Hershey Co. (NYSE:HSY)

Raw materials

Raw materials inventory showed a consistent increase from 237,086 thousand US dollars in 2018 to a peak of 395,358 thousand US dollars in 2021, before declining to 372,612 thousand US dollars in 2022. This trend indicates an initial buildup of raw materials stock, followed by a moderate reduction in the latest year.

Goods in process

Goods in process inventories exhibited fluctuations over the period. Starting at 107,139 thousand US dollars in 2018, there was a decrease to 98,842 thousand in 2019, followed by a steady increase reaching 137,298 thousand US dollars in 2022. This suggests variations in production stages and possibly adjustments in manufacturing throughput or cycle times.

Finished goods

Finished goods inventories remained relatively stable from 2018 to 2021, ranging between 618,798 and 649,082 thousand US dollars, but experienced a significant rise to 855,217 thousand US dollars in 2022. The sharp increase in finished goods stocks in the final year could indicate anticipation of higher sales, slower turnover, or a buildup due to supply chain considerations.

Inventories at FIFO

The total inventories measured at FIFO showed a consistent upward trend, rising from 963,023 thousand US dollars in 2018 to 1,365,127 thousand US dollars in 2022. This growth reflects an overall expansion of inventory holdings across the categories, with the most notable increases in finished goods and goods in process.

Adjustment to LIFO

The adjustment to LIFO remained negative throughout the period, fluctuating between -174,898 and -165,937 thousand US dollars before reaching a larger negative adjustment of -192,008 thousand US dollars in 2022. This suggests that inventory costs under LIFO accounting have been higher than under FIFO, with the disparity becoming more pronounced in the most recent year.

Inventories

The net inventory values, factoring in the LIFO adjustment, increased steadily from 784,879 thousand US dollars in 2018 to 1,173,119 thousand US dollars in 2022. This upward trajectory indicates a growing investment in inventories, possibly reflecting expansion, changes in inventory management practices, or market conditions affecting supply and demand.

The financial data over the five-year period reveals consistent upward trends in both reported and inventory LIFO reserve adjusted figures for Hershey Co., reflecting growth in various asset and equity categories as well as income.

Inventories

Reported inventories increased steadily from approximately $785 million in 2018 to about $1.17 billion in 2022. The adjusted inventories, accounting for the LIFO reserve, also rose correspondingly from around $963 million to $1.37 billion over the same period. This indicates an underlying growth in inventory levels, possibly reflecting expanded production or inventory holding strategies.

Current Assets

Both reported and adjusted current assets exhibit a less linear but generally increasing pattern. Reported current assets fluctuated, with a peak in 2020 at nearly $3.0 billion followed by a drop in 2021 and a rebound in 2022 to approximately $2.62 billion. Adjusted current assets followed a similar trajectory, peaking higher at about $3.15 billion in 2020, dipping in 2021, and then climbing back to roughly $2.81 billion in 2022. These movements suggest variability in working capital components, with inventory adjustments consistently contributing to higher asset values.

Total Assets

Reported total assets grew steadily from $7.70 billion in 2018 to about $10.95 billion in 2022. The adjusted total assets show a similar upward trend, rising from $7.88 billion to $11.41 billion. This reflects ongoing asset growth, with the inventory LIFO reserve adjustment adding a modest premium to reported totals consistently across years.

Stockholders’ Equity

Reported stockholders’ equity shows a pronounced increase, nearly doubling from about $1.40 billion in 2018 to approximately $3.30 billion in 2022. The adjusted equity values are consistently higher, starting at around $1.58 billion in 2018 and reaching about $3.49 billion by 2022. This growth in equity underscores strengthening financial position and retained earnings, with LIFO adjustments slightly augmenting equity figures, suggesting the inventory accounting method impacts shareholders' equity presentation.

Net Income

Reported net income attributable to the company rose from approximately $1.18 billion in 2018 to about $1.64 billion in 2022, showing overall profitability growth across the period. Adjusted net income closely mirrors reported income, with minor deviations likely due to inventory cost layer adjustments affecting cost of goods sold and related income impacts. The adjusted figures exhibit a similar increasing trend, ending slightly above reported income in 2022 at about $1.67 billion.

