Spooky season is big business in the retail world, even as consumers trim their spending overall amid persistent inflation and other concerns. The National Retail Federation estimates Halloween spending will increase by 13% year-over-year (YOY) to more than $13 billion this year, with customers adding costumes, decorations, candy, and more to their carts in anticipation. Investors might see this as an opportunity to focus on some retailers specializing in holiday goods, all of whom could get a boost thanks ...

PART I — FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Tootsie Roll Industries, Inc.'s unaudited condensed consolidated financial statements, including the statements of financial position, earnings and retained earnings, comprehensive earnings, and cash flows, along with their accompanying notes [Condensed Consolidated Statements of Financial Position](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) This section provides a snapshot of the company's assets, liabilities, and equity at specific reporting dates, highlighting changes in financial structure Condensed Consolidated Statements of Financial Position (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------- | :------------ | :---------------- | :------------ | | **ASSETS** | | | | | Cash and cash equivalents | $120,521 | $138,841 | $45,623 | | Total current assets | $364,766 | $333,605 | $323,877 | | Net property, plant and equipment | $222,878 | $219,803 | $220,735 | | Total assets | $1,181,456 | $1,147,181 | $1,102,601 | | **LIABILITIES & EQUITY** | | | | | Total current liabilities | $91,497 | $87,286 | $86,763 | | Total noncurrent liabilities | $197,197 | $189,486 | $174,744 | | Total equity | $892,762 | $870,409 | $841,094 | | Total liabilities and shareholders' equity | $1,181,456 | $1,147,181 | $1,102,601 | - Total assets increased to **$1,181,456 thousand** as of June 30, 2025, from $1,147,181 thousand at December 31, 2024, and $1,102,601 thousand at June 30, 2024[9](index=9&type=chunk) - Current assets saw an increase to **$364,766 thousand** at June 30, 2025, from $333,605 thousand at December 31, 2024, primarily driven by higher inventories (finished goods and work-in-process increased from $43,603 thousand to $81,838 thousand)[9](index=9&type=chunk) - Total equity increased to **$892,762 thousand** at June 30, 2025, from $870,409 thousand at December 31, 2024, and $841,094 thousand at June 30, 2024[11](index=11&type=chunk) [Condensed Consolidated Statements of Earnings and Retained Earnings](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings%20and%20Retained%20Earnings) This section details the company's revenues, expenses, and net earnings over specific periods, along with changes in retained earnings Condensed Consolidated Statements of Earnings and Retained Earnings (in thousands except per share) | Metric (in thousands except per share) | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Year to Date Ended June 30, 2025 | Year to Date Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------------------------- | :------------------------------- | | Net product sales | $153,190 | $148,819 | $299,711 | $300,283 | | Total revenue | $155,088 | $150,736 | $303,543 | $303,911 | | Total gross margin | $56,483 | $50,475 | $108,933 | $100,503 | | Earnings from operations | $12,121 | $15,435 | $35,181 | $26,545 | | Net earnings attributable to Tootsie Roll Industries, Inc. | $17,544 | $15,640 | $35,602 | $31,474 | | Net earnings per share | $0.24 | $0.21 | $0.49 | $0.43 | | Dividends per share | $0.09 | $0.09 | $0.18 | $0.18 | - Net product sales increased by **2.9% to $153,190 thousand** in Q2 2025 compared to Q2 2024, but decreased slightly by **0.2% to $299,711 thousand** for the first half of 2025 compared to the first half of 2024[12](index=12&type=chunk) - Total gross margin increased by **11.9% in Q2 2025** and **8.4% in H1 2025**, indicating improved profitability[12](index=12&type=chunk) - Net earnings attributable to Tootsie Roll Industries, Inc. increased by **12.2% in Q2 2025** and **13.1% in H1 2025**, with EPS rising from **$0.21 to $0.24 in Q2** and from **$0.43 to $0.49 in H1**[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Earnings](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Earnings) This section presents net earnings and other comprehensive income (loss) components, providing a complete view of changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Earnings (in thousands) | Metric (in thousands) | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Year to Date Ended June 30, 2025 | Year to Date Ended June 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :------------------------------- | :------------------------------- | | Net earnings | $17,530 | $15,634 | $35,571 | $31,469 | | Total other comprehensive income (loss), before tax | $3,251 | $(2,286) | $8,008 | $(334) | | Total comprehensive earnings attributable to Tootsie Roll Industries, Inc. | $20,333 | $13,422 | $42,006 | $30,813 | - Total comprehensive earnings attributable to Tootsie Roll Industries, Inc. significantly increased to **$20,333 thousand** in Q2 2025 from $13,422 thousand in Q2 2024, and to **$42,006 thousand** in H1 2025 from $30,813 thousand in H1 2024[14](index=14&type=chunk) - The increase in comprehensive earnings was largely driven by positive other comprehensive income before tax in 2025, primarily from foreign currency translation adjustments and unrealized gains on investments and derivatives, contrasting with losses in 2024[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities, illustrating the company's liquidity and solvency Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Year to Date Ended June 30, 2025 | Year to Date Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(4,935) | $8,777 | | Net cash provided by (used in) investing activities | $5,670 | $(25,918) | | Net cash used in financing activities | $(19,437) | $(12,646) | | Decrease in cash and cash equivalents | $(18,272) | $(30,303) | | Cash, cash equivalents and restricted cash at end of quarter | $120,921 | $45,987 | - Net cash used in operating activities was **$(4,935) thousand** in H1 2025, a significant decrease from $8,777 thousand provided in H1 2024, primarily due to changes in working capital, particularly accounts receivable and inventories[15](index=15&type=chunk)[80](index=80&type=chunk) - Net cash provided by investing activities was **$5,670 thousand** in H1 2025, a favorable increase from $(25,918) thousand used in H1 2024, mainly reflecting a decline in purchases of available-for-sale securities[15](index=15&type=chunk)[81](index=81&type=chunk) - Net cash used in financing activities increased to **$(19,437) thousand** in H1 2025 from $(12,646) thousand in H1 2024, driven by common stock purchases and retirements of **$6,483 thousand** in H1 2025[15](index=15&type=chunk)[83](index=83&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides additional information and explanations for the figures presented in the condensed consolidated financial statements [Note 1 — Significant Accounting Policies](index=9&type=section&id=Note%201%20%E2%80%94%20Significant%20Accounting%20Policies) This note describes the key accounting principles and methods used in preparing the financial statements, including revenue recognition and segment reporting - The financial statements are unaudited and prepared in accordance with GAAP for interim financial reporting, and should be read with the 2024 Form 10-K[16](index=16&type=chunk) - Results for the period ended June 30, 2025, are not necessarily indicative of full-year results due to the seasonal nature of operations, with the **third quarter historically being the largest for net product sales** due to pre-Halloween sales[17](index=17&type=chunk) - Revenue recognition follows a five-step model, with adjustments for variable consideration (discounts, returns, promotions) recorded as a reduction of net product sales; changes in business conditions led to an increase in net product sales of **$900 thousand in Q2 2025** and **$1,400 thousand in H1 2025** due to a reduction in estimated liabilities for prior period obligations[18](index=18&type=chunk) - The Company has **one reportable