Hershey Co. (NYSE:HSY)

The financial data reflects the annual current, deferred income tax expenses, and total provision for income taxes over the five-year period from 2018 to 2022.

Current Income Tax Expense

The current income tax expense shows variability throughout the period. Starting at 202,755 thousand USD in 2018, it increased significantly to 249,104 thousand USD in 2019. In 2020, the value decreased to 192,704 thousand USD but rebounded strongly to reach a peak of 301,031 thousand USD in 2021, before declining to 235,365 thousand USD in 2022. This trend indicates fluctuating current tax liabilities, with a notable peak in 2021.

Deferred Income Tax (Expense) Benefit

Deferred income tax expense exhibits considerable volatility. Beginning at 36,255 thousand USD in 2018, it shifted to a negative amount (-15,072 thousand USD) in 2019, indicating a deferred tax benefit or reversal during that year. It then climbed back to positive territory, with 26,880 thousand USD in 2020 and slightly declined to 13,374 thousand USD in 2021 before rising again to 36,889 thousand USD in 2022. This pattern suggests considerable fluctuations in deferred tax assets and liabilities, possibly due to changes in timing differences or tax strategy adjustments.

Total Provision for Income Taxes

The total provision for income taxes, combining both current and deferred components, ranges from 219,584 thousand USD in 2020 as the lowest point to a high of 314,405 thousand USD in 2021. Over the years, the provision decreased marginally from 239,010 thousand USD in 2018 to 234,032 thousand USD in 2019, then declined further in 2020. A sharp increase occurred in 2021, followed by a drop to 272,254 thousand USD in 2022. This overall trend aligns closely with the movements seen in the current tax expense, with deferred tax fluctuations providing some offset.

In summary, the data reveals that the current income tax expense drove most of the fluctuations in the total income tax provision. The deferred income tax expense provides periods of both expense and benefit, indicating episodic changes in deferred tax positions. The peak in 2021 for current tax and total provision may point to higher taxable income or changes in tax rates or regulations affecting that period. The overall trend suggests active management of tax liabilities and timing differences over the examined years.

The analysis of the annual tax-related financial data reveals several noteworthy trends affecting the effective income tax rate over the observed five-year period.

Federal Statutory Income Tax Rate

This rate remained constant at 21% throughout all five years, serving as a stable baseline for comparison to other tax-related percentages.

State Income Taxes, Net of Federal Income Tax Benefits

These taxes exhibited some fluctuation, initially declining from 2.7% in 2018 to 1.8% in 2019, before gradually increasing each subsequent year to reach 3.2% in 2022. This suggests a rising impact of state taxes on the overall tax liability in recent years.

Business Realignment and Impairment Charges

These charges were only recorded in 2018 at 0.6%, with no corresponding data reported in following years, indicating a one-time charge during that period.

Foreign Rate Differences

Negative contributions from foreign rate differences consistently decreased in magnitude over time, moving from -2% in 2018 to -0.1% in 2022. This trend points to diminishing adverse effects from foreign tax rate variations.

Historic and Solar Tax Credits

These credits significantly influenced the tax rate, with a notable increase in their effect in 2020, where the rate reached -7.7%. After a slight decline in 2021, the impact intensified further to -9.9% in 2022, indicating an increasing utilization or benefit from such credits.

U.S. Tax Reform

This factor was relevant only in 2018 and contributed -1.4%. There were no effects recorded subsequently, suggesting the reform's impacts were fully accounted for or no further changes occurred afterward.

Tax Contingencies

These showed variability, beginning at 0.5% in 2018, reaching a peak of 1.7% in 2021, and then declining to 0.4% in 2022. This pattern indicates fluctuating tax-related uncertainties or adjustments.

Stock Compensation

Impacts from stock compensation remained relatively small but negative throughout the period, fluctuating between -0.3% and -1.3%, reflecting consistent but modest tax effects from compensation practices.

Valuation Allowance Release

This item appears only in 2019 with a -1.5% impact, implying a one-time adjustment during that year that lowered the effective tax rate.

Other, Net

The "Other" category exhibited inconsistent contributions, varying in sign and magnitude from -0.6% in 2018 to positive 0.9% in 2019, then dipping again and slightly rebounding to 0.3% in 2022. These fluctuations suggest miscellaneous effects with no clear directional trend.

Effective Income Tax Rate

The overall effective income tax rate displayed variability, starting at 17% in 2018, slightly decreasing to 16.9% in 2019, and reaching its lowest point of 14.7% in 2020. It then increased to 17.5% in 2021 before falling again to 14.2% in 2022. This pattern reflects the combined influences of the aforementioned factors, including varying tax credits, contingencies, and foreign rate differences.