Overall, the data exhibit consistent growth in inventories, assets, stockholders' equity, and net income for the company over the five years. The inventory LIFO reserve adjustment consistently increases reported figures across these categories, indicating the company’s use of LIFO accounting results in conservative reported asset and equity valuations. The fluctuations in current assets highlight some variability in short-term asset management, whereas total assets and equity show steady expansion, suggesting solid underlying financial strength.

Current Ratio

The reported current ratio experienced an initial increase from 0.93 in 2018 to a peak of 1.57 in 2020, followed by a significant decline to 0.8 by the end of 2022. The adjusted current ratio shows a similar pattern with slightly higher values, peaking at 1.67 in 2020 before falling to 0.86 in 2022. This trend indicates that liquidity improved through 2020 but weakened subsequently.

Net Profit Margin

Both reported and adjusted net profit margins showed relatively stable performance with slight fluctuations. The reported margin declined from 15.11% in 2018 to 14.4% in 2019, then increased to 16.47% in 2021 before moderating to 15.79% in 2022. The adjusted margin follows a similar pattern with a slightly higher final value of 16.04% in 2022. This suggests consistent profitability with some resilience in recent years.

Total Asset Turnover

The total asset turnover ratio, both reported and adjusted, declined steadily from near 1.0 in 2018 to a low point around 0.85 in 2021, with a modest recovery to approximately 0.94-0.95 in 2022. This reflects a decrease in asset efficiency over the period followed by some improvement in the latest year.

Financial Leverage

Financial leverage ratios showed a steady downward trend from 2018 through 2022. The reported leverage decreased from 5.51 to 3.32, while adjusted leverage fell from 5.00 to 3.19. Lower leverage indicates reduced reliance on debt or other liabilities over time, possibly reflecting a more conservative capital structure.

Return on Equity (ROE)

Reported ROE decreased substantially from 84.19% in 2018 to 49.85% in 2022, with adjusted ROE showing a comparable decline from 74.52% to 47.86%. This significant decline suggests diminishing returns to shareholders, likely impacted by the combined effects of lower financial leverage and changing profitability.

Return on Assets (ROA)

ROA showed relative stability during the period, with reported values decreasing slightly from 15.29% to 14.12% in 2019 and remaining near 14% through 2021, followed by an increase to 15.02% in 2022. Adjusted ROA tracked closely, ending at 15.00% in 2022. This stability indicates consistent asset profitability despite fluctuations in other areas.

The data exhibits notable fluctuations in both reported and inventory LIFO reserve adjusted financial metrics over the five-year period. Current assets, both reported and adjusted, show an overall upward trend with some variation.

Reported Current Assets

Reported current assets were highest in 2020 at approximately 2.98 billion US dollars, representing a significant increase from the previous years. Following this peak, the value declined notably in 2021 but recovered partially in 2022.

Adjusted Current Assets

Adjusted current assets, which account for inventory LIFO reserve adjustments, follow a similar pattern but consistently present higher values than the reported figures. The adjustment increases the asset base by roughly 8% to 9%, particularly evident in 2020 and 2022. The peak adjusted assets also occurred in 2020, corresponding to a maximum figure surpassing 3.15 billion US dollars.

Reported Current Ratio

The reported current ratio shows considerable volatility, peaking at 1.57 in 2020, which suggests improved short-term liquidity that year. However, the ratio declined sharply to 0.9 in 2021 and further to 0.8 in 2022, indicating a weakening liquidity position in the most recent years relative to current liabilities.

Adjusted Current Ratio

The adjusted current ratio, accounting for inventory valuation changes, mirrors the reported ratio trend but consistently reflects a slightly stronger liquidity position. This ratio peaks at 1.67 in 2020, confirming that inventory reserve adjustments have a positive effect on perceived liquidity. The subsequent decline to 0.97 in 2021 and 0.86 in 2022 aligns closely with the reported ratio's downward trend but still remains marginally higher.

Overall, the data indicates a peak in liquidity and asset levels in 2020, followed by a decline in 2021 and 2022. The inventory LIFO reserve adjustments systematically increase both current assets and current ratios, which subtly improves the financial position when compared to the reported numbers alone. However, the post-2020 trend suggests potential liquidity challenges or increased current liabilities affecting the company's short-term financial health in the last two years of the analyzed period.

The financial data reveals several noteworthy trends over the five-year period ending December 31, 2022. Both reported and adjusted net income attributable to the company show a consistent upward trajectory, indicating growth in profitability. Reported net income increased from approximately 1.18 billion US dollars in 2018 to about 1.64 billion US dollars in 2022, while adjusted net income followed a similar pattern, rising from nearly 1.18 billion US dollars to around 1.67 billion US dollars over the same period.

