Unwrapping the secrets of world-class SEC reporting with Jonathan Gregory at Hershey Co. - Part One

You would expect the company that makes 70 million Hershey’s KISSES® a day to know a little something about innovation and technology. 

The fifth-largest candymaker in the world, Hershey Co. is well known for operational excellence, which also includes its SEC reporting function. We had a wide-ranging conversation with Jonathan Gregory, Director of External Reporting and Technical Accounting, to talk about what it takes to achieve world-class SEC reporting.

Not many SEC reporting executives would consider it torture to have an extra two weeks to prepare a 10-Q filing. Yet, this is how Jonathan remembers Hershey’s 3-Q 2020 SEC reporting cycle. To discuss final Halloween data on the Hershey Co. 3-Q earnings call, the company delayed reporting third-quarter earnings from its usual mid-October release to early November. This was two weeks later than the company’s usual filing schedule, yet well within its SEC deadlines.

“Changing the earnings release schedule was one of those nuances created by the COVID-19 pandemic,” said Jonathan. “The SEC reporting team was ready to file under our normal timetables and processes, and to wait two extra weeks was torture.”

Typically, Hershey files a 10-Q four weeks after the fiscal quarter ends, which Jonathan admits is an aggressive timeline for SEC filing. The whole quarterly financial reporting process operates with the precision of a Swiss watch. Because the company is on a 4-4-5 fiscal year calendar, fiscal quarters end on Sundays and the financial close team gets started on closing the books bright and early the following Monday morning. 

Six days later, the financial close team delivers a preliminary review copy of financial statements to management and for their review and feedback. With financial statements in hand, Jonathan and his team begin to draft the 10-Q. By the end of the second week in this schedule, the first draft of the 10-Q is close to complete, and external audit and disclosure committee reviews are underway. 


How technology opens up the time for what matters most.

Driving this efficient quarterly close is Hershey’s ongoing effort to reduce complex processes and streamline workflow between teams. Efficiency, though, is only the means to an end: to create more time for strategic analysis.  

Automating and standardizing financial statement formats is one example of how Hershey simplified a process. Other data systems are configured to produce financial statements for external reporting that are formatted close to 10-Q ready. The SEC filing team doesn’t spend time formatting tables or hunting for the data to support footnotes and disclosures. 

The Hershey external reporting team also works in a cloud-based platform that connects people and data streamlines workflow.  “When all hands are on deck working on the 10-Q and earnings release, the cross-reference linking functions that simultaneously update all the relevant documents with the same information at the same time makes life significantly easier for all of us,” says Jonathan.

The goal of technology and process transformation is to create the time for multiple teams to analyze, strategize and communicate.  “We have the time to collaborate with corporate communication and investor relations to make sure our messaging is clear and consistent across the 10-Q, the earnings release, management’s scripts for the analyst call, and internal communication,” says Jonathan.

Another outcome of the Hershey financial reporting process is the same-day filing of the 8-K earnings release and quarterly 10-Q. While this is considered a best practice, it’s not easy to achieve. The SEC Pro Group 2020 Benchmark Report shows that on average, 10-Q filings lag behind the 8-K quarterly earnings release by five days. 


The more the merrier: getting more teams on board the cloud-based reporting platform. 

Since joining Hershey five years ago, Jonathan has worked to leverage the cloud-based reporting platform across the enterprise. “A lot of the efficiency gains have come from reaching out to other departments to educate them about the tools and resources in the cloud that can make life easier for all of us,” he says.  As a global company, the cloud-based platform creates better visibility and communication between the external reporting department and the global country controllers.

The platform is also used to prepare financial statements for a variety of management review or management control processes. Hershey teams work and collaborate in the cloud on the proxy statement, 401(k) audits, pension audits, and other financial statements that need to be prepared. The next migration to the cloud will be financial statutory statements. 

Technology transformation is an ever-evolving process.  Jonathan and his counterpart on the financial close team frequently collaborate on technology projects to leverage the tools they use to produce financial statements and external reports. Looking forward, they would like to get a little more cutting edge, connect more data and automate more of the process. 

For example, they are working on a project to automate a cash flow statement. The outcome will produce a cash flow statement in a standardized format that is close to a 10-Q or 10-K filing format. Formatting is done once, rather than manually repeated through every step of the reporting process, which is time-consuming and error-prone. 


Partnerships drive a high-performance external reporting function

Jonathan credits strong partnerships across Hershey’s teams for creating a world-class SEC reporting function. 

“The internal disclosure committee process is one of the most important processes we have surrounding financial reporting,” he says. A team of four people – Jonathan, legal, the global controller, and investor relations – lead the internal disclosure committee. Not every company has a disclosure committee, but as a former auditor, Jonathan says there is value in one committee to oversee the entire reporting process. 

By the time they meet with the CEO and CFO to obtain their certification to file with the SEC, the disclosure team leaders are prepared with a clear, crisp review of their entire quarterly reporting process, their communication with auditors, and items that warrant audit committee review.

“It’s a phenomenal team of individuals on the disclosure committee,” says Jonathan. “The partnerships we have developed make the process effortless.”


Link to part II

Other news