Sales Performance - Net product sales in Q3 2025 were $230,614, an increase of $6,723 or 3.0% compared to Q3 2024[51] - Domestic net product sales increased by 3.8% in Q3 2025, representing 92.3% of total consolidated net product sales[51] - Net earnings attributable to Tootsie Roll Industries, Inc. in Q3 2025 were $35,659, an increase of $2,815 or 8.6% from Q3 2024[65] Costs and Expenses - Product cost of goods sold in Q3 2025 was $152,741, an increase of $4,400 or 3.0% from Q3 2024[52] - Selling, marketing, and administrative expenses in Q3 2025 were $47,031, an increase of $5,206 or 12.4% from Q3 2024[55] - Current tariffs are estimated to have an adverse annual effect of approximately $6,900 on the Company's consolidated earnings from operations[78] Earnings and Taxation - Adjusted earnings from operations in Q3 2025 were $39,701, a decrease of $343 or 0.9% compared to Q3 2024[59] - Effective income tax rates increased to 26.7% in Q3 2025 from 22.6% in Q3 2024, primarily due to non-deductible deferred compensation[64] Cash Flow and Investments - Cash flows provided by operating activities were $57,288 and $70,102 for the nine months of 2025 and 2024, respectively, reflecting a decrease of $12,814[80] - Cash flows used in investing activities increased to $91,843 in nine months 2025 from $32,176 in 2024, primarily due to increased purchases of available-for-sale securities[81] Company Initiatives and Future Outlook - The Company is pursuing a plant expansion with total costs expected to be between $75,000 and $85,000 over the next five years, funded from cash flow from operations[81] - The Company is focused on recovering increases in input costs through price increases to restore margins[89] - The overall competitive environment in the Company's industry remains a significant factor influencing future performance[89] - Successful distribution and sell-through during key seasons, such as Halloween, are critical for the Company's financial results[89] Financial Position and Liabilities - The Company's current ratio was 2.8 to 1 at September 30, 2025, down from 3.8 to 1 at December 31, 2024[83] - The Company expects its withdrawal liability, if it withdrew in 2024, to be limited to twenty annual payments of $2,664, with a present value range of $31,262 to $37,654[73] Market Conditions and Risks - The availability of cocoa and chocolate at reasonable prices is a concern due to elevated and volatile market conditions[89] - The Company acknowledges that actual results may differ materially from forward-looking statements due to various risks and uncertainties[90] - The Company has no obligation to update forward-looking statements made in the report[90] Trust Fund Information - The Company funded $20,000 to a VEBA trust in 2023, with no contributions made during the nine months of 2025 or 2024[85] - The VEBA trust held aggregate cash and cash equivalents of $10,989, $13,926, and $16,345 at September 30, 2025, December 31, 2024, and September 30, 2024, respectively[85] - The assets in the VEBA trust primarily comprise cash and corporate bonds, categorized as Level 1 and Level 2 within the fair value hierarchy[85]

Palantir - Palantir's shares have decreased by as much as 8% despite topping analysts' estimates for third-quarter sales and raising its annual revenue outlook, marking 21 consecutive quarters of revenue above estimates [1][2] - The company's stock has surged over 170% this year, closing at a record high, but its price-to-sales ratio stands at 85, the highest in the S&P 500 index, raising concerns about valuation sustainability [2] - Investors are seeking more guidance for the upcoming year, particularly for 2026, indicating a desire for clearer future expectations [3] Hertz - Hertz's stock has increased by 25% after swinging to a third-quarter profit, aided by lower depreciation costs and a strategy of replacing older cars with newer models [4] - The company reported a net income of $184 million, or $0.42 per share, compared to a loss of $1.33 billion, or $4.34 per share, in the previous year [5] Uber - Uber's earnings exceeded estimates, but the stock faced a decline due to a miss on third-quarter operating income and an adjusted earnings forecast that fell short of expectations [7] - The company experienced its strongest quarterly growth since late 2023, with total bookings growing by 21% to $49.7 billion for the quarter, surpassing estimates [8] iHeartMedia - iHeartMedia's shares rose by as much as 30% following reports that Netflix is in talks to license video podcasts distributed by iHeartMedia, positioning it in competition with YouTube [9]

Core Insights - The consumer staples sector has several oversold stocks, presenting potential buying opportunities for undervalued companies [1][2] Company Summaries - **Tootsie Roll Industries Inc (NYSE:TR)**: Reported Q3 earnings of 49 cents per share, an increase from 45 cents year-over-year. The stock has declined approximately 14% in the past five days, with a 52-week low of $28.32. Current RSI is 28.8, and the stock closed at $36.05, up 1.9% [8] - **National Beverage Corp (NASDAQ:FIZZ)**: Experienced disappointing quarterly sales, with a stock decline of around 8% over the past month and a 52-week low of $33.72. The current RSI is 21.4, and shares closed at $33.75, down 3.1% [8] - **Calavo Growers Inc (NASDAQ:CVGW)**: Reported weaker-than-expected quarterly results, with a stock decline of about 10% over the past month and a 52-week low of $21.46. The current RSI is 25.6, and shares closed at $23.21, down 0.5% [8]