segment**, with the CEO focusing on consolidated net income (loss) for performance assessment and resource allocation[20](index=20&type=chunk) - The Company is evaluating new FASB ASUs (2023-09 on Income Tax Disclosures and 2024-03 on Expense Disaggregation Disclosures) but believes their adoption will not significantly impact financial condition, results of operations, and disclosures[21](index=21&type=chunk)[22](index=22&type=chunk) [Note 2 — Average Shares Outstanding](index=11&type=section&id=Note%202%20%E2%80%94%20Average%20Shares%20Outstanding) This note details the calculation of average shares outstanding, considering stock purchases and dividends for earnings per share computations - Average shares outstanding for H1 2025 reflect aggregate stock purchases of **209 thousand shares for $6,483 thousand** and a **3% stock dividend of 2,118 thousand shares** distributed on April 4, 2025[23](index=23&type=chunk) - For H1 2024, average shares outstanding reflected a **3% stock dividend of 2,075 thousand shares** distributed on April 5, 2024, with no stock purchases during that period[23](index=23&type=chunk) [Note 3 — Income Taxes](index=11&type=section&id=Note%203%20%E2%80%94%20Income%20Taxes) This note provides information on the company's effective income tax rates and the potential impact of new tax legislation Effective Income Tax Rate | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----- | :------ | :------ | :------ | :------ | | Effective Income Tax Rate | 33.1% | 23.1% | 27.7% | 22.3% | - The Company's effective income tax rate increased in both **Q2 2025 (to 33.1% from 23.1%)** and **H1 2025 (to 27.7% from 22.3%)** compared to the prior year periods[25](index=25&type=chunk) - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces changes to U.S. tax policy, trade regulations, and federal spending; the Company is currently assessing its potential implications[26](index=26&type=chunk) [NOTE 4—Share Capital and Capital In Excess of Par Value](index=13&type=section&id=NOTE%204%E2%80%94Share%20Capital%20and%20Capital%20In%20Excess%20of%20Par%20Value) This note outlines the composition of the company's share capital, including common and Class B common stock, and capital in excess of par value Share Capital and Capital In Excess of Par Value (Shares in 000's, amounts in thousands) | Metric (Shares in 000's) | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :----------------------- | :------------ | :------------ | :---------------- | | Common Stock Shares | 41,808 | 41,213 | 40,789 | | Class B Common Stock Shares | 31,179 | 30,309 | 30,286 | | Capital in Excess of Par Value | $847,308 | $802,253 | $788,894 | - Common stock shares outstanding increased to **41,808 thousand** at June 30, 2025, from 40,789 thousand at December 31, 2024, and 41,213 thousand at June 30, 2024[27](index=27&type=chunk) - Capital in excess of par value increased to **$847,308 thousand** at June 30, 2025, from $788,894 thousand at December 31, 2024, primarily due to the issuance of a **3% stock dividend**[27](index=27&type=chunk) [Note 5 — Fair Value Measurements](index=13&type=section&id=Note%205%20%E2%80%94%20Fair%20Value%20Measurements) This note describes the valuation methodologies and inputs used for financial assets and liabilities measured at fair value on a recurring basis - The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivative hedging instruments, trading securities, and available-for-sale securities[31](index=31&type=chunk) - Available-for-sale and trading securities primarily utilize **Level 2 inputs** (quoted market prices or alternative pricing sources with reasonable transparency) for valuation[31](index=31&type=chunk) Assets Measured at Fair Value (in thousands) | Asset (in thousands) | Total Fair Value (June 30, 2025) | Level 1 | Level 2 | | :------------------- | :------------------------------- | :------ | :------ | | Cash and cash equivalents | $120,521 | $120,521 | $— | | Available for sale securities | $271,627 | $4,143 | $267,484 | | Trading securities | $112,009 | $95,499 | $16,510 | | Total assets measured at fair value | $503,766 | $219,533 | $284,233 | [Note 6 — Derivative Instruments and Hedging Activities](index=17&type=section&id=Note%206%20%E2%80%94%20Derivative%20Instruments%20and%20Hedging%20Activities) This note explains the company's use of derivative instruments to manage exposures to foreign currency and commodity price risks - The Company uses foreign currency forward contracts and commodity futures contracts to manage exposures to foreign exchange and commodity prices, primarily sugar[35](index=35&type=chunk) - All derivative instruments are recognized as assets or liabilities at fair value and accounted for using hedge accounting, with changes in fair value recorded in accumulated other comprehensive loss[36](index=36&type=chunk)[37](index=37&type=chunk) Derivative Instruments and Hedging Activities (in thousands) | Derivative Type (in thousands) | Notional Amounts (June 30, 2025) | Assets (June 30, 2025) | Liabilities (June 30, 2025) | | :----------------------------- | :------------------------------- | :--------------------- | :-------------------------- | | Foreign currency derivatives | $13,106 | $239 | $— | | Commodity derivatives | $12,527 | $85 | $(715) | - For H1 2025, total gain recognized in OCI from derivatives was **$644 thousand**, while total gain reclassified from accumulated OCI into earnings was **$(1,949) thousand**[40](index=40&type=chunk) [Note 7 — Pension Plans](index=19&type=section&id=Note%207%20%E2%80%94%20Pension%20Plans) This note provides an update on the multi-employer defined benefit pension plan, including its critical status and potential withdrawal liability - The Bakery and Confectionery Union and Industry International Pension Fund, a multi-employer defined benefit plan, was reclassified to **'critical status' for 2024 (until 2051)** after receiving approximately **$3.4 billion in Special Financial Assistance** in July 2024[40](index=40&type=chunk)[41](index=41&type=chunk) - The Company's withdrawal liability was estimated at **$97,500 thousand for 2024**, but the impact of the Special Financial Assistance on future withdrawal liability is uncertain and could result in a higher liability due to new PBGC regulations[42](index=42&type=chunk) - Pension expense for this Plan was **$1,744 thousand for H1 2025** (including $615 thousand in surcharges), slightly down from $1,770 thousand in H1 2024[43](index=43&type=chunk) [Note 8 — Accumulated Other Comprehensive Earnings (Loss)](index=22&type=section&id=Note%208%20%E2%80%94%20Accumulated%20Other%20Comprehensive%20Earnings%20%28Loss%29) This note details the components of accumulated other comprehensive earnings (loss), including foreign currency translation, investments, and derivatives Accumulated Other Comprehensive Earnings (Loss) (in thousands) | Component (in thousands) | Balance at June 30, 2025 | Balance at June 30, 2024 | | :----------------------- | :----------------------- | :----------------------- | | Foreign Currency Translation | $(23,405) | $(22,739) | | Investments | $4,552 | $(1,615) | | Foreign Currency Derivatives | $180 | $(34) | | Commodity Derivatives | $(477) | $(1,127) | | Postretirement and Pension Benefits | $2,136 | $1,641 | | Total Accumulated Other Comprehensive Earnings (Loss) | $(17,014) | $(23,874) | - Accumulated other comprehensive loss improved to **$(17,014) thousand** at June 30, 2025, from $(23,874) thousand at June 30, 2024, primarily due to positive changes in investments and foreign currency derivatives[45](index=45&type=chunk) - Reclassifications from accumulated other comprehensive income (loss) to earnings for H1 2025 included **$(61) thousand from investments**, **$229 thousand from foreign currency derivatives**, **$1,720 thousand from commodity derivatives**, and **$(410) thousand from postretirement and pension benefits**[46](index=46&type=chunk) [Note 9 — Restricted Cash](index=24&type=section&id=Note%209%20%E2%80%94%20Restricted%20Cash) This note explains the nature and purpose of restricted cash balances, primarily for collateral related to the Spanish subsidiary - Restricted cash consists of cash deposits by the Company's Spanish subsidiary, pledged as collateral