Hershey Co. (NYSE:HSY)

Goodwill

Goodwill increased steadily from 1,801,103 thousand USD in 2018 to a peak of 2,633,174 thousand USD in 2021, followed by a slight decline to 2,606,956 thousand USD in 2022. This trend indicates substantial acquisition-related growth up to 2021, with a minor decrease thereafter.

Trademarks

The value of trademarks showed moderate growth from 1,173,770 thousand USD in 2018 to 1,705,390 thousand USD in 2021, stabilizing at 1,701,932 thousand USD in 2022. This reflects strategic brand asset accumulation primarily between 2019 and 2021.

Customer-related Intangible Assets

Customer-related assets rose from 163,860 thousand USD in 2018 to 207,749 thousand USD in 2019, followed by a slight decline in 2020. A significant jump occurred in 2021 to 504,667 thousand USD, sustaining a similar level at 513,188 thousand USD in 2022. The pronounced increase starting in 2021 may relate to acquisition of customer relationships or developed customer loyalty assets.

Patents

Patent values remained relatively low and stable, starting at 16,306 thousand USD in 2018, dropping nearly by half to 8,556 thousand USD in 2020, and then slightly decreasing to 8,053 thousand USD in 2022. This downward trend might signify amortization or disposal of certain patents.

Intangible Assets Subject to Amortization, Gross Carrying Amount

This line item showed a gradual increase from 1,353,936 thousand USD in 2018 to 1,433,632 thousand USD in 2019, then a minor decrease in 2020. A marked increase occurred in 2021 reaching 2,218,680 thousand USD, maintaining this level in 2022. The pattern implies notable acquisitions or revaluations occurring in 2021.

Accumulated Amortization

Accumulated amortization grew steadily from -110,283 thousand USD in 2018 to -291,593 thousand USD in 2022, indicating ongoing amortization expense recognition over time consistent with the increase in amortizable intangible assets.

Intangible Assets Subject to Amortization, Net

The net carrying amount increased moderately from 1,243,653 thousand USD in 2018 to 1,306,301 thousand USD in 2019 but decreased somewhat in 2020. A significant rise was observed in 2021 to 2,003,166 thousand USD, with a slight decrease to 1,931,580 thousand USD in 2022. This trend mirrors increases in amortizable assets less accumulated amortization, highlighting acquisition activity concentrated in 2021 with minor adjustments in 2022.

Trademarks Not Subject to Amortization

Trademarks not subject to amortization showed remarkable stability around 34,600 thousand USD throughout the given years, suggesting these assets are maintained consistently without amortization impact.

Other Intangible Assets

Other intangible assets followed a trend similar to net amortizable intangibles, increasing from 1,278,292 thousand USD in 2018 to a peak of 2,037,588 thousand USD in 2021, with a slight decrease to 1,966,269 thousand USD in 2022. This reflects the overall growth in intangible asset base primarily attributable to acquisitions or revaluations in 2021.

Goodwill and Intangible Assets, Total

The total amount of goodwill and intangible assets increased steadily from 3,079,395 thousand USD in 2018 to 4,670,762 thousand USD in 2021, before experiencing a modest decrease to 4,573,225 thousand USD in 2022. This overall growth trend signifies increased investment in intangible assets over the period, particularly driven by significant asset additions in 2021, with slight consolidation or amortization impacts in 2022.

Assets Trend

Reported total assets demonstrated a consistent upward trajectory from 2018 through 2022, increasing from approximately $7.7 billion to nearly $11 billion. This indicates overall growth in the company's asset base over the five-year period. Adjusted total assets, which remove the impact of goodwill, also show growth but at a lower level, rising from about $5.9 billion to $8.3 billion. The adjusted asset figures suggest that while total assets have increased, a significant portion is attributed to intangible assets such as goodwill.

Stockholders’ Equity Evolution

Reported stockholders’ equity expanded markedly from $1.4 billion in 2018 to almost $3.3 billion in 2022, reflecting increasing net worth attributable to shareholders and stronger financial positioning. However, adjusted stockholders’ equity exhibits a more complex pattern. Initially negative in 2018 and 2019 (-$402 million and -$246 million respectively), it turns positive starting in 2020 ($246 million) but at a substantially lower magnitude compared to reported equity. The positive adjusted equity persists through 2021 and 2022, although remaining significantly below the reported figures, which signals the adjusting effect of goodwill and other intangible assets on perceived equity strength.

Goodwill Impact

The divergence between reported and adjusted figures for both total assets and stockholders’ equity underscores the material influence of goodwill. The sizeable disparity between reported and adjusted equity until 2020 and the consistent difference in asset measures indicate that goodwill comprises a considerable portion of the balance sheet. This adjustment affects the evaluation of the company's underlying tangible net worth and asset base.

Overall Financial Position

The steady increase in reported assets and stockholders’ equity points to operational growth and capital accumulation. The adjusted figures, while showing weaker equity levels, demonstrate improving trends since 2020, suggesting either better asset quality or changes in goodwill valuation. The data implies the company has strengthened its financial position over the five years, but reliance on intangible assets like goodwill remains an important consideration for financial stability assessment.