Core Insights - The consumer staples sector has several oversold stocks, presenting potential buying opportunities for undervalued companies [1][2] Company Summaries - **Tootsie Roll Industries Inc (NYSE:TR)**: Reported Q3 earnings of 49 cents per share, an increase from 45 cents year-over-year. The stock has declined approximately 14% in the past five days, with a 52-week low of $28.32. Current RSI is 28.8, and the stock closed at $36.05, up 1.9% [8] - **National Beverage Corp (NASDAQ:FIZZ)**: Experienced disappointing quarterly sales, with a stock decline of around 8% over the past month and a 52-week low of $33.72. The current RSI is 21.4, and shares closed at $33.75, down 3.1% [8] - **Calavo Growers Inc (NASDAQ:CVGW)**: Reported weaker-than-expected quarterly results, with a stock drop of about 10% in the last month and a 52-week low of $21.46. The RSI stands at 25.6, and shares closed at $23.21, down 0.5% [8]

Financial Performance - Third quarter 2025 net sales were $230,614,000, an increase of $6,723,000 or 3% compared to $223,891,000 in third quarter 2024[3] - Third quarter 2025 net earnings were $35,659,000, up from $32,844,000 in third quarter 2024, with net earnings per share increasing by $0.04 or 9% to $0.49[3] - Nine months 2025 net sales reached $530,325,000, a 1% increase from $524,174,000 in nine months 2024[4] - Nine months 2025 net earnings were $71,261,000, compared to $64,318,000 in nine months 2024, with net earnings per share increasing by $0.11 or 13% to $0.98[4] Challenges - The company faced challenges in nine months 2025 as customers became more resistant to higher prices, impacting sales[5] - Higher input costs, particularly for cocoa and chocolate, have adversely affected gross profit margins in 2025[6][8] Profit Margins - Third quarter and nine months 2025 gross profit margins benefited from higher price realization and improvements in manufacturing efficiencies[7] Other Income and Tax Rates - Increased Other income, including a $3.4 million cumulative after-tax adjustment, contributed to net earnings in both third quarter and nine months 2025[9] - The effective income tax rates for third quarter 2025 and nine months 2025 were 26.7% and 27.2%, respectively, reflecting higher deferred compensation impacts[9] Investments - The company continues to invest in plant manufacturing operations to meet new product demands and improve operational efficiencies[11]

Core Insights - Artificial intelligence (AI) represents a significant investment opportunity, with a strong emphasis on the urgent need for energy to support its growth [1][2][3] - A specific company, largely overlooked by AI investors, is positioned to benefit from the increasing demand for energy driven by AI data centers [3][6][7] Investment Landscape - Wall Street is investing hundreds of billions into AI technologies, but the energy requirements for these technologies are immense, with data centers consuming as much energy as small cities [2][4] - The company in focus owns critical energy infrastructure assets, making it integral to the future of AI and energy supply [7][8] Company Profile - The company is described as a "toll booth" operator in the AI energy boom, collecting fees from energy exports and benefiting from the onshoring trend due to tariffs [5][6] - It is debt-free and has a significant cash reserve, equating to nearly one-third of its market capitalization, which positions it favorably compared to other energy firms [8][10] Market Position - The company has a substantial equity stake in another AI-related venture, providing indirect exposure to multiple growth engines in the AI sector [9][10] - It is trading at less than 7 times earnings, indicating a potentially undervalued investment opportunity in the context of its critical role in energy infrastructure [10][11] Future Outlook - The ongoing AI infrastructure supercycle, combined with the surge in U.S. LNG exports and the focus on nuclear energy, presents a unique investment landscape [14] - The influx of talent into the AI sector ensures continuous innovation, making investments in AI a strategic move for future growth [12][13]

Industry Overview - Halloween spending is projected to increase by 13% year-over-year (YOY) to over $13 billion, indicating strong consumer interest despite overall spending cuts due to inflation [2][3] - Retailers specializing in holiday goods are expected to benefit from this increase in consumer spending [2] Walmart - Walmart is anticipated to be a primary destination for Halloween shopping, with a current stock price of $102.99 and a 12-month price forecast of $112.38, representing a 9.12% upside [3][4] - The company has shown a year-to-date return of nearly 15% and is expected to achieve over 18% earnings growth [4] - Walmart's e-commerce business has surged by 25% YOY, and the company is exploring growth in advertising, membership income, and international expansion [5] - Despite concerns over high valuation and tariff risks, analysts remain bullish, with 30 out of 31 ratings being a Buy [6] Hasbro - Hasbro's stock is currently priced at $75.96, with a 12-month price forecast of $87.64, indicating a 15.37% upside [8] - The company has reported strong growth in digital gaming and its Wizards of the Coast segment, with a 23% YOY revenue increase in the last quarter [9] - Although consumer products linked to Halloween saw a 16% decline in sales, October is expected to be a positive month for Hasbro [10] - Analysts rate Hasbro as a Moderate Buy, with 10 out of 12 ratings being positive and a potential upside of over 17% [11] Tootsie Roll - Tootsie Roll's stock is currently priced at $42.42, with a forecast indicating a significant downside, but it remains a Buy based on one analyst rating [12] - The company has shown a 14% YOY improvement in EPS despite economic headwinds, with a 3% sales growth [13] - Tootsie Roll offers a dividend yield of 0.84% and maintains a conservative balance sheet, providing flexibility for future challenges [14][15]

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