for letters of credit and bank borrowings[47](index=47&type=chunk) [Note 10 — Bank Loans](index=24&type=section&id=Note%2010%20%E2%80%94%20Bank%20Loans) This note provides details on short-term bank borrowings by the Spanish subsidiary, including their amounts and weighted-average interest rates - Bank loans, totaling **$1,018 thousand** at June 30, 2025, and $1,046 thousand at June 30, 2024, are short-term borrowings by the Spanish subsidiary[48](index=48&type=chunk) - The weighted-average interest rate on these bank loans was **4.7%** at June 30, 2025, down from 6.4% at June 30, 2024[48](index=48&type=chunk) [Note 11 — Leases](index=24&type=section&id=Note%2011%20%E2%80%94%20Leases) This note describes the company's operating lease arrangements as both a lessee and a lessor, including associated costs and income - The Company leases buildings, land, and equipment classified as operating leases, with remaining terms up to 16 years; operating lease cost was **$366 thousand in Q2 2025** and **$731 thousand in H1 2025**[49](index=49&type=chunk) - Operating lease right-of-use assets were **$5,554 thousand** and liabilities were **$5,901 thousand** at June 30, 2025[49](index=49&type=chunk) - As a lessor, the Company rents commercial real estate, generating lease income of **$1,826 thousand in Q2 2025** and **$3,613 thousand in H1 2025**[50](index=50&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, liquidity, and capital resources for the periods ended June 30, 2025, highlighting key drivers and external factors [Net Product Sales](index=26&type=section&id=Net%20Product%20Sales) This section analyzes the trends and drivers of net product sales, distinguishing between domestic and foreign market performance Net Product Sales (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net product sales | $153,190 | $148,819 | $4,371 | 2.9% | | H1 2025 | $299,711 | $300,283 | $(572) | (0.2)% | | Domestic (U.S.) sales (Q2) | +4.6% | | | | | Foreign sales (Q2) | -16.8% | | | | | Domestic (U.S.) sales (H1) | +1.4% | | | | | Foreign sales (H1) | -16.5% | | | | - Domestic (U.S.) net product sales increased by **4.6% in Q2 2025** and **1.4% in H1 2025**, while foreign net product sales decreased by **16.8%** and **16.5%** respectively[52](index=52&type=chunk) - Domestic sales represented **93.8% of total consolidated net product sales in Q2 2025** and **92.6% in H1 2025**[52](index=52&type=chunk) - The Company faced a challenging market with increased customer and consumer resistance to higher prices, despite successful marketing and sales programs contributing to higher Q2 2025 sales[52](index=52&type=chunk) [Product Cost of Goods Sold and Gross Margin](index=26&type=section&id=Product%20Cost%20of%20Goods%20Sold%20and%20Gross%20Margin) This section examines the factors influencing the cost of goods sold and gross profit margins, including commodity prices and manufacturing efficiencies Product Cost of Goods Sold and Gross Margin (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Product cost of goods sold | $98,127 | $99,732 | $(1,605) | (1.6)% | | H1 2025 | $193,627 | $202,464 | $(8,837) | (4.4)% | | Adjusted product cost of goods sold (Q2) | $97,660 | $99,610 | $(1,950) | (2.0)% | | Adjusted product cost of goods sold (H1) | $193,315 | $201,977 | $(8,662) | (4.3)% | | Adjusted COGS as % of net product sales (Q2) | 63.8% | 66.9% | -3.1 pp | | | Adjusted COGS as % of net product sales (H1) | 64.5% | 67.3% | -2.8 pp | | - Product cost of goods sold decreased in both Q2 2025 and H1 2025, leading to improved gross profit margins due to higher price realization, plant manufacturing efficiencies, and cost reductions[53](index=53&type=chunk) - Cocoa and chocolate prices remain significantly elevated, and the Company expects even higher unit costs in late 2025 and 2026 as older supply contracts expire[54](index=54&type=chunk) - The use of the LIFO inventory method will result in lower current net earnings during periods of increasing costs and higher inflation, adversely affecting gross profit margins as cocoa and chocolate costs rise[55](index=55&type=chunk) [Selling, Marketing and Administrative Expenses](index=26&type=section&id=Selling%2C%20Marketing%20and%20Administrative%20Expenses) This section discusses the changes and drivers of selling, marketing, and administrative expenses, including customer freight and warehousing costs Selling, Marketing and Administrative Expenses (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Selling, marketing and administrative expenses | $44,362 | $35,040 | $9,322 | 26.6% | | H1 2025 | $73,752 | $73,958 | $(206) | (0.3)% | | Adjusted selling, marketing and administrative expenses (Q2) | $33,959 | $32,670 | $1,289 | 3.9% | | Adjusted selling, marketing and administrative expenses (H1) | $66,808 | $64,663 | $2,145 | 3.3% | | Adjusted as % of net product sales (Q2) | 22.2% | 22.0% | +0.2 pp | | | Adjusted as % of net product sales (H1) | 22.3% | 21.5% | +0.8 pp | | - Adjusted selling, marketing and administrative expenses increased by **3.9% in Q2 2025** and **3.3% in H1 2025**, primarily due to fixed costs not changing significantly with lower sales[57](index=57&type=chunk) - Customer freight, delivery, and warehousing expenses decreased by **5.7% in Q2 2025** and **1.8% in H1 2025**, with favorable unit costs in Q2 2025[58](index=58&type=chunk) [Earnings from Operations](index=28&type=section&id=Earnings%20from%20Operations) This section analyzes the company's operating profitability, including adjustments for deferred compensation expenses, and the impact of gross margin improvements Earnings from Operations (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Earnings from operations | $12,121 | $15,435 | $(3,314) | (21.5)% | | H1 2025 | $35,181 | $26,545 | $8,636 | 32.5% | | Adjusted earnings from operations (Q2) | $22,991 | $17,927 | $5,064 | 28.2% | | Adjusted earnings from operations (H1) | $42,437 | $36,327 | $6,110 | 16.8% | | Adjusted as % of net product sales (Q2) | 15.0% | 12.0% | +3.0 pp | | | Adjusted as % of net product sales (H1) | 14.2% | 12.1% | +2.1 pp | | - Adjusted earnings from operations increased by **28.2% in Q2 2025** and **16.8% in H1 2025**, primarily driven by improvements in gross profit margins[60](index=60&type=chunk) - Management believes that comparisons adjusted for deferred compensation expenses are useful for assessing the Company's operations[62](index=62&type=chunk) [Other Income, Net](index=28&type=section&id=Other%20Income%2C%20Net) This section details the components of other income, net, including investment income, gains on trading securities, insurance recoveries, and foreign exchange impacts Other Income, Net (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Other income, net | $14,072 | $4,900 | $9,172 | 187.2% | | H1 2025 | $14,021 | $13,932 | $89 | 0.6% | | Investment income from available for sale securities and cash equivalents (Q2) | $3,485 | $2,114 | $1,371 | 64.9% | | Investment income from available for sale securities and cash equivalents (H1) | $6,946 | $3,977 | $2,969 | 74.6% | - Other income, net, significantly increased in Q2 2025, primarily due to net gains and investment income on trading securities, which economically hedge deferred compensation liabilities[61](index=61&type=chunk) - Investment income from available-for-sale securities and cash equivalents increased in 2025, reflecting a higher interest rate environment and higher average balances[63](index=63&type=chunk) - Other income, net, also included an insurance recovery of **$479 thousand in Q2 2025** and **$1,307 thousand in H1 2025**, and pre-tax foreign exchange losses of **$(843) thousand in Q2 2025** and **$(1,387) thousand in H1 2025**[64](index=64&type=chunk) [Effective Income Tax Rates](index=30&type=section&id=Effective%20Income%20Tax%20Rates) This section explains the factors contributing to changes in the effective income tax rates, particularly the impact of deferred compensation Effective Income Tax Rate | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----- | :------ | :------ | :------ | :------ | | Effective Income Tax Rate | 33.1% | 23.1% | 27.7% | 22.3% | - The effective income tax rates were higher in 2025 compared to 2024, primarily due to the