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Toppan Merrill - Tootsie Roll Annual Report ED | 108961 | 29-Feb-20 02:56 | 20-10976-1.ba | Sequence: 1
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Toppan Merrill - Tootsie Roll Annual Report ED | 108961 | 29-Feb-20 02:56 | 20-10976-1.za | Sequence: 1
Corporate Profile
Tootsie Roll Industries, Inc. has been engaged in the
manufacture and sale of confectionery products for
over 120 years. Our products are primarily sold under
the familiar brand names: Tootsie Roll, Tootsie Roll Pops,
Caramel Apple Pops, Child’s Play, Charms, Blow Pop,
Blue Razz, Cella’s chocolate covered cherries, Dots,
Crows, Junior Mints, Junior Caramels, Charleston
Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff
cotton candy, Dubble Bubble, Razzles, Cry Baby and
Nik-L-Nip.
Corporate Principles
We believe that the differences among companies are
attributable to the caliber of their people, and therefore
we strive to attract and retain superior people for each
job.
We believe that an open family atmosphere at work
combined with professional management fosters
cooperation and enables each individual to maximize
his or her contribution to the Company and realize the
corresponding rewards.
We do not jeopardize long-term growth for immediate,
short-term results.
We maintain a conservative financial posture in the
deployment and management of our assets.
We run a trim operation and continually strive to
eliminate waste, minimize cost and implement
performance improvements.
We invest in the latest and most productive equipment
to deliver the best quality product to our customers at
the lowest cost.
We seek to outsource functions where appropriate and
to vertically integrate operations where it is financially
advantageous to do so.
We view our well known brands as prized assets to be
aggressively advertised and promoted to each new
generation of consumers.
We conduct business with the highest ethical
standards and integrity which are codified in the
Company’s “Code of Business Conduct and Ethics.”
Financial Highlights
December 31,
2019
2018
(in thousands except per share data)
Board of Directors
Offices, Plants
Ellen R. Gordon
Chairman of the Board and
Chief Executive Officer
Executive Offices
Lana Jane Lewis-Brent(1)(2)
Barre A. Seibert(1)(2)
Paula M. Wardynski(1)(2)
President, Paul Brent
Designer, Inc., an art
publishing, design and
licensing company
Retired First Vice President,
Washington Mutual Bank
Former Senior Vice
President—Finance,
Twenty-First Century Fox
(1)Audit Committee (2)Compensation Committee
Plants/Warehouses
Foreign Sales Offices
7401 S. Cicero Ave.
Chicago, Illinois 60629
www.tootsie.com
Illinois
Tennessee
Massachusetts
Pennsylvania
Wisconsin
Ontario, Canada
Mexico City, Mexico
Barcelona, Spain
Mexico City, Mexico
Ontario, Canada
Barcelona, Spain
Officers
Ellen R. Gordon
Thomas E. Corr
G. Howard Ember, Jr.
Chairman of the Board and
Chief Executive Officer
Vice President,
Marketing & Sales
Vice President, Finance &
Chief Financial Officer
Stephen P. Green
Vice President, Manufacturing
Barry P. Bowen
Treasurer & Assistant
Secretary
Richard F. Berezewski
Controller
Other Information
Stock Exchange
Stock Identification
Stock Transfer Agent and
Stock Registrar
Independent Registered
Public Accounting Firm
General Counsel
Annual Meeting
New York Stock
Exchange, Inc.
(Since 1922)
Ticker Symbol: TR
CUSIP No. 890516 10-7
American Stock Transfer
and Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
1-800-710-0932
www.amstock.com
Grant Thornton LLP
171 North Clark Street,
Suite 200
Chicago, IL 60601
Aronberg Goldgehn Davis &
Garmisa
330 North Wabash Avenue
Chicago, IL 60611
May 4, 2020
Mutual Building, Room 1200
909 East Main Street
Richmond, VA 23219
Net Product Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $523,616
64,920
Net Earnings Attributable to Tootsie Roll Industries, Inc. . . . . . . . . . . . . . . . . .