The financial data over the five-year period reveals several notable trends and shifts in various liability, asset, and deferred tax accounts.

Post-retirement Benefit Obligations

There is a steady decline from 52,915 thousand USD in 2018 to 40,100 thousand USD in 2022, indicating a reduction in these obligations over the years.

Accrued Expenses and Other Reserves

The values slightly decreased from 85,180 thousand USD in 2018 to 78,523 thousand USD by 2022, showing a modest contraction in accrued liabilities.

Stock-based Compensation

After a sharp drop from 30,448 thousand USD in 2018 to 19,304 thousand USD in 2019, the figures remained relatively stable, ending at 19,847 thousand USD in 2022, suggesting a sustained lower level of stock compensation costs.

Derivative Instruments (Liabilities)

Liabilities related to derivative instruments decreased markedly from 17,423 thousand USD in 2018 to 3,983 thousand USD in 2022, with missing data in 2021.

Pension

The pension-related liabilities exhibit volatility with figures initially decreasing to 3,952 thousand USD in 2019, followed by fluctuations including missing data, ending at 0 in 2022 due to lack of data or possibly changes in accounting treatment.

Lease Liabilities

A significant increase is observed, from 12,284 thousand USD in 2018 to a high of 95,503 thousand USD in 2021, slightly decreasing to 91,099 thousand USD in 2022, reflecting a substantial increase in lease obligations, possibly due to new lease accounting standards or expanded leasing activity.

Accrued Trade Promotion Reserves

These reserves increased notably from 13,670 thousand USD in 2018 to a peak of 25,877 thousand USD in 2020, followed by a slight decline to 23,082 thousand USD in 2022, indicating dynamic management of trade promotion liabilities.

Net Operating Loss Carryforwards

These assets decreased consistently from 161,242 thousand USD in 2018 to 130,944 thousand USD in 2022, which may suggest utilization of loss carryforwards or expirations over the years.

Capital Loss Carryforwards

A sharp reduction is evident, from 26,670 thousand USD in 2018 to just 1,999 thousand USD in 2022, reflecting significant utilization or write-offs.

Other Deferred Tax Assets

These increased substantially from 9,969 thousand USD in 2018 to 52,802 thousand USD in 2022, indicating recognition of additional deferred tax assets under the "Other" category.

Gross Deferred Tax Assets

The gross deferred tax assets showed an overall upward trend peaking at 480,327 thousand USD in 2021 before declining to 442,379 thousand USD in 2022, indicating overall growth with a notable dip in the final year.

Valuation Allowance

The negative valuation allowance decreased from -239,959 thousand USD in 2018 to -137,531 thousand USD in 2022, suggesting a reduction in the valuation reserve against deferred tax assets, potentially reflecting improved asset realizability assessments.

Deferred Tax Assets (Net)

These rose from 178,763 thousand USD in 2018 to a peak of 312,539 thousand USD in 2021, followed by a slight decrease to 304,848 thousand USD in 2022, consistent with movements in gross assets and valuation allowance.

Property, Plant, and Equipment (Net)

The net property, plant, and equipment showed an increasing negative balance, deepening from -144,044 thousand USD in 2018 to -247,964 thousand USD in 2022, indicating continuous investment or capital expenditures resulting in growth of asset base and accumulation of depreciation or impairments.

Acquired Intangibles

Negative balances expanded from -161,003 thousand USD in 2018 to -193,160 thousand USD in 2022, pointing to either acquisitions or amortization-related increases contributing to growing intangible assets net value.

Lease Right-of-Use (ROU) Assets

Reported starting 2019 with negative values, showing fluctuations with a large negative net asset in 2021 (-76,285 thousand USD) but improving in 2022 to -28,573 thousand USD, consistent with the lease liabilities trend and indicating lease capitalization effects under new accounting standards.

Inventories

Inventories displayed variability, initially worsening (negative) with a notable dip to -29,158 thousand USD in 2019, then showing less negative figures until a sharp increase in negative value to -72,602 thousand USD in 2022, potentially reflecting inventory valuation or write-down changes.

Derivative Instruments (Assets)

Reported as a small negative balance in 2021 (-1,352 thousand USD) with missing data in other years, suggesting a minor exposure to derivative assets.

Pension (Assets)

Negative pension asset values in 2021 and 2022 (-11,871 and -11,038 thousand USD respectively) contrast prior pension liabilities, indicating a possible shift or reclassification.