adverse effect of certain deferred compensation that will not be deductible for income taxes when paid in future periods[65](index=65&type=chunk) [Net Earnings and Earnings Per Share](index=30&type=section&id=Net%20Earnings%20and%20Earnings%20Per%20Share) This section analyzes the company's net earnings and earnings per share, considering the effects of stock purchases and overall profitability Net Earnings and Earnings Per Share (in thousands except per share) | Metric (in thousands except per share) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net earnings attributable to Tootsie Roll Industries, Inc. | $17,544 | $15,640 | $1,904 | 12.2% | | H1 2025 | $35,602 | $31,474 | $4,128 | 13.1% | | Net earnings per share (Q2) | $0.24 | $0.21 | $0.03 | 14.3% | | Net earnings per share (H1) | $0.49 | $0.43 | $0.06 | 14.0% | - Net earnings per share benefited from a reduction in average shares outstanding due to common stock purchases by the Company[66](index=66&type=chunk) [Goodwill and Intangibles](index=30&type=section&id=Goodwill%20and%20Intangibles) This section confirms the annual assessment of goodwill and intangibles for impairment, with no material triggering events identified - Goodwill and intangibles (primarily trademarks) are assessed annually, and no triggering events or adverse information indicating material impairment were identified in Q2 or H1 2025[67](index=67&type=chunk) [Pension Plan Update](index=30&type=section&id=Pension%20Plan%20Update) This section provides an update on the multi-employer pension plan's critical status, solvency concerns, and potential changes to withdrawal liability calculations - The multi-employer pension plan was reclassified to **'critical status' for 2024 (until 2051)** after receiving **$3.4 billion in Special Financial Assistance** in July 2024[68](index=68&type=chunk) - The Company's actuary believes the Plan's solvency through 2051 remains unclear, and new PBGC regulations could result in a higher withdrawal liability, phased-in over time[69](index=69&type=chunk)[70](index=70&type=chunk) - The Plan's funded percentage was **45.2%** as of January 1, 2024 (actuarial value), with only **15% active employees** and a **54% decline in active participants** since 2011[71](index=71&type=chunk) - The estimated withdrawal liability for 2024 was **$97,500 thousand**, but this does not include the impact of the Special Financial Assistance, which is expected to alter the calculation[72](index=72&type=chunk) - Pension expense for the Plan was **$1,744 thousand for H1 2025**, including frozen surcharges as per an agreement in Q1 2021[75](index=75&type=chunk) [Tariffs and Plant Investments](index=34&type=section&id=Tariffs%20and%20Plant%20Investments) This section discusses the adverse financial impact of tariffs on various inputs and the company's ongoing strategic investments in manufacturing operations - Current tariffs are estimated to have an adverse annual effect of approximately **$6,800 thousand** on consolidated earnings from operations, impacting foreign-sourced ingredients, packaging, and manufacturing equipment[78](index=78&type=chunk) - The Company is continuing investments in plant manufacturing operations to meet new consumer demands, improve product quality, expand capacity, and increase operational efficiencies[79](index=79&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations, focusing on cash flows from operating, investing, and financing activities, and working capital Cash Flow Summary (in thousands) | Metric (in thousands) | H1 2025 | H1 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net cash (used in) provided by operating activities | $(4,935) | $8,777 | $(13,712) | (156.2)% | | Net cash provided by (used in) investing activities | $5,670 | $(25,918) | $31,588 | 121.9% | | Net cash used in financing activities | $(19,437) | $(12,646) | $(6,791) | (53.7)% | - The decrease in operating cash flows was primarily due to changes in working capital, particularly accounts receivable and inventory[80](index=80&type=chunk) - Investing cash flows improved significantly due to a decline in purchases of available-for-sale securities; capital expenditures were **$10,363 thousand in H1 2025**, with a plant expansion project estimated at **$95,000 to $100,000 thousand** over the next five years[81](index=81&type=chunk) - Financing activities included common stock purchases and retirements of **$6,483 thousand in H1 2025** and cash dividends of **$12,928 thousand**[83](index=83&type=chunk) Liquidity Metrics (in thousands) | Metric (in thousands) | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :-------------------- | :------------ | :----------- | :------------ | | Current ratio | 4.0 to 1 | 3.8 to 1 | 3.7 to 1 | | Net working capital | $273,269 | $246,319 | $237,114 | | Aggregate cash and investments | $504,157 | $526,968 | $423,894 | - The Company's current ratio improved to **4.0 to 1** at June 30, 2025, from 3.8 to 1 at December 31, 2024, and net working capital increased to **$273,269 thousand**[84](index=84&type=chunk) - The VEBA trust, used to fund employee health benefits, held **$12,509 thousand** in cash and cash equivalents at June 30, 2025, with no contribution made in H1 2025[86](index=86&type=chunk) [Accounting Pronouncements](index=36&type=section&id=Accounting%20Pronouncements) This section directs readers to Note 1 for details on recent accounting pronouncements and their potential impact - Refer to Note 1 of the Condensed Consolidated Financial Statements for information on recent accounting pronouncements[87](index=87&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section refers readers to Note 1 and the 2024 Form 10-K for information on the company's critical accounting policies and estimates - Refer to Note 1 of the Condensed Consolidated Financial Statements and the 2024 Form 10-K for information on critical accounting policies and estimates[88](index=88&type=chunk) [Forward-Looking Statements](index=36&type=section&id=Forward-Looking%20Statements) This section cautions readers about the inherent risks and uncertainties associated with forward-looking statements and the company's policy on updating them - The report contains forward-looking statements subject to risks and uncertainties, including the effects of tariffs, ability to recover input cost increases, competitive environment, seasonal sales, cocoa and chocolate availability/prices, and changes in assumptions[89](index=89&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the Company undertakes no obligation to update them[91](index=91&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Company's exposure to various market risks, including commodity price fluctuations (sugar, cocoa, chocolate), foreign exchange rates (Canadian dollar), and interest rates, and outlines mitigation strategies - The Company is exposed to market risks from fluctuations in commodity prices (sugar, corn syrup, edible oils, cocoa, chocolate, etc.), packaging, and fuel costs[92](index=92&type=chunk) - Strategies include annual supply contracts and hedging certain commodities (primarily sugar); longer-range supply contracts for cocoa and chocolate have been entered into for 2025 and much of 2026, but at significantly higher costs due to unprecedented market volatility[92](index=92&type=chunk) - Foreign exchange risk, particularly with the Canadian dollar, is managed through forward contracts; the Company also faces exchange rate fluctuations in Mexico, Canada, and Spain[93](index=93&type=chunk) - Interest rate risk is managed by investing primarily in high-quality corporate bonds with an average maturity of **three to five years**[93](index=93&type=chunk) - No material changes in market risks were identified, other than the elevated cocoa and chocolate market and tariffs, compared to the 2024 Form 10-K[94](index=94&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025, concluding they are effective, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were **effective** as of June 30, 2025[95](index=95&type=chunk) - No material changes occurred in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[96](index=96&type=chunk) PART II — OTHER INFORMATION [ITEM 1A. RISK FACTORS](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors previously disclosed in the 2024 Form 10-K, specifically highlighting the potential adverse impact of tariffs and evolving food industry regulations - The imposition of tariffs and other surcharges on products, ingredients, packaging, and operating equipment could materially adversely affect the Company's business and operating results[99](index=99&type=chunk) - The Company procures certain materials from outside the U.S. that are currently subject to tariffs, leading to **higher costs in 2025**[99](index=99&type=chunk) - Continued developments in food industry legislation and regulatory requirements, such as the FDA's intent to phase out petroleum-based synthetic dyes, could adversely affect the business[100](index=100&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section reports that the Company did not purchase any of its common stock during the quarter ended June 30, 2025, noting the board's periodic authorization for share purchases Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------ | :------------------------------- | :--------------------------- | | Apr 1 to Apr 30 | — | $— | | May 1 to May 31 | — | $— | | Jun 1 to Jun 30 | — | $— | | Total | — | $— | - The Company did not purchase any common stock during the quarter ended June 30, 2025[101](index=101&type=chunk) - While there is no formal or publicly announced stock purchase program, the board of directors periodically authorizes a dollar amount for share purchases[102](index=102&type=chunk) [ITEM 6. EXHIBITS](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including XBRL taxonomy documents and certifications from the Chief Executive Officer and Chief Financial Officer - Key exhibits include XBRL Taxonomy Extension documents (Calculation, Schema, Label, Presentation, Definition Linkbase Documents) and certifications from the CEO (Exhibit 31.1) and CFO (Exhibit 31.2) pursuant to the Sarbanes-Oxley Act[102](index=102&type=chunk)[105](index=105&type=chunk) [Signatures](index=42&type=section&id=Signatures) The Quarterly Report on Form 10-Q was signed on August 8, 2025, by Ellen R. Gordon, Chairman and Chief Executive Officer, and G. Howard Ember, Jr., Vice President Finance and Chief Financial Officer - The report was signed by Ellen R. Gordon, Chairman and Chief Executive Officer, and G. Howard Ember, Jr., Vice President Finance and Chief Financial Officer, on August 8, 2025[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)

Core Insights - Tootsie Roll Industries reported Q2 2025 GAAP revenue of $153.2 million, a 3.0% increase year-over-year, with net earnings rising to $17.5 million, up 12.2% from the previous year [1][2][5][6] - The company faced challenges from rising input costs, particularly for cocoa and chocolate, which are expected to impact gross margins in the latter half of 2025 and into 2026 [6][10] Financial Performance - Q2 2025 revenue was $153.2 million compared to $148.8 million in Q2 2024, reflecting a 3.0% year-over-year growth [2] - Net earnings increased to $17.5 million from $15.64 million, marking a 12.2% rise [2] - Earnings per share (EPS) improved to $0.24 from $0.21, a 14.3% increase [2] - The effective income tax rate rose to 33.1% from 23.1% year-over-year [2][8] Business Overview - Tootsie Roll Industries specializes in producing and selling various candy products, including chocolate confections and lollipops, primarily in the U.S. market [3] - The company relies on brand recognition, customer concentration, and efficient cost management to navigate the confectionery industry [4] Strategic Initiatives - Recent strategies have focused on managing higher costs through price increases and manufacturing efficiencies [4][7] - The company has reduced the number of shares outstanding through buybacks, contributing to higher EPS [7] Market Challenges - The company noted that first half GAAP net sales were flat compared to 2024, with total net sales for H1 2025 at $299.7 million versus $300.3 million in H1 2024 [5] - Management highlighted the impact of tariffs on imported ingredients, adding to cost pressures [7] - The company anticipates that input cost inflation will continue to pose risks to profitability in the upcoming quarters [10]

[Press Release Overview](index=1&type=section&id=Press_Release_Overview) Tootsie Roll Industries, Inc. announced its second quarter and first half 2025 financial results [Introduction](index=1&type=section&id=Introduction) Tootsie Roll Industries, Inc. announced its second quarter and first half 2025 net sales and net earnings on July 23, 2025 - Tootsie Roll Industries, Inc. reported **second quarter and first half 2025 net sales and net earnings**[2](index=2&type=chunk) [Financial Performance Highlights](index=1&type=section&id=Financial_Performance_Highlights) This section highlights the company's financial performance for the second quarter and first half of 2025 [Second Quarter 2025 Performance](index=1&type=section&id=Q2_2025_Performance) In the second quarter of 2025, Tootsie Roll Industries reported a 3% increase in net sales and a 12.2% increase in net earnings, with EPS growing by 14% | Metric | Q2 2025 ($) | Q2 2024 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $153,190,000 | $148,819,000 | $4,371,000 | 3% | | Net Earnings | $17,544,000 | $15,640,000 | $1,904,000 | 12.2% | | Net Earnings Per Share | $0.24 | $0.21 | $0.03 | 14% | [First Half 2025 Performance](index=1&type=section&id=H1_2025_Performance) For the first half of 2025, net sales slightly decreased by 0.2% compared to 2024, while net earnings increased by 13.1% and EPS grew by 14% | Metric | H1 2025 ($) | H1 2024 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $299,711,000 | $300,283,000 | -$572,000 | -0.2% | | Net Earnings | $35,602,000 | $31,474,000 | $4,128,000 | 13.1% | | Net Earnings Per Share | $0.49 | $0.43 | $0.06 | 14% | [Management Commentary and Business Outlook](index=1&type=section&id=Management_Commentary_Business_Outlook) Management discusses sales, cost, and margin strategies, operational impacts, and strategic investments [Sales and Pricing Strategy](index=1&type=section&id=Sales_Pricing_Strategy) Successful marketing and sales programs drove higher Q2 2025 sales, but the first half faced challenges from consumer resistance to higher prices. The company has implemented price increases to mitigate rising input costs - Successful marketing and sales programs contributed to **higher sales in second quarter 2025**[5](index=5&type=chunk) - First half 2025 sales faced headwinds as customers and consumers became more resistant to **higher prices**[5](index=5&type=chunk) - The company implemented **price increases** to mitigate input cost increases and recover margin declines[6](index=6&type=chunk) [Cost and Margin Management](index=1&type=section&id=Cost_Margin_Management) Gross profit margins in Q2 and H1 2025 benefited from higher price realization, improved plant efficiencies, and cost reductions. However, significantly elevated cocoa and chocolate costs are expected to adversely affect gross profit margins in the second half of 2025 and into 2026 as older supply contracts expire - **Gross profit margins** in second quarter and first half 2025 benefited from **higher price realization, improvements in plant manufacturing operating efficiencies, and certain cost reductions**[7](index=7&type=chunk) - **Cocoa and chocolate markets** continue at significantly elevated levels, with even **higher costs expected** during the balance of 2025 and into 2026[6](index=6&type=chunk) - The Last-In-First-Out (LIFO) accounting method, combined with higher input costs (primarily cocoa and chocolate), will have increasingly **adverse effects on gross profit margins in the second half of 2025**[7](index=7&type=chunk) [Other Financial Factors](index=3&type=section&id=Other_Financial_Factors) Net earnings were positively impacted by increased investment income and insurance recoveries. However, effective income tax rates were higher in Q2 and H1 2025 due to non-deductible deferred compensation. Earnings per share benefited from stock repurchases, resulting in fewer shares outstanding - Second quarter and first half 2025 net earnings benefited from **increased investment income** from