The analysis of the financial ratios over the five-year period reveals several noteworthy trends concerning asset utilization, leverage, and profitability.

Total Asset Turnover

The reported total asset turnover ratio exhibited a gradual decline from 1.01 in 2018 to 0.86 in 2021, followed by a modest recovery to 0.95 in 2022. This suggests a decreasing efficiency in the use of assets to generate sales during most of the period, with slight improvement towards the end. In contrast, the adjusted total asset turnover, which accounts for goodwill, consistently remained higher than the reported figures, starting at 1.32 in 2018 and decreasing to 1.14 in 2020 but then slightly increasing to 1.25 by 2022, indicating better asset efficiency when goodwill is excluded.

Financial Leverage

Reported financial leverage demonstrated a clear downward trend, decreasing from 5.51 in 2018 to 3.32 in 2022, indicating a significant reduction in the company's reliance on debt or other liabilities relative to equity. Conversely, the adjusted financial leverage ratios vary widely, with missing data for 2018 and 2019, then showing an extremely high value of 29.02 in 2020, further spiking to 62.71 in 2021, before sharply declining to 12.04 in 2022. These large fluctuations suggest anomalies or adjustments related to goodwill affecting leverage calculations, indicating possible changes in goodwill valuation or capital structure.

Return on Equity (ROE)

The reported ROE exhibited a steady decline over the period, moving from a very high 84.19% in 2018 down to 49.85% in 2022. Although this remains robust relative to typical industry standards, the diminishing trend may reflect decreasing profitability or efficiency in generating returns for shareholders. The adjusted ROE, available only from 2020 onwards, shows extremely elevated values: 519.51% in 2020, escalating to 1191.01% in 2021, and then contracting to 237.49% in 2022. These elevated values reinforce that adjustment for goodwill dramatically affects equity returns, possibly due to a significantly reduced equity base after goodwill adjustments.

Return on Assets (ROA)

Reported ROA remained relatively stable over the examined period, fluctuating slightly between 14.0% and 15.29%, indicating consistent profitability from asset use. The adjusted ROA ratios, consistently higher than reported values, ranged from 17.9% in 2020 to 19.72% in 2022, showing a slight improving trend. This implies that when goodwill is excluded, asset profitability is better than reported figures, and the company maintains steady efficiency in generating profits from its assets.

In summary, the reported data suggest a company experiencing gradual declines in asset efficiency and profitability margins, coupled with a progressive reduction in financial leverage. The adjustments for goodwill considerably alter key ratios, notably increasing return measures and financial leverage in certain years, which implies significant goodwill values impacting equity and asset bases. The overall trends point to stable underlying asset profitability but indicate the need for further scrutiny of goodwill-related accounting impacts on financial metrics.

Total Assets

Reported total assets showed a consistent upward trend from $7,703,020 thousand in 2018 to $10,948,820 thousand in 2022, indicating steady growth in the company's asset base over the five-year period.

Adjusted total assets, which exclude goodwill, also increased progressively from $5,901,917 thousand in 2018 to $8,341,864 thousand in 2022, reflecting real growth in tangible or non-goodwill assets during this timeframe.

The difference between reported and adjusted total assets suggests a significant goodwill component in the asset structure, although the underlying asset base excluding goodwill has also exhibited consistent expansion.

Total Asset Turnover

The reported total asset turnover ratio declined from 1.01 in 2018 to a low of 0.86 in 2021, before improving to 0.95 in 2022. This pattern suggests a reduction in sales generated per dollar of reported assets until 2021, with a partial recovery in 2022.

The adjusted total asset turnover ratio, which excludes goodwill effects, followed a somewhat similar but higher range pattern. It decreased from 1.32 in 2018 to 1.14 in 2020, then stabilized around 1.15 in 2021 and increased to 1.25 in 2022.

This adjusted ratio implies that the company was able to generate more sales per unit of adjusted assets than per unit of total assets reported, and the recovery seen in 2022 points to improved asset utilization efficiency excluding goodwill assets.

Overall Insights

The company has demonstrated steady asset growth both reported and adjusted for goodwill, which shows consistent investment in asset expansion.

Asset turnover ratios indicate a period of declining efficiency in generating sales from assets up to 2021, followed by signs of operational improvement in 2022.

The adjusted total asset turnover remaining higher than the reported ratio suggests that goodwill makes the reported assets larger but may dilute overall asset utilization metrics.

Management may want to focus on enhancing asset utilization further to sustain growth and improve returns on both reported and adjusted asset bases.

The reported total assets demonstrate a consistent upward trend from 2018 through 2022, increasing from approximately 7.7 billion US dollars to nearly 11 billion US dollars. This steady growth indicates the company has been expanding its asset base over the period under review.

Adjusted total assets, which exclude goodwill or similar adjustments, also exhibit an increasing pattern, rising from about 5.9 billion US dollars in 2018 to around 8.3 billion US dollars in 2022. The growth in adjusted assets suggests underlying asset expansion independent of goodwill considerations, showing a positive asset base progression when potential intangible asset adjustments are removed.