Other (Net)

Negative balances increased in magnitude from -28,044 thousand USD in 2018 to -39,416 thousand USD in 2022, showing a rise in other miscellaneous net liabilities or asset reductions.

Deferred Tax Liabilities

These increased consistently in negative value from -354,457 thousand USD in 2018 to -592,753 thousand USD in 2022, representing growing deferred tax obligations.

Net Deferred Tax Assets (Liabilities)

Showing increasing net liability positions from -175,694 thousand USD in 2018 to -287,905 thousand USD in 2022, illustrating an overall negative net deferred tax balance that has deepened over time.

Non-current deferred tax assets, net

The non-current deferred tax assets exhibited a substantial increase from 1,166 thousand US dollars in 2018 to 31,033 thousand US dollars in 2019. Following this sharp rise, the value slightly decreased to 29,369 thousand US dollars in 2020, before rising again to 40,873 thousand US dollars in 2021. In 2022, there was a minor decline to 40,498 thousand US dollars. Overall, this item showed a significant growth trend with some volatility, particularly the notable jump between 2018 and 2019 and a peak in 2021.

Non-current deferred tax liabilities, net

The non-current deferred tax liabilities showed a consistent upward trajectory over the entire period. Starting from 176,860 thousand US dollars in 2018, the liabilities increased steadily year over year to reach 200,018 thousand in 2019, 229,028 thousand in 2020, 288,004 thousand in 2021, and ultimately 328,403 thousand in 2022. This pattern indicates a continual growth in deferred tax liabilities, reflecting possibly increasing taxable temporary differences or changes in tax regulations impacting the company's long-term tax positions.

Assets

Total assets, both reported and adjusted, exhibited a consistent upward trend from 2018 to 2022. Reported total assets increased from approximately 7.7 billion to nearly 11 billion US dollars, while adjusted total assets followed a closely similar pattern, rising from around 7.7 billion to 10.9 billion US dollars. The growth appeared steady each year, with the most significant increases observed between 2020 and 2021.

Liabilities

Reported total liabilities showed moderate growth over the five-year period, moving from about 6.3 billion to 7.6 billion US dollars. Adjusted total liabilities also increased during the same timeframe, from approximately 6.1 billion to 7.3 billion US dollars. The rate of increase in liabilities was more subdued compared to assets, contributing to an improving balance sheet structure.

Stockholders’ Equity

The Hershey Company stockholders’ equity, both reported and adjusted, demonstrated strong growth from 2018 to 2022. Reported equity rose from around 1.4 billion to nearly 3.3 billion US dollars, more than doubling over the five years. Adjusted equity increased from approximately 1.6 billion to 3.6 billion US dollars, indicating enhanced shareholder value and financial strength relative to liabilities.

Net Income

Net income attributable to the company showed an overall increasing trend in both reported and adjusted figures. Reported net income increased from approximately 1.18 billion US dollars in 2018 to over 1.64 billion US dollars in 2022. Adjusted net income followed a similar trajectory, rising from about 1.21 billion to 1.68 billion US dollars. Although there was a slight dip in adjusted net income in 2019 compared to 2018, subsequent years saw consistent growth, reflecting improved profitability.

General Observations

The comparison between reported and adjusted figures reveals that adjustments related to income taxes had modest but noticeable impacts on the financial metrics. Adjusted values for assets, liabilities, equity, and net income were slightly lower or higher than reported figures depending on the item and year, suggesting the adjustments enhanced the reflection of underlying economic reality. Overall, the company exhibited solid financial expansion characterized by growing asset bases, controlled liability increases, strengthening equity positions, and improving net income, indicating financial health and operational effectiveness over the examined period.

Net Profit Margin

The reported net profit margin exhibited slight fluctuations over the period, starting at 15.11% in 2018, decreasing marginally in 2019, then increasing to a peak of 16.47% in 2021 before declining to 15.79% in 2022. The adjusted net profit margin generally followed a similar trend but consistently reflected slightly higher margins than the reported figures post-2019, peaking at 16.62% in 2021 and settling at 16.14% in 2022. This suggests that adjustments, including deferred income tax considerations, reveal a somewhat stronger profitability position than reported figures alone.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios declined from 1.01 in 2018 to 0.86-0.87 in 2021, indicating decreasing efficiency in asset utilization to generate sales. A modest recovery was visible in 2022, with ratios rising to 0.95-0.96, although still below the initial 2018 level. The close alignment of reported and adjusted ratios suggests minimal impact of tax adjustments on asset efficiency measurements.

