Hershey Co. (NYSE:HSY)

The reported debt data reveals notable fluctuations across the analyzed periods, indicating shifts in the company's debt structure and obligations.

Short-term debt

The short-term debt exhibited significant volatility. It started at a high level in 2018, sharply declined in 2019, and climbed again in 2020. The year 2021 saw a pronounced increase, reaching close to the 2018 level, followed by a decline in 2022. These fluctuations suggest changes in the company's reliance on short-term financing, possibly reflecting adjustments in working capital management or interim funding needs.

Current portion of long-term debt

This component experienced dramatic shifts. From a relatively low value in 2018, it surged substantially in 2019, decreased notably in 2020 and 2021, then rose again sharply in 2022 to a level significantly exceeding initial figures. Such variability could indicate refinancing activities, debt restructuring, or reclassification between current and long-term liabilities.

Long-term portion of long-term debt

The long-term debt portion showed a gradual increase from 2018 to 2020, peaking in 2020, and then slightly declining in subsequent years, ending lower in 2022 compared to its peak but higher than in 2018. This trend implies that while the company increased its long-term borrowings up to 2020, there were repayments or reclassifications reducing the balance in later years.

Total debt (carrying amount)

Total debt experienced an initial decrease from 2018 to 2019, then increased steadily through 2021, reaching its highest point in the observed period before declining moderately in 2022. The overall pattern indicates periods of debt accumulation followed by some reduction, reflecting strategic debt management aligned with changing financial conditions or capital requirements.

Interest Expense

The interest expense shows a generally fluctuating pattern over the period from 2018 to 2022. Starting at $146.9 million in 2018, it gradually increases to $152.1 million in 2019 and $153.5 million in 2020. However, there is a noticeable decline in 2021, with the expense dropping to approximately $129.8 million. In 2022, the interest expense rises again to about $140.1 million, although it does not reach the peak levels observed in 2019 and 2020.

Capitalized Interest

Capitalized interest displays an overall upward trend throughout the years, beginning at roughly $5.1 million in 2018 and increasing incrementally to $5.6 million in 2019 and $6.7 million in 2020. The upward movement becomes more pronounced in 2021, reaching $9.3 million, which represents the highest value in the period under review. There is a slight decline in 2022 to $8.1 million, though the amount remains significantly higher than the earlier years.

Interest Costs Incurred

This category, being the sum of interest expense and capitalized interest, follows a trend consistent with the individual components. It starts at approximately $152.0 million in 2018, steadily increasing to around $157.7 million in 2019 and $160.2 million in 2020. A notable decrease occurs in 2021 to $139.2 million, driven predominantly by the reduction in interest expense despite higher capitalized interest. In 2022, interest costs incurred rise again to about $148.2 million, which suggests a partial recovery but still below the 2019-2020 peak levels.

Summary

Overall, the data reveal that while capitalized interest has generally increased over the five-year period, the interest expense experienced volatility, particularly a dip in 2021. This volatility in interest expense significantly influences the total interest costs incurred. The peak in capitalized interest during 2021 suggests increased investment activities or capital projects during that year. The partial rebound in both interest expense and total interest costs in 2022 may indicate changing financing conditions or strategic shifts in asset capitalization.

The financial data reveals the evolution of the interest coverage ratios over a five-year period. Both the interest coverage ratio without capitalized interest and the adjusted interest coverage ratio with capitalized interest exhibit generally positive trends, with some fluctuations.

Interest coverage ratio (without capitalized interest)

This ratio starts at 10.6 in 2018 and slightly declines to 10.08 in 2019. It then recovers to 10.74 in 2020, followed by a marked increase to 14.84 in 2021. In 2022, the ratio experiences a minimal decrease to 14.68, maintaining a substantially higher level compared to the 2018-2020 period.

Adjusted interest coverage ratio (with capitalized interest)

Similarly, the adjusted interest coverage ratio begins at 10.25 in 2018 and decreases to 9.72 in 2019. It then rises to 10.29 in 2020. A significant increase is observed in 2021, reaching 13.85, and this is followed by a slight uptick to 13.88 in 2022. Overall, the adjusted ratio shows a pattern consistent with the non-adjusted ratio but remains marginally lower in each year.

The data indicates a generally improving ability to cover interest expenses over the analyzed period, particularly from 2020 onwards. Both ratios demonstrate a notable improvement starting in 2021, which may suggest enhanced operational earnings relative to interest obligations or favorable financial management practices implemented during that time frame. The small decrease or stabilization in 2022 suggests the company sustained its improved coverage capacity.