Regarding equity, the reported stockholders’ equity follows a strong upward trajectory, advancing from roughly 1.4 billion US dollars in 2018 to nearly 3.3 billion US dollars in 2022. This indicates strengthening shareholder value and retained earnings or additional equity financing over the period. Conversely, the adjusted stockholders’ equity figures fluctuate significantly, starting with negative equity positions in 2018 and 2019, turning positive in 2020, declining slightly in 2021, and then increasing again in 2022. The negative values in the earlier years suggest that after adjusting for goodwill and related items, liabilities may have exceeded adjusted assets, but this situation improves over time, reflecting a recovery or improved asset valuation on an adjusted basis.

The reported financial leverage ratio shows a consistent decline from 5.51 in 2018 to 3.32 in 2022. This decreasing trend implies the company has been reducing its reliance on debt relative to equity, enhancing its capital structure by lowering financial risk.

In contrast, the adjusted financial leverage ratio is only available from 2020 onward and presents unusually high values, with a significant spike to 62.71 in 2021 followed by a substantial decrease to 12.04 in 2022. These elevated values suggest considerable volatility in adjusted equity levels, which is consistent with the earlier observed fluctuations in adjusted stockholders’ equity. The large swings in adjusted leverage underscore potential distortions caused by goodwill adjustments and indicate that the leverage metric based on adjusted data may not provide a stable measure of financial risk over this period.

Overall, the data portrays a company experiencing asset growth and improving reported equity strength, coupled with a deliberate reduction in financial leverage. The adjusted figures reveal more volatility and temporary deficits in equity after removing goodwill, signaling the importance of considering the impact of intangible assets when analyzing the company’s financial position and leverage.

Reported total stockholders’ equity

The reported total stockholders’ equity demonstrates a consistent upward trend from 2018 to 2022, rising from approximately $1.40 billion to nearly $3.30 billion. This steady increase indicates ongoing growth in the equity base over the five-year period.

Adjusted total stockholders’ equity

The adjusted total stockholders’ equity shows significant fluctuations during the years reported. Initially negative in 2018 and 2019, it shifts to positive values from 2020 onward, peaking at $246 million in 2020 before declining and then rising again to $693 million in 2022. This volatility suggests notable impacts from adjustments, possibly related to goodwill or other accounting considerations, affecting the equity base differently than the reported figures.

Reported Return on Equity (ROE)

The reported ROE exhibits a declining trend, decreasing from a high level of 84.19% in 2018 to 49.85% by 2022. This downward trajectory indicates diminishing profitability relative to shareholders’ equity over the analysis period, despite the expanding equity base.

Adjusted Return on Equity (ROE)

The adjusted ROE data is partially missing for 2018 and 2019 but shows extreme volatility for the years it is available. In 2020, the adjusted ROE is notably high at 519.51%, surging further to 1191.01% in 2021, before declining significantly to 237.49% in 2022. These extraordinary values suggest that adjustments substantially impacted the profitability measurements, potentially reflecting large non-operating items or goodwill revisions, leading to atypical ROE figures that differ markedly from the reported values.

Total Assets

The reported total assets exhibit a consistent upward trend over the five-year period, increasing from approximately US$7.7 billion at the end of 2018 to around US$10.9 billion by the end of 2022. This represents a growth of approximately 42% over the observed period. Similarly, the adjusted total assets, which presumably exclude goodwill, also show a steady increase from about US$5.9 billion in 2018 to roughly US$8.3 billion in 2022. This increase amounts to approximately 41% growth. Both measures indicate expansion of the asset base, with the reported figures consistently higher than the adjusted figures, reflecting the impact of goodwill or intangible assets.

Return on Assets (ROA)

The reported ROA remains relatively stable throughout the period, ranging between 14.0% and 15.3%. It starts at 15.29% in 2018, experiences a slight decline to 14% in 2020, and then shows modest recovery to 15.02% by 2022. The adjusted ROA, which excludes goodwill effects, consistently registers higher percentages than the reported ROA, starting at 19.95% in 2018 and slightly declining to 17.9% in 2020 before recovering to 19.72% in 2022. The adjusted ROA demonstrates a somewhat similar pattern to the reported ROA but remains approximately 4 to 5 percentage points higher throughout the period. This suggests that excluding goodwill from asset calculations yields a higher efficiency measure of asset utilization for profit generation.

Overall Insights

Both reported and adjusted asset values indicate steady growth over the five years, reflecting possible investments, acquisitions, or organic expansion of asset base. The consistent gap between reported and adjusted asset figures highlights the significance of goodwill or intangible assets in the company's total asset composition. The ROA metrics, both reported and adjusted, indicate a stable capacity to generate returns from assets, with the adjusted return consistently outperforming the reported figure, underscoring the impact of excluding intangible assets from profitability analysis. These trends suggest prudent asset management and stable profitability across the analyzed period.