is provided in Note 2 to the Consolidated Financial Statements.
• Intangible assets. In 2025, we purchased the Fulfil brand in North America for $73.6 million.
• Other investing activities . In 2025, 2024, and 2023, our other investing activities were minimal.
Financing activities
Our principal uses of cash for financing activities relates to the use of cash for payment of dividends and for purchases of our Common Stock, partially offset by net borrowing activity and proceeds from the exercise of stock options. Financing activities used cash of $0.8 billion, $1.3 billion, and $1.1 billion, respectively, in 2025, 2024, and 2023.
The majority of our financing activity was 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 2025, our short-term borrowings decreased $1.7 billion predominately through a decrease in U.S. commercial paper, partially offset by an increase in foreign bank borrowings. In 2024, our short-term borrowings increased $607.0 million predominately through the issuance of short-term commercial paper, partially offset by a decrease in short-term foreign bank borrowings. In 2023, our short-term borrowings increased $26.0 million predominately through the issuance of short-term commercial paper, as well as an increase in short-term foreign bank borrowings.
• Long-term debt borrowings and repayments . In June 2025 and August 2025, we repaid $300 million of 0.900% Notes and $300 million of 3.200% Notes, respectively, due upon their maturity. In February 2025, we issued $500 million of 4.550% Notes due in February 2028, $500 million of 4.750% Notes due in February 2030, $500 million of 4.950% Notes due in February 2032 and $500 million of 5.100% Notes due in February 2035 (together, the “2025 Notes”). Proceeds from the issuance of the 2025 Notes, net of discounts and issuance costs, totaled $1,985 million. In November 2024, we repaid $300 million of 2.050% Notes due upon maturity. In May 2023, we repaid $250 million of 2.625% Notes and $500 million of 3.375% Notes due upon their maturities. In May 2023, we issued $350 million of 4.250% Notes due in May 2028 and $400 million of 4.500% Notes due in May 2033 (the “2023 Notes”). Proceeds from the issuance of the 2023 Notes, net of discounts and issuance costs, totaled $744.1 million.
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• Dividend payments . Total dividend payments to holders of our Common Stock and Class B Common Stock were $1,085.3 million in 2025, $1,084.8 million in 2024 and $889.1 million in 2023. Dividends per share of Common Stock were $5.480 per share in both 2025 and 2024, while dividends per share of Class B Common Stock were $4.980 per share in both 2025 and 2024. Details regarding our 2025 cash dividends paid to stockholders are as follows:
Quarter Ended
In millions of dollars except per share amounts
March 31, 2025
June 30, 2025
September 29, 2025
December 31, 2025
Dividends paid per share – Common stock
Dividends paid per share – Class B common stock
Total cash dividends paid
Declaration date
February 5, 2025
April 30, 2025
July 29, 2025
October 30, 2025
Record date
February 17, 2025
May 16, 2025
August 15, 2025
November 17, 2025
Payment date
March 14, 2025
June 16, 2025
September 15, 2025
December 15, 2025
• 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:
In millions
Milton Hershey School Trust repurchase (1)(2)
Shares repurchased in the open market under pre-approved share repurchase programs (2)
Shares repurchased in the open market to replace Treasury Stock issued for stock options and incentive compensation
Cash used for total share repurchases (excluding excise tax)
Total shares repurchased under pre-approved share repurchase programs
(1) In February 2023, the Company entered into a Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, pursuant to which the Company purchased 1,000,000 shares in 2023 of the Company’s Common Stock from the School Trust at a price equal to $239.91 per share, for a total purchase price of $239.9 million in 2023. As a result of the 2023 share repurchase, our July 2018 share repurchase authorization program was completed.
(2) In July 2018, our Board of Directors approved a $500 million share repurchase authorization to repurchase shares of our Common Stock. As a result of the February 2023 Stock Purchase Agreement with Hershey Trust Company, as trustee for the School Trust, the July 2018 share repurchase authorization was completed. In May 2021, our Board of Directors approved an additional $500 million share repurchase authorization, which was completed as of March 31, 2024. In December 2023, our Board of Directors approved an additional $500 million share repurchase authorization. This program commenced after the existing May 2021 authorization was completed and is to be utilized at management’s discretion. Approximately $470 million remains available for repurchases under our December 2023 share repurchase authorization. We are authorized to purchase our outstanding shares in open market and privately negotiated transactions. The program has no expiration date and acquired shares of Common Stock will be held as treasury shares. Purchases under approved share repurchase authorizations are in addition to our practice of buying back shares sufficient to offset those issued under incentive compensation plans.
• Proceeds from the exercise of stock options, including tax benefits. In 2025 we received $21.3 million from employee exercises of stock options and paid $18.8 million of employee taxes withheld from share-based awards. In 2024 we received $14.7 million from employee exercises of stock options and paid $32.8 million of employee
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taxes withheld from share-based awards. In 2023 we received $26.0 million from employee exercises of stock options and paid $35.0 million of employee taxes withheld from share-based awards. Variances are driven primarily by the number of shares exercised and the share price at the date of grant.