marketable securities and **insurance recoveries**[8](index=8&type=chunk) | Period | 2025 Effective Tax Rate (%) | 2024 Effective Tax Rate (%) | | :--- | :--- | :--- | | Second Quarter | 33.1% | 23.1% | | First Half | 27.7% | 22.3% | - **Higher effective tax rates in 2025** reflect the adverse effect of certain deferred compensation that will not be deductible for income taxes[8](index=8&type=chunk) - **Earnings per share benefited from stock purchases** in the open market, resulting in fewer shares outstanding[8](index=8&type=chunk) [Operational and Tariff Impacts](index=3&type=section&id=Operational_Tariff_Impacts) The company's operations are primarily in North America, benefiting from the USMCA free-trade agreement. However, foreign-sourced ingredients and packaging from outside USMCA incur higher tariffs, which added to costs in Q2 and H1 2025, with future tariff effects remaining uncertain - Operations and sales are principally in **North America**, with cross-border transactions qualifying under the **USMCA free-trade agreement**[9](index=9&type=chunk) - **Higher tariffs** on foreign-origin ingredients (e.g., cocoa, chocolate, edible oils) and packaging **added to costs** in second quarter and first half 2025[9](index=9&type=chunk) - The company is unable to ascertain the effects of tariffs on its business until more clarity regarding tariffs and possible retaliatory tariffs is forthcoming[9](index=9&type=chunk) [Strategic Investments and Forward-Looking Statements](index=3&type=section&id=Strategic_Investments_Forward_Looking) Tootsie Roll Industries is focused on long-term growth, continuing investments in plant manufacturing to meet demand, improve quality, expand capacity, and increase operational efficiencies. The release also includes a standard safe harbor statement, outlining various risk factors that could cause actual results to differ from forward-looking statements - The company is focused on the longer term and continues to make **investments in plant manufacturing operations** to meet new customer and consumer product demands, achieve product quality improvements, expand capacity, and increase operational efficiencies[10](index=10&type=chunk) - The release contains **forward-looking statements** made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995[10](index=10&type=chunk) - Risk factors include the effects of U.S. tariffs and retaliatory tariffs, competitive environment, ability to recover input cost increases, successful seasonal distribution, and changes in assumptions discussed in the Annual Report on Form 10-K[10](index=10&type=chunk) [Consolidated Financial Summary](index=4&type=section&id=Consolidated_Financial_Summary) This section provides a detailed consolidated summary of key financial metrics for Q2 and H1 2025 and 2024 [Summary of Sales & Earnings](index=4&type=section&id=Summary_Sales_Earnings) This section provides a detailed consolidated summary of net sales, net earnings, net earnings per share, and average shares outstanding for the second quarter and first half of 2025 and 2024 **TOOTSIE ROLL INDUSTRIES, INC. CONSOLIDATED SUMMARY OF SALES & EARNINGS** **Second Quarter Ended** | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net Sales | $153,190,000 | $148,819,000 | | Net Earnings | $17,544,000 | $15,640,000 | | Net Earnings Per Share* | $0.24 | $0.21 | | Average Shares Outstanding* | 72,879,000 | 73,536,000 | **Six Months Ended** | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net Sales | $299,711,000 | $300,283,000 | | Net Earnings | $35,602,000 | $31,474,000 | | Net Earnings Per Share* | $0.49 | $0.43 | | Average Shares Outstanding* | 72,923,000 | 73,536,000 | *Based on average shares outstanding adjusted for 3% stock dividends distributed April 4, 2025 and April 5, 2024

[Part I — Financial Information](index=4&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) This section provides the company's unaudited interim financial statements and management's analysis for the first quarter of 2025 [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited Condensed Consolidated Financial Statements for Tootsie Roll Industries, Inc. for the quarter ended March 31, 2025 - The financial statements are unaudited and prepared in accordance with GAAP for interim reporting, to be read with the company's 2024 Form 10-K[16](index=16&type=chunk) - The company's operations are seasonal, with the third quarter historically being the largest for net product sales due to pre-Halloween demand[17](index=17&type=chunk) [Condensed Consolidated Statements of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) As of March 31, 2025, total assets were $1.14 billion, total equity increased to $879.0 million, and cash decreased to $119.5 million Key Balance Sheet Figures (in thousands) | Account | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--- | :--- | :--- | :--- | | **Total current assets** | $329,116 | $333,605 | $328,540 | | **Total assets** | $1,141,700 | $1,147,181 | $1,093,453 | | **Total current liabilities** | $78,178 | $87,286 | $87,268 | | **Total liabilities** | $262,699 | $276,772 | $259,347 | | **Total equity** | $879,001 | $870,409 | $834,106 | [Condensed Consolidated Statements of Earnings and Retained Earnings](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings%20and%20Retained%20Earnings) For Q1 2025, net earnings increased to $18.0 million ($0.25 per share) from $15.8 million ($0.22 per share) in Q1 2024, despite a 3.3% revenue decrease Q1 2025 vs. Q1 2024 Performance (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | **Total revenue** | $148,455 | $153,175 | -3.1% | | **Total gross margin** | $52,450 | $50,028 | +4.8% | | **Earnings from operations** | $23,060 | $11,110 | +107.6% | | **Net earnings** | $18,041 | $15,835 | +13.9% | | **Net earnings per share** | $0.25 | $0.22 | +13.6% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations significantly decreased to $3.6 million in Q1 2025 from $21.4 million in Q1 2024, primarily due to working capital changes Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $3,602 | $21,401 | | **Net cash used in investing activities** | $(3,673) | $(20,002) | | **Net cash used in financing activities** | $(19,253) | $(12,507) | | **Decrease in cash and cash equivalents** | $(19,298) | $(11,037) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, fair value measurements, derivative instruments, and the status of the multi-employer pension plan - The company uses derivative instruments, including foreign currency and commodity futures contracts, to manage exposure to price volatility, primarily for sugar and Canadian dollar exchange rates[31](index=31&type=chunk) - The Bakery and Confectionery Union and Industry International Pension Fund, a multi-employer plan, is in 'critical status', with an estimated withdrawal liability of **$97.5 million** for 2024, though management believes the actual liability would be limited to a present value between **$31.3 million** and **$37.7 million**[37](index=37&type=chunk)[39](index=39&type=chunk)[69](index=69&type=chunk) - The company leases certain buildings, land, and equipment, with total operating lease liabilities of **$6.1 million** as of March 31, 2025[45](index=45&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 challenges, including a 3.3% sales decline, improved gross margins, and anticipated high cocoa costs, while maintaining strong liquidity Q1 2025 vs Q1 2024 Sales Performance | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | **Net Product Sales** | $146,521 | $151,464 | -3.3% | | **Domestic Sales Change** | -1.8% | N/A | N/A | | **Foreign Sales Change** | -16.3% | N/A | N/A | - The company expects to incur significantly higher cocoa and chocolate costs through 2025 and 2026 as older, lower-priced supply contracts expire and are replaced by new contracts at elevated market prices[51](index=51&type=chunk) - A multi-year plant expansion is underway, with an estimated total cost of **$95 million to $100 million**, expected to be funded from cash flow from operations and internal sources[78](index=78&type=chunk) - The company's liquidity remains strong, with a current ratio of **4.2 to 1** and aggregate cash, cash equivalents, and investments totaling **$507.6 million** at the end of the quarter[80](index=80&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from commodity price volatility, especially unprecedented cocoa prices, and uses hedging to mitigate these exposures - The cocoa market is experiencing unprecedented volatility and high prices, which is a primary market risk, leading to significantly higher costs for new supply contracts for 2025 and much of 2026[88](index=88&type=chunk) - The company hedges against commodity price changes (primarily sugar) and foreign exchange fluctuations (primarily Canadian dollar) using derivative contracts[88](index=88&type=chunk)[89](index=89&type=chunk) [Controls and Procedures](index=33&type=section&id=Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[91](index=91&type=chunk) - No material changes in internal control over financial reporting occurred during the first quarter of 2025[92](index=92&type=chunk) [Part II — Other Information](index=34&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) This section provides updates on risk factors, equity security purchases, and required exhibits [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors include potential impacts from tariffs and increasing regulatory scrutiny, such as the FDA's intention to phase out synthetic dyes - The imposition of tariffs on goods imported from outside the USMCA (e.g., cocoa, chocolate, edible oils) or on cross-border shipments within North America could have a negative impact on the business[95](index=95&type=chunk) - The food industry is subject to increasing laws and regulations, exemplified by the FDA's announced intention in April 2025 to phase out petroleum-based synthetic dyes in food products, the impact of which is still being evaluated[96](index=96&type=chunk) [Issuer Purchases of Equity Securities](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company repurchased 208,519 shares for approximately $6.5 million in Q1 2025, authorized by the board but not part of a formal program Q1 2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 to Jan 31 | 112,478 | $31.34 | | Feb 1 to Feb 28 | 88,662 | $30.70 | | Mar 1 to Mar 31 | 7,379 | $30.88 | | **Total** | **208,519** | **$31.05** | - The company does not have a formal stock purchase program; instead, the board periodically authorizes a dollar amount for share purchases[98](index=98&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including CEO and CFO certifications and XBRL interactive data files - Filed exhibits include CEO and CFO certifications (Exhibits 31.1, 31.2, and 32) and Inline XBRL documents[102](index=102&type=chunk)

Financial Results - Tootsie Roll Industries, Inc. announced its financial results for Q1 2025, ending March 31, 2025[6]. - The company issued a press release detailing its operations and financial condition on April 23, 2025[6]. Report Classification - The report is classified as "furnished" and not "filed" under the Securities Exchange Act of 1934[7]. - The financial statements and exhibits related to the report include Exhibit 99.1, which contains the press release[8]. Management - G. Howard Ember, Jr. serves as the Vice President Finance and Chief Financial Officer of Tootsie Roll Industries, Inc.[12].

Group 1 - The article discusses the performance of Tootsie Roll Industries, highlighting its strong fundamental performance over the past two years [1] - The focus of the article is on the confectionery industry, particularly the growth and stability of Tootsie Roll Industries [1] Group 2 - Crude Value Insights provides an investment service centered on oil and natural gas, emphasizing cash flow and growth potential [2] - Subscribers have access to a stock model account and in-depth cash flow analyses of exploration and production firms [2]

Financial Performance - The Company reported consolidated net product sales of $715,530 for the twelve months of 2024, a decrease of $47,722 or 6.3% compared to 2023[71]. - Total revenue for 2024 was $723,217,000, a decrease of 6.0% from $769,365,000 in 2023[159]. - Net earnings attributable to Tootsie Roll Industries, Inc. were $86,827 in twelve months 2024, a decrease from $91,912 in 2023, representing a decline of 4.7%[90]. - Net earnings for 2024 were $86,808,000, a decrease of 5.7% compared to $91,886,000 in 2023[167]. - Net earnings per share for twelve months 2024 were $1.22, down from $1.28 in 2023, a decrease of $0.06 per share[90]. - Product gross margin for 2024 was $247,474,000, representing a slight decrease from $252,515,000 in 2023[159]. - Selling, marketing, and administrative expenses decreased by $2,337 or 1.5% to $152,675 in 2024 compared to 2023[76]. - The Company faced challenges in the Spanish market, with an operating loss of $611 in 2024, slightly improved from a loss of $828 in 2023[79]. Cash Flow and Investments - Cash flows from operating activities totaled $138,889 in 2024, an increase from $94,611 in 2023[67]. - The Company's total cash, cash equivalents, and investments increased to $526,968 as of December 31, 2024, up by $99,940 from $427,028 in 2023[68]. - Cash and cash equivalents increased to $138,841,000 in 2024 from $75,915,000 in 2023[163]. - The Company has invested in a diversified portfolio of highly rated marketable securities, primarily corporate bonds, with maturities generally of three to five years[39]. - The Company’s investments classified as available for sale total $283,060, with maturities structured to limit exposure to interest rate fluctuations[132]. - The Company recorded a favorable change of $5,665 in customer incentive program estimates in 2024, although such adjustments have not historically been material to operating results[114]. Operational Insights - The Company employs approximately 2,300 full-time employees, with seasonal increases in workforce primarily before Halloween[26]. - The Company’s sales are significantly impacted by seasonal demand, particularly during Halloween, Christmas, Easter, and Valentine's Day[35]. - The Company is exploring various programs to increase sales and profitability of its Spanish subsidiary, which is currently experiencing losses[39]. - The Company does not expend material amounts on research and development but focuses on improving existing products and production processes[23]. - The Company maintains ongoing cost reduction and productivity improvement programs, although the outcomes of these initiatives are not accurately predictable[124]. Risks and Challenges - The Company faces risks related to ingredient price volatility, competition, and changing consumer preferences that could adversely affect its financial condition[33]. - The Company is subject to risks related to operational interruptions from software or hardware failures, including potential cyber-attacks[37]. - The Company faces risks associated with climate change that could impact costs and availability of materials needed for manufacturing[37]. - The Company participates in a multi-employer union pension plan that is currently in "critical and declining status," which may lead to significant withdrawal liabilities in the future[39]. Shareholder Information - The Company paid cash dividends of $25,515 in 2024 and plans to continue issuing quarterly cash dividends[67]. - Shareholders' equity rose from $823,422 at December 31, 2023, to $870,743 as of December 31, 2024, reflecting net earnings of $86,827[69]. - The average number of shares outstanding decreased to 71,320 in 2024 from 71,903 in 2023[159]. - The Company repurchased $13,534 worth of common stock in 2024, compared to $33,114 in 2023[106]. - The Company issued a 3% stock dividend, resulting in an increase of 1,196 thousand shares in 2024, compared to 1,185 thousand shares in 2023[213]. Tax and Regulatory Matters - The effective income tax rate for twelve months 2024 was 31.6%, compared to 23.4% in 2023, reflecting the impact of deferred tax asset write-offs[90]. - The provision for income taxes in 2024 was $40,063, compared to $28,008 in 2023[204]. - The Company had unrecognized tax benefits of $2,114 in 2024, compared to $2,313 in 2023[209]. - The Company remains subject to examination by tax authorities for the years 2021 through 2023, with no examinations for years prior to 2020[211].

