Hershey(HSY) - 2024 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2024, net sales were $11,202.3 million, reflecting a slight increase of 0.3% compared to$ 11,165.0 million in 2023, primarily due to a favorable price realization of approximately 3%[140]. - Gross profit for 2024 was $5,300.9 million, representing a 6.1% increase from$ 4,997.8 million in 2023, with a gross margin of 47.3%, up from 44.8% in the previous year[139][146]. - Operating profit increased to $2,898.2 million in 2024, a 13.2% rise from$ 2,560.9 million in 2023, with an operating profit margin of 25.9%[153]. - Net income for 2024 was $2,221.2 million, a significant increase of 19.3% compared to$ 1,861.8 million in 2023, with diluted net income per share rising to $10.92 from$ 9.06[139]. - Selling, marketing, and administrative expenses decreased by 2.6% to $2,373.6 million in 2024, driven by lower corporate expenses and a decline in advertising costs[149]. - Cost of sales decreased to$ 5,901.4 million in 2024, down 4.3% from $6,167.2 million in 2023, influenced by favorable costs from commodity derivative instruments[145]. - The effective income tax rate decreased to 10.2% in 2024 from 14.3% in 2023, contributing to the increase in net income[139]. - Earnings Per Share (EPS) diluted rose to$ 10.92 in 2024, up $1.86, or 20.5%, from$ 9.06 in 2023[160]. Segment Performance - North America Confectionery segment net sales were $9,118.6 million in 2024, a slight decrease of$ 4.5 million from $9,123.1 million in 2023, driven by a 4% volume decline[168]. - North America Salty Snacks segment net sales increased to$ 1,135.7 million in 2024, up $43.0 million, or 3.9%, from$ 1,092.7 million in 2023[176]. - Segment income for North America Confectionery was $2,945.7 million in 2024, a decrease of$ 171.3 million, or 5.5%, compared to $3,117.0 million in 2023[170]. - North America Salty Snacks segment income increased to$ 199.4 million in 2024, up $41.1 million, or 26.0%, from$ 158.3 million in 2023[177]. - International segment net sales were $948.0 million in 2024, a slight decrease of 0.1% from$ 949.2 million in 2023, primarily due to unfavorable foreign currency exchange rates and volume decrease[182]. - Segment income for the International segment dropped to $111.5 million in 2024, a decrease of 24.8% from$ 148.3 million in 2023, mainly due to higher commodity costs and unfavorable foreign currency exchange rates[183]. Cash Flow and Capital Expenditures - Cash flow from operating activities increased to $2.5 billion in 2024, up by$ 208.4 million compared to $2.3 billion in 2023, driven by improvements in working capital management[193]. - Investing activities used cash of$ 960.3 million in 2024, a decrease from $1.2 billion in 2023, reflecting reduced investments in capabilities and technology[197]. - Financing activities used cash of$ 1.3 billion in 2024, compared to $1.1 billion in 2023, primarily for stock repurchases and dividend payments[198]. - Capital expenditures were$ 605.9 million in 2024, down from $771.1 million in 2023, as key strategic initiatives were completed[199]. - The company expects capital expenditures in 2025 to be approximately$ 425 million to $450 million, returning to historical levels[199]. Shareholder Returns - Total dividend payments increased to$ 1,084.8 million in 2024, up from $889.1 million in 2023, with dividends per share of Common Stock rising 23.0% to$ 5.480[200]. - Share repurchases totaled $494.2 million in 2024, including$ 400.0 million under pre-approved programs and $94.2 million to offset stock options[201]. Debt and Liquidity - Total short- and long-term debt increased to$ 5.1 billion in 2024, primarily due to a $587 million rise in short-term debt[205]. - The company maintains a$ 1.35 billion unsecured revolving credit facility, with $204 million of available capacity as of December 31, 2024[206]. - Future material cash requirements total$ 8,541.7 million, with $3,227.5 million due within one year[214]. - Approximately 80% of cash and cash equivalents were held by subsidiaries outside the U.S., with plans to reinvest earnings to avoid material tax implications[204]. Tax and Pension - The company maintains reserves for uncertain tax positions, reflecting the most likely outcome of tax audits and assessments[239]. - The company applies a more-likely-than-not threshold for recognizing uncertain tax positions, impacting income in the quarter of any changes[239]. - The expected long-term rate of return on pension plan assets was increased to 6.8% for 2024 from 6.7% in 2023, aligning with the historical average return of approximately 6.8% over the past 20 years[228]. - Cumulative unrecognized investment and actuarial losses for pension plans amounted to approximately$ 165 million as of December 31, 2024, which may increase future pension expenses if not offset by favorable investment returns or other factors[229]. - Pension expense for defined benefit pension plans is projected to be approximately $13 million in 2025, with future expenses dependent on investment performance and other variables[230]. Corporate Governance - The Hershey Trust Company maintains voting control over the company, influencing business decisions through its representatives on the Board[212].