Financial Condition
At December 31, 2025, our cash and cash equivalents totaled $925.9 million. At December 31, 2024, our cash and cash equivalents totaled $730.7 million. Our cash and cash equivalents at the end of 2025 increased $195.1 million compared to the 2024 year-end balance as a result of the net uses of cash outlined in the previous discussion.
Approximately 70% of the balance of our cash and cash equivalents at December 31, 2025 was held by subsidiaries domiciled outside of the United States. A majority of this balance is distributable to the United States without material tax implications, such as withholding tax. We intend to continue to reinvest the remainder of the earnings outside of
the United States for which there would be a material tax implication to distributing for the foreseeable future and,
therefore, have not recognized additional tax expense on these earnings.
We 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 $5.4 billion and $5.1 billion at December 31, 2025 and December 31, 2024, respectively. Our total deb t increased i n 2025 primarily due to the issuance of $500 million of 4.550% Notes due in February 2028, $500 million of 4.750% Notes due in February 2030,$500 million of 4.950% Notes due in February 2032 and $500 million of 5.100% Notes due in February 2035 and offset with a decrease of $1.1 billion in short-term debt, primarily driven by commercial paper, partially offset by the repayment of $300 million of 0.900% Notes and $300 million of 3.200% Notes due upon their maturity in June 2025 and August 2025, respectively.
As a source of short-term financing, we maintain a $1.875 billion unsecured revolving credit facility with the option to increase borrowings by an additional $1.0 billion with the consent of the lenders. As of December 31, 2025, the termination date of this agreement is October 21, 2030; 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, 2025, we had $1.875 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, 2025.
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, 2025, we had available capacity of $299 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, funding the repurchase of shares of our common stock, financing 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.
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Equity Structure
We have two classes of stock outstanding – Common Stock and Class B Stock. Holders of the Common Stock and the Class B Stock generally vote together without regard to class on matters submitted to stockholders, including the election of directors. Holders of the Common Stock have 1 vote per share. Holders of the Class B Stock have 10 votes per share. Holders of the Common Stock, voting separately as a class, are entitled to elect one-sixth of our Board. With respect to dividend rights, holders of the Common Stock are entitled to cash dividends 10% higher than those declared and paid on the Class B Stock.
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 Requirements
The following table summarizes our future material cash requirements as of December 31, 2025:
(1) Includes the 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 machinery and equipment and vehicles.
(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 include fixed price forward contracts and unpriced contracts that were valued using market prices as of December 31, 2025. The amounts presented in the table do not include items already recorded in accounts payable or accrued liabilities at year-end 2025, 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.
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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.
Income 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 Liabilities for Trade Promotion Activities
• Pension and Other Post-Retirement Benefits Plans
• Business Acquisitions, Valuation and Impairment of Goodwill 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.
Accrued Liabilities 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 2025, 2024, and 2023, actual annual promotional costs have not deviated from the estimated amount by more than 3%. Our trade promotion and consumer incentive accrued liabilities totaled $227.7 million and $221.3 million at December 31, 2025 and 2024, respectively.
Pension and Other Post-Retirement Benefits Plans
We sponsor a number of defined benefit pension plans. The primary plan is The Hershey Retirement Plan for Salaried and Hourly Employees. This is a cash balance plan that provides pension benefits for most U.S. employees hired prior to January 1, 2007. We also sponsor two post-retirement benefit plans: health care and life insurance. The health care plan is contributory, with participants’ contributions adjusted annually. 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 long-term rate of return and the actual return realized. For 2025, we increased the expected return on plan assets
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assumption to 7.0% from the 6.8% assumption used during 2024. The historical average return (compounded annually) over the 20 years prior to December 31, 2025 was approximately 7.0%.
As of December 31, 2025, our plans had cumulative unrecognized investment and actuarial losses of approximately $122 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 $7 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 the annual net periodic pension benefit expense by approximately $5 million or decrease the annual net periodic pension benefit expense by $4 million, respectively, and the December 31, 2025 pension liability would increase by approximately $48 million or decrease by approximately $42 million, respectively.
Pension income for defined benefit pension plans is expected to be approximately $1 million in 2026. Pension income or expense beyond 2026 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
Changes in significant assumptions could affect consolidated expense and benefit obligations, particularly the discount rates used to calculate such obligations:
• Discount rate . The determination of the discount rate used to calculate the benefit obligati ons 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, 2025 benefit liability would increase by approximately $10 million or decrease by approximately $8 million, respectively.
Business Acquisitions, Valuation and Imp airment of Goodwill 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.
Results of Impairment Tests
At December 31, 2025, the net book value of our goodwill totaled $3.0 billion. As it relates to our 2025 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, with the exception of one reporting unit in our International segment. During our qualitative assessment, results indicated that it was more likely than not that the fair value of one reporting unit was less than its carrying amount. As a result, we performed a quantitative test which indicated a goodwill impairment of $6.4 million. This non-cash impairment charge was recorded in the fourth quarter of 2025. All other reporting units had an excess fair value well over 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 2024 or 2023.
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.
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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. Refer to Note 10 to the Consolidated Financial Statements for further discussion of our deferred tax assets and liabilities.