Financial Leverage

Financial leverage showed a consistent downward trend over the period. Reported leverage decreased markedly from 5.51 in 2018 to 3.32 in 2022, while adjusted leverage followed a similar pattern moving from 4.89 to 3.04. The reduction indicates a progressive deleveraging strategy, reflecting a more conservative capital structure or repayment of debt over time. Adjusted leverage ratios being consistently lower than reported figures imply some tax adjustments reduce the effective leverage ratio.

Return on Equity (ROE)

Return on equity declined steadily from very high levels, with reported ROE falling from 84.19% in 2018 to 49.85% in 2022 and adjusted ROE from 77.1% to 46.88%. Despite the decline, ROE remains robust. The decrease corresponds with the reduction in financial leverage and total asset turnover, which collectively diminish equity returns. Adjusted ROE values consistently remain below reported values, which may reflect tax-related impacts on equity profitability.

Return on Assets (ROA)

Return on assets maintained relative stability throughout the period. Reported ROA started at 15.29% in 2018, dipped to around 14% by 2020-2021, and rebounded to 15.02% in 2022. Adjusted ROA showed a similar but slightly more positive trend, increasing from 15.76% to 15.42% by 2022. The stabilization and slight improvement in ROA, notwithstanding the declining asset turnover and financial leverage, suggest effective management of asset profitability, with tax adjustments indicating a slightly enhanced asset return perspective.

Reported Net Income Trends

The reported net income attributable fluctuated over the five-year period. It started at approximately $1.18 billion in 2018, experienced a slight decline in 2019 to roughly $1.15 billion, then rose consistently to reach about $1.65 billion by 2022. This indicates a general upward trajectory with a temporary dip in 2019.

Adjusted Net Income Patterns

The adjusted net income demonstrates a similar pattern to the reported figures but shows slightly higher values in most years. It started at around $1.21 billion in 2018, decreased to roughly $1.13 billion in 2019, and then steadily increased each subsequent year, culminating in approximately $1.68 billion in 2022. The adjustment appears to moderate the decline seen in 2019 and accentuates growth in the later years.

Reported Net Profit Margin Dynamics

The reported net profit margin exhibited some variability throughout the period, beginning at 15.11% in 2018, dropping to 14.4% in 2019, then increasing to a peak of 16.47% in 2021 before slightly declining to 15.79% in 2022. This pattern reflects an initial contraction in profitability margin followed by improvement and a minor recent softening.

Adjusted Net Profit Margin Changes

The adjusted net profit margin follows a trend comparable to the reported margin but with consistently higher percentages. Starting at 15.58% in 2018, it fell to 14.21% in 2019, then progressively increased each year to reach 16.14% in 2022. The adjusted margins suggest a more favorable profitability profile than reported margins, with a similar initial dip and sustained growth afterward.

Overall Insights

Both reported and adjusted financial data show resilience and growth in net income over the examined period, despite a setback in 2019. Adjusted figures provide a slightly more optimistic view of profitability and income generation. Margins generally improved after 2019, indicating enhanced operational efficiency or favorable business conditions. The data imply that the company has strengthened its profitability position in recent years while managing to recover from prior declines.

Total Assets

The total assets, both reported and adjusted, show a consistent upward trend over the five-year period. Reported total assets increased from approximately 7.7 billion USD in 2018 to about 10.95 billion USD in 2022. Adjusted total assets follow a very similar pattern, rising from approximately 7.7 billion USD in 2018 to around 10.91 billion USD in 2022. The close alignment between reported and adjusted figures indicates minimal impact of deferred income tax adjustments on asset valuation.

Total Asset Turnover

The total asset turnover ratios, both reported and adjusted, generally declined from 2018 through 2021 before showing a rebound in 2022. Specifically, reported total asset turnover decreased from 1.01 in 2018 to a low of 0.86 in 2021, then increased to 0.95 in 2022. Adjusted ratios follow almost the same pattern, decreasing from 1.01 to 0.87 and then rising to 0.96 in the last year. This trend suggests a decreasing efficiency in asset utilization to generate sales up to 2021, followed by a partial recovery in 2022.

Comparative Insights

The similarity between reported and adjusted values across all years and metrics indicates that deferred income tax adjustments have a negligible effect on reported financial data for total assets and asset turnover in this context. The increase in total assets over the review period reflects continued growth or asset acquisition, while the asset turnover pattern points to short-term operational challenges in efficiently deploying assets, with signs of improvement in the latest period.

The financial data reveals significant trends in the company's asset base, equity position, and leverage ratios over the five-year period.