Examining the net profit margins, both reported and adjusted measures display an overall increase from 2018 to 2022, though some fluctuations are apparent. The reported net profit margin began at 15.11% in 2018, experienced a decline to 14.4% in 2019, then rose steadily to a peak of 16.47% in 2021 before decreasing slightly to 15.79% in 2022. Conversely, the adjusted net profit margin moved from 15.08% in 2018 down to 14.29% in 2019, then increased consistently to reach 16.04% in 2022.

The adjusted figures, which account for LIFO reserve inventory effects, tend to show a slightly more favorable profitability outcome compared to the reported figures, particularly evident in the last year where the adjusted net profit margin exceeds the reported margin. This suggests that inventory accounting adjustments had a positive impact on profitability measures in the most recent periods.

Overall, the data reflects steady growth in net income and improving profit margins, with adjusted metrics providing insight into underlying operational performance free from inventory method impacts.

Total Assets

Reported total assets exhibited a consistent upward trend from 7,703,020 thousand US dollars at the end of 2018 to 10,948,820 thousand US dollars by the end of 2022. This represents a notable increase in asset base over the five-year period.

Adjusted total assets, accounting for the inventory LIFO reserve, followed a similar upward trajectory, starting at 7,881,164 thousand US dollars in 2018 and rising to 11,140,828 thousand US dollars in 2022. The adjusted values were consistently higher than the reported figures, indicating the impact of inventory adjustments on the asset base.

Total Asset Turnover

Reported total asset turnover displayed a declining trend from 1.01 in 2018 to a low of 0.86 in 2021, suggesting a decrease in efficiency in generating sales from the asset base during those years. However, there was a partial recovery in 2022, with the ratio increasing to 0.95.

Adjusted total asset turnover mirrored this pattern, decreasing from 0.99 in 2018 to 0.85 in 2021, followed by an increase to 0.94 in 2022. The adjusted turnover ratios were slightly lower than the reported ratios, reflecting the effect of LIFO reserve adjustments on asset utilization metrics.

Insights

The steady increase in both reported and adjusted total assets indicates ongoing investments or asset growth over the analyzed period. The dip and subsequent recovery in total asset turnover ratios suggest a period of reduced operational efficiency or sales generation relative to assets, with improvement noted in the final year. The adjustments for inventory LIFO reserves slightly increase the asset base and correspondingly lower turnover ratios, which highlights the importance of considering these adjustments for a more accurate assessment of asset utilization.

The financial data reveals several notable trends over the five-year period. Total assets, both reported and adjusted for inventory LIFO reserve, demonstrate a consistent upward trajectory. Reported total assets grew from approximately 7.7 billion US dollars in 2018 to nearly 11 billion US dollars by the end of 2022. The adjusted total assets followed a similar pattern, starting slightly higher than the reported figure in 2018 and maintaining a proportionately higher level throughout the period, reaching about 11.1 billion US dollars in 2022. This adjustment indicates that the inventory accounted for under LIFO (last-in, first-out) has a measurable but stable impact on total asset valuation.

Stockholders’ equity also shows a significant increase during the same period. The reported stockholders’ equity rose steadily from roughly 1.4 billion US dollars in 2018 to over 3.2 billion US dollars in 2022. When adjusted for LIFO reserve effects, equity values are consistently higher, starting from approximately 1.6 billion and increasing to about 3.5 billion US dollars by the end of 2022. The parallel movement of both reported and adjusted equity indicates a robust growth in the company’s net worth, with the adjustment highlighting the additional equity value attributable to inventory valuation differences under LIFO accounting.

Financial leverage ratios, both reported and adjusted, indicate a declining trend over the reviewed years. The reported financial leverage ratio dropped notably from 5.51 in 2018 to 3.32 in 2022, while the adjusted ratio followed a similar trajectory, decreasing from 5.00 to 3.19. This decline suggests a reduction in the use of debt relative to equity, reflecting a strengthening of the company’s equity base and potentially lower financial risk. The adjusted financial leverage being consistently lower than the reported ratio aligns with the higher adjusted equity values, confirming that the LIFO adjustment results in a more conservative measure of leverage.