Financial Performance - Fourth quarter 2024 net sales were $191,356,000, a decrease of 2% from $195,368,000 in fourth quarter 2023[3] - Fourth quarter 2024 net earnings were $22,509,000, down 22% from $29,403,000 in fourth quarter 2023, resulting in earnings per share of $0.32 compared to $0.41[3] - Twelve months 2024 net sales totaled $715,530,000, a decline of 6% from $763,252,000 in twelve months 2023[4] - Twelve months 2024 net earnings were $86,827,000, a decrease of 5% from $91,912,000 in twelve months 2023, with earnings per share of $1.22 compared to $1.28[4] Tax and Adjustments - The company wrote off $11,010,000 of deferred tax assets in fourth quarter 2024, impacting net earnings[5] - Adjusted for the tax asset write-off, fourth quarter 2024 net earnings would have increased by 14% year-over-year[5] Operational Efficiency - Gross profit margins improved due to higher price realization and manufacturing efficiencies, despite lower sales volumes[7] - The company is focused on long-term investments in manufacturing operations to enhance product quality and operational efficiencies[10] Market Outlook - The company anticipates higher cocoa and chocolate costs in 2025 due to expiring supply contracts and new contracts at elevated prices[8] Other Income - Increased investment income and leasing revenue contributed positively to net earnings in fourth quarter 2024[9]

Financial Performance - Net product sales decreased to $223,891 in Q3 2024 from $248,336 in Q3 2023, a decline of 9.8%[63] - Domestic net product sales represented 91.6% of total consolidated net product sales in Q3 2024, with a decrease of 9.7% compared to the prior year[63] - Adjusted earnings from operations were $40,044 in Q3 2024, down 9.4% from $44,215 in Q3 2023[71] - Net earnings attributable to Tootsie Roll Industries, Inc. were $32,844 in Q3 2024, compared to $34,382 in Q3 2023, a decrease of 4.5%[78] Costs and Expenses - Product cost of goods sold decreased to $148,266 in Q3 2024 from $164,163 in Q3 2023, a decrease of 9.9%[64] - Selling, marketing, and administrative expenses increased to $41,825 in Q3 2024 from $39,300 in Q3 2023, an increase of 6.4%[66] - Cocoa and chocolate costs are expected to rise significantly, adversely affecting input costs and margins for the remainder of 2024 and into 2025[65] - The Company is exposed to significant increases in ingredient and packaging costs, particularly in cocoa and chocolate, which have reached unprecedented highs[105] Tax and Earnings Per Share - The consolidated effective tax rate decreased to 22.6% in Q3 2024 from 23.9% in Q3 2023, contributing to higher net earnings[77] - Average shares outstanding decreased from 71,696 in Q3 2023 to 71,379 in Q3 2024, impacting earnings per share positively[78] Future Outlook - The company expects adverse sales trends to continue through the remainder of 2024 and possibly into 2025[63] - The cocoa market is experiencing unprecedented volatility and remains a risk for the intermediate term and possibly longer[105] Pension and Employee Benefits - As of January 1, 2023, the Plan's funded percentage was 47.0%, down from 49.3% in 2022 and 48.5% in 2021, with a market value-adjusted percentage of 43.6%[81] - The number of current active employee Plan participants decreased by 1% from the previous year and 6% over the past two years, reflecting a 55% decline since January 1, 2011[83] - The Company's pension expense for the nine months ended 2024 was $2,579, compared to $2,785 for the same period in 2023, with surcharges of $909 and $982 respectively[87] - The Company received approximately $3.4 billion in Special Financial Assistance from the PBGC in July 2024, aimed at ensuring the Plan's solvency through 2051[88] - The Company expects to use VEBA funds to pay actual costs of employee benefits through part or all of 2027[101] Cash Flow and Investments - Net cash flows from operating activities increased by $30,496, totaling $70,102 for the nine months ended 2024 compared to $39,606 in 2023[94] - Cash used in investing activities was $(32,176) for the nine months ended 2024, with capital expenditures of $13,911 compared to $19,458 in 2023[95] - Aggregate cash and cash equivalents and investments totaled $481,555 at September 30, 2024, up from $427,028 at December 31, 2023[98] - The Company's current ratio was 3.6 to 1 at September 30, 2024, unchanged from December 31, 2023, and improved from 3.2 to 1 at September 30, 2023[97] Expansion Plans - The Company plans a plant expansion with an estimated cost of $70,000 to $80,000 over the next five years to meet projected demand[95] Market Risks - The Company is exposed to exchange rate fluctuations in the Canadian dollar, affecting raw material and packaging costs, as well as labor and local plant operating costs[106] - The Company invests principally in corporate bonds with an average maturity of three to five years to manage its interest rate risk[106] - The Company believes its policies limit exposure to significant interest rate fluctuations, with no material changes in market risks affecting disclosures made in the Form 10-K for the year ended December 31, 2023[107] - The net unrealized loss on available for sale investments was approximately $4,300 and $6,600 at September 30, 2024 and 2023, respectively, reflecting the increase in market interest rates[100] VEBA Trust - The VEBA trust held $16,345, $19,126, and $21,965 of aggregate cash and cash equivalents at September 30, 2024, December 31, 2023, and September 30, 2023, respectively[101] - The Company added $20,000 in additional funding to the VEBA trust in 2023, with no contributions made during the nine months of 2024[101] - The Company has entered into longer-range supply contracts for cocoa and chocolate needs in 2024 and much of 2025 at significantly higher costs than in recent years[105]