Total Assets

Reported total assets exhibited consistent growth each year, rising from approximately $7.7 billion in 2018 to nearly $11 billion by the end of 2022. Adjusted total assets reflect a similar trajectory, with values slightly lower than reported amounts but following an analogous growth pattern. The steady increase indicates an expanding asset base over the period assessed.

Stockholders’ Equity

Both reported and adjusted stockholders' equity increased substantially throughout the years. Reported equity grew from about $1.4 billion in 2018 to nearly $3.3 billion by 2022, while adjusted equity rose from approximately $1.6 billion to $3.6 billion in the same timeframe. The adjusted figures consistently exceed the reported amounts, suggesting that deferred income tax adjustments result in a higher recognized equity balance. The upward trend underscores strengthening shareholder value and improved capitalization over time.

Financial Leverage

Financial leverage ratios decreased steadily for both reported and adjusted figures. Reported leverage fell from 5.51 in 2018 to 3.32 in 2022, while adjusted leverage declined from 4.89 to 3.04 over the same period. This downward trend indicates a reduction in reliance on debt financing relative to equity, reflecting a strengthening equity base and potentially lower financial risk. The adjusted leverage ratios are consistently below the reported ones, aligning with their higher equity values.

Overall, the data suggests a trajectory of growing asset accumulation and enhanced equity positions, coupled with a progressive reduction in financial leverage. These patterns collectively point to improved financial stability and a stronger capital structure over the analyzed timeframe.

Net Income

Reported net income attributable to the company demonstrated a consistent upward trend from 1,177,562 thousand USD in 2018 to 1,644,817 thousand USD in 2022. The adjusted net income also followed a similar pattern, increasing from 1,213,817 thousand USD in 2018 to 1,681,706 thousand USD in 2022. This reflects steady growth in profitability over the five-year period.

Stockholders’ Equity

Reported total stockholders’ equity rose substantially from 1,398,721 thousand USD at the end of 2018 to 3,299,544 thousand USD at the end of 2022. The adjusted stockholders' equity figures were consistently higher than the reported figures, growing from 1,574,415 thousand USD in 2018 to 3,587,449 thousand USD in 2022. This indicates an expanding equity base and possibly retained earnings or other comprehensive income adjustments contributing to equity growth.

Return on Equity (ROE)

Reported ROE showed a declining trend, decreasing from 84.19% in 2018 to 49.85% in 2022, despite the increase in net income and equity. Similarly, the adjusted ROE declined from 77.1% in 2018 to 46.88% in 2022. This downward trend indicates that although the company’s profitability in absolute terms increased, the efficiency in generating profit from shareholders’ equity diminished over time. The decreasing ROE suggests dilution of returns as the equity base expanded at a faster rate than net income growth.

Net Income Attributable to The Hershey Company

The reported net income demonstrated a consistent upward trend over the five-year period, rising from approximately $1.18 billion in 2018 to around $1.64 billion in 2022. The adjusted net income followed a similar pattern, increasing from roughly $1.21 billion in 2018 to about $1.68 billion in 2022. Notably, the adjusted net income values are generally higher than the reported figures, indicating adjustments for deferred income tax effects have increased the recognized profitability each year.

Total Assets

Reported total assets exhibited steady growth throughout the period, expanding from $7.7 billion at the end of 2018 to nearly $10.95 billion by the end of 2022. The adjusted total assets closely mirrored the reported figures, with marginal differences suggesting minor adjustments related to deferred income taxes. The growth in total assets over the years reflects sustained investment and asset accumulation activities within the company.

Return on Assets (ROA)

Reported ROA showed a slight downward trend from 15.29% in 2018 to 14.00% in 2020, followed by a gradual recovery to 15.02% in 2022. Adjusted ROA followed a somewhat parallel trajectory, initially decreasing from 15.76% in 2018 to 13.99% in 2019, then improving to 15.42% by 2022. The adjusted ROA consistently remained slightly higher than the reported ROA, underscoring the impact of deferred tax adjustments on profitability metrics. The overall improvement in ROA towards the latter years suggests enhanced asset efficiency and profitability after tax-related adjustments.

General Insights

Across the analyzed period, both reported and adjusted metrics reflect consistent growth in net income and assets, indicating positive operational performance and expansion. The adjustments for deferred income tax influence net income and asset base moderately but appear to enhance profitability indicators such as ROA. The convergence of reported and adjusted figures in later years suggests that tax-related accounting adjustments have become more aligned with the underlying economic realities of the company’s financial performance.