Total Assets

Steady growth observed both in reported and adjusted figures, with adjustment introducing a slight but consistent premium due to inventory valuation.

Stockholders’ Equity

Strong upward trend in both reported and adjusted values, reflecting increasing company net worth and equity base expansion over the period.

Financial Leverage

Marked decrease in leverage ratios indicating reduced reliance on debt, with adjusted ratios slightly lower due to higher equity from LIFO adjustments.

The financial data indicates overall growth in income and equity over the five-year period, accompanied by a gradual decline in return on equity (ROE) percentages.

Net Income

Both reported and adjusted net income attributable to the company show a consistent upward trend from 2018 through 2022. Reported net income increased from approximately $1.18 billion in 2018 to about $1.64 billion in 2022. Adjusted net income follows a similar growth trajectory, rising from $1.18 billion to approximately $1.67 billion over the same period. The adjustment made results in slightly higher net income figures each year compared to the reported values, suggesting the adjustments may capture additional earnings elements or inventory valuation effects that positively impact net income.

Total Stockholders’ Equity

Total stockholders' equity, both reported and adjusted, also demonstrates steady growth. Reported equity grew from about $1.40 billion in 2018 to roughly $3.30 billion in 2022. Adjusted equity values are higher each year, increasing from approximately $1.58 billion in 2018 to about $3.49 billion in 2022. This adjustment appears to account for factors such as LIFO reserves, which increase the equity base and more accurately reflect the company's net asset position over time.

Return on Equity (ROE)

Reported ROE shows a declining pattern, decreasing from 84.19% in 2018 to 49.85% in 2022. Adjusted ROE likewise declines over the same period, from 74.52% down to 47.86%. The adjusted ROE is consistently lower than the reported ROE, reflecting the impact of the higher equity base after adjustments. The downward trend in ROE suggests that while net income and equity have both grown, equity has increased at a relatively faster pace, reducing the efficiency ratio of net income generated per equity dollar invested.

In summary, the company has experienced strong growth in both net income and equity over the observed timeframe, but this growth has been accompanied by decreasing returns on equity. The adjustments made for LIFO reserves and related items provide a more conservative and arguably more accurate picture of the company's financial position and performance. This reflects increasing asset values and equity levels that have tempered profitability ratios, highlighting a potential focus on reinvestment or capital accumulation during the period.

The financial data presented reveals several key trends regarding the company's performance and asset base over the five-year period ending December 31, 2022. Both reported and inventory LIFO reserve adjusted figures are provided for net income, total assets, and return on assets (ROA), allowing for a comparative analysis of these metrics with and without inventory accounting adjustments.

Net Income Trends

Reported net income shows a general upward trajectory, increasing from approximately $1.18 billion in 2018 to $1.64 billion in 2022. Adjusted net income closely mirrors this pattern, starting near $1.18 billion in 2018 and rising to about $1.67 billion in 2022. Notably, adjusted net income equals or slightly exceeds the reported figures in all years, indicating that inventory accounting adjustments marginally enhance reported profitability.

Total Assets Trends

Reported total assets grew consistently from about $7.7 billion in 2018 to approximately $10.9 billion in 2022. Adjusted total assets, which include LIFO reserve adjustments, consistently exceed reported figures by a few percentage points, rising from roughly $7.9 billion in 2018 to $11.4 billion in 2022. This indicates that inventory accounting adjustments increase the reported asset base throughout the period, reflecting the accumulation of LIFO reserves.

Return on Assets (ROA) Trends

The reported ROA shows a slight decrease from 15.29% in 2018 to 14.12% in 2019, then stabilizes near 14% in 2020 and 2021, followed by a moderate increase to 15.02% in 2022. Meanwhile, adjusted ROA follows a similar pattern but remains consistently below the reported ROA by roughly 0.4 to 0.5 percentage points from 2018 to 2021, before converging closely in 2022 at 15.00%. This suggests that the inclusion of LIFO reserves in asset values slightly dilutes ROA metrics, though by 2022 the difference is negligible.

Overall, the company demonstrated steady growth in income and assets over the five-year period. Inventory adjustments consistently increased the reported asset values, causing modest differences in profitability metrics when comparing reported versus adjusted figures. The alignment of reported and adjusted ROA values in 2022 suggests improved asset efficiency or changes in inventory accounting effects during that year. The data reflects a financially stable entity with slight improvements in profitability and asset utilization in the most recent reporting period.