Cumulative amount of mark-to-market gains (losses) on commodity derivatives

THE HERSHEY COMPANYNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)(amounts in thousands, except share data or if otherwise indicated)  
Our segment net sales and earnings were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  | Nine Months Ended |
|  |  | October 2, 2022 |  | October 3, 2021 |  | October 2, 2022 |  | October 3, 2021 |
| Net sales: |  |  |  |  |  |  |  |  |
| North America Confectionery |  | $ | 2,235,550  |  |  | $ | 2,024,243  |  |  | $ | 6,361,695  |  |  | $ | 5,700,031  |  |
| North America Salty Snacks |  | 275,024 |  | 147,108 |  | 757,443 |  | 396,729 |
| International |  | 217,579 |  | 188,488 |  | 647,818 |  | 548,449 |
| Total |  | $ | 2,728,153  |  |  | $ | 2,359,839  |  |  | $ | 7,766,956  |  |  | $ | 6,645,209  |  |
|  |  |  |  |  |  |  |  |  |
| Segment income: |  |  |  |  |  |  |  |  |
| North America Confectionery |  | $ | 706,815 |  | $ | 655,599 |  | $ | 2,107,564 |  | $ | 1,852,692 |
| North America Salty Snacks |  | 44,516  |  |  | 29,639  |  |  | 103,250  |  |  | 81,058  |  |
| International |  | 35,379  |  |  | 19,550  |  |  | 108,058  |  |  | 74,526  |  |
| Total segment income |  | 786,710 |  | 704,788 |  | 2,318,872 |  | 2,008,276 |
| Unallocated corporate expense (1) |  | 179,632 |  | 145,028 |  | 518,834 |  | 434,070 |
| Unallocated mark-to-market losses (gains) on commodity derivatives |  | 50,065 |  | (18,468) |  | 63,524 |  | (24,137) |
|  |  |  |  |  |  |  |  |  |
| Costs associated with business realignment activities (see [Note 9](#i0bc28196a24d4084af1a4cbdf6bdf4bd_64)) |  | 393  |  |  | 3,397  |  |  | 2,373  |  |  | 13,793  |  |
|  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |
| Operating profit |  | 556,620 |  | 574,831 |  | 1,734,141 |  | 1,584,550 |
| Interest expense, net (see [Note 4](#i0bc28196a24d4084af1a4cbdf6bdf4bd_46)) |  | 35,378  |  |  | 30,154  |  |  | 101,970  |  |  | 97,655  |  |
| Other (income) expense, net (see [Note 17](#i0bc28196a24d4084af1a4cbdf6bdf4bd_88)) |  | 48,157 |  | 23,004 |  | 78,222 |  | 32,612 |
| Income before income taxes |  | $ | 473,085  |  |  | $ | 521,673  |  |  | $ | 1,553,949  |  |  | $ | 1,454,283  |  |

(1)Includes centrally-managed (a) corporate functional costs relating to legal, treasury, finance, and human resources, (b) expenses associated with the oversight and administration of our global operations, including warehousing, distribution and manufacturing, information systems and global shared services, (c) non-cash stock-based compensation expense, (d) acquisition-related costs, and (e) other gains or losses that are not integral to segment performance.  
Activity within the unallocated mark-to-market adjustment for commodity derivatives is as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  | Nine Months Ended |
|  |  | October 2, 2022 |  | October 3, 2021 |  | October 2, 2022 |  | October 3, 2021 |
| Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in income |  | $ | 14,044  |  |  | $ | (33,643) |  |  | $ | (28,027) |  |  | $ | (64,199) |  |
| Net gains on commodity derivative positions reclassified from unallocated to segment income  |  | 36,021  |  |  | 15,175  |  |  | 91,551  |  |  | 40,062  |  |
| Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative (gains) losses |  | $ | 50,065  |  |  | $ | (18,468) |  |  | $ | 63,524  |  |  | $ | (24,137) |  |

As of October 2, 2022, the cumulative amount of mark-to-market gains on commodity derivatives that have been recognized in our consolidated cost of sales and not yet allocated to reportable segments was $23,389. Based on our forecasts of the timing of the recognition of the underlying hedged items, we expect to reclassify net pre-tax gains on commodity derivatives of $32,656 to segment operating results in the next twelve months.  
  


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