Hershey(HSY)2023-02-16 16:00Business Segments and Operations - The company operates through three segments: North America Confectionery, North America Salty Snacks, and International, with each segment focusing on specific product categories and key markets[9] - The company's sales are typically higher during the third and fourth quarters due to seasonal and holiday-related patterns[20] - The company engages in research and development activities across multiple countries to develop new products, improve existing ones, and enhance production processes[23] Acquisitions and Portfolio Expansion - In December 2021, the company completed the acquisition of Pretzels Inc. and Dot's Pretzels, LLC, enhancing its salty snacks portfolio and pretzel category expertise[10] - In June 2021, the company acquired Lily's Sweets, LLC, adding sugar-free and low-sugar confectionery products to its portfolio[11] Sales and Distribution - Approximately 28% of the company's consolidated net sales in 2022 were made to McLane Company, Inc., a major U.S. wholesale distributor[16] - The percentage of total consolidated net sales outside the United States was 12.5% for 2022, 13.0% for 2021, and 13.6% for 2020[27] Raw Materials and Supply Chain - Cocoa products are the most significant raw materials, with West Africa accounting for approximately 70% of the world's cocoa bean supply[18] - Cocoa futures contract prices decreased by 0.9% in 2022 compared to 2021, trading between 1.22 per pound[203] - Cocoa production in Ghana decreased by nearly 30% in 2022, while remaining stable in the rest of West Africa[203] - U.S. refined sugar prices ranged from 0.71 per pound in 2022, driven by tight domestic supply and strong demand[205] - Corn prices traded between 8.25 per bushel in 2022, influenced by global grain stock tightness due to the Russia-Ukraine conflict[206] - Fluid dairy milk prices ranged from 0.26 per pound in 2022, higher than 2021 due to reduced U.S. milk production and increased global demand[207] - Hard wheat prices traded between 13.21 per bushel in 2022, while soft wheat prices ranged from 12.29 per bushel, reaching historic highs[208] - Peanut prices in the U.S. ranged from 0.64 per pound in 2022, driven by higher competing crop prices and a smaller peanut crop[208] - Almond prices traded between 2.25 per pound in 2022, lower than 2021 due to large crop yields and high inventory levels[208] Environmental Commitments - The company aims to achieve a 50% absolute reduction in Scope 1 and 2 GHG emissions and a 25% absolute reduction in Scope 3 GHG emissions by 2030, compared to a 2018 baseline[25] - The company has made voluntary commitments to reduce environmental impacts, including eliminating commodity-driven deforestation and reducing greenhouse gas emissions[25] Marketing and Brand Strategy - The company's marketing strategy focuses on strong brand equities, product innovation, and superior product quality, supported by promotional programs and an efficient distribution network[17] International Operations and Assets - The percentage of total long-lived assets outside the United States was 17.9% as of December 31, 2022, and 18.8% as of December 31, 2021[27] Workforce and Labor Relations - The Company employed approximately 18,075 full-time and 1,790 part-time employees worldwide as of December 31, 2022[28] - Collective bargaining agreements covered approximately 6,470 employees, or 33% of the Company's worldwide workforce[28] Financial Risk Management - A hypothetical 100 basis point increase in interest rates would have increased interest expense by approximately 2.4 million for 2021 on short-term debt[195] - A 100 basis point increase in market interest rates would decrease the fair value of fixed-rate long-term debt by approximately 319 million at December 31, 2021[196] - The net fair value of foreign currency forward exchange contracts was an asset of 2.8 million at December 31, 2021[199] - An unfavorable 10% change in year-end foreign currency exchange rates would have declined the fair value of foreign currency forward exchange contracts by 24.8 million at December 31, 2021[199] - The Company uses futures and options contracts to hedge price volatility for raw materials such as cocoa, sugar, corn, dairy, wheat, natural gas, and diesel fuel, typically covering 3 to 24 months[202] - Dairy futures liquidity is less developed, making it difficult to hedge dairy costs for extended periods[202] - The notional value of open commodity derivative contracts was 313.2 million in 2021[210] - A 10% decrease in underlying commodity prices would have increased net unrealized losses by $25.1 million in 2022, offset by reduced commodity purchase costs[210]