273,786
Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188,455
Net Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
759,854
Average Shares Outstanding* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per Share Items*
Net Earnings Attributable to Tootsie Roll Industries, Inc. . . . . . . . . . . . . . . . . .
Cash Dividends Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,474
$515,251
56,893
242,655
186,101
750,622
66,130
$0.99 $0.86
0.36
0.36
*Adjusted for stock dividends.
Printed on recycled paper.
JOB: 20-10976-1 CYCLE#;BL#: 2; 0 TRIM: 8.50" x 11.00" AS: Chicago: 877-427-2185
182299_Cover.indd 2
COLORS: Yellow, Cyan, ~note-color 2, Black, Magenta GRAPHICS: Tootsie_roll_candy_logo.eps V1.5
JOB: 20-10976-1 CYCLE#;BL#: 2; 0 TRIM: 8.50" x 11.00" AS: Chicago: 877-427-2185
COLORS: Yellow, Cyan, ~note-color 2, Black, Magenta GRAPHICS: tootsie_com_4c_photo.eps, tr_listed_nyse_k_logo.eps, recycled_logo.eps V1.5
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penses due to an unprecedented
measures that improve every
higher freight and delivery ex-
holders. We strive to implement
versely impacted by significantly
our consumers and to our share-
Net earnings in 2018 were ad-
we can deliver maximum value to
keep our operations lean so that
lenge. We always endeavor to
tax liabilities.
2017 on the Company’s deferred
another are a pervasive chal-
U.S. Tax Cuts and Jobs Act of
Cost pressures of one sort or
share related to the impact of the
ment of $20.3 million or $0.31 per
new manufacturing lines.
income tax accounting adjust-
a one-time favorable deferred
product packaging and start-up of
related to quality improvements in
in the prior year. 2017 included
programs, as well as by costs
were $0.89 as compared to $1.24
our self-insured employee benefit
lion in 2017. Earnings per share
es and unfavorable experience in
million as compared to $80.9 mil-
increases in manufacturing wag-
Net earnings in 2018 were $56.9
Earnings were also affected by
season.
increases.
another good Halloween selling
and had to absorb these
remained strong and we had
cost of delivery to our customers
in 2017. Sales of our core brands
the candy industry, we pay for the
million in 2018 and $515.7 million
ing industry. As is customary in
Net product sales were $515.3
shortage of capacity in the truck-
Ellen R. Gordon, Chairman and Chief Executive Officer
Shareholders
To Our
To Our
To Our
Shareholders
Shareholders
Ellen R. Gordon, Chairman and Chief Executive Officer
Ellen R. Gordon, Chairman and Chief Executive Officer
Net product sales in 2019 were
$524 million, as compared to 2018
net product sales of $515 million.
Many of our core brands posted
solid results, and Halloween was
once again our largest selling
season of the year.
Net product sales were $515.3
million in 2018 and $515.7 million
in 2017. Sales of our core brands
remained strong and we had
another good Halloween selling
season.
programs. Lower general and
administrative expenses in 2019,
primarily legal and professional
fees, also contributed to improved
results.
shortage of capacity in the truck-
ing industry. As is customary in
the candy industry, we pay for the
cost of delivery to our customers
and had to absorb these
increases.
Net earnings grew to $64.9 million
in 2019 from $56.9 million in 2018.
The increase in earnings was
attributable to higher price
realization which has allowed the
Company to recover some of the
margin decline that has resulted
from higher costs of certain inputs
in recent years. Plant efficiencies
driven by capital investments and
ongoing cost containment programs
contributed to improved earnings.
Net earnings in 2018 were $56.9
million as compared to $80.9 mil-
lion in 2017. Earnings per share
were $0.89 as compared to $1.24
in the prior year. 2017 included
a one-time favorable deferred
income tax accounting adjust-
ment of $20.3 million or $0.31 per
share related to the impact of the
U.S. Tax Cuts and Jobs Act of
2017 on the Company’s deferred
tax liabilities.
The prior year 2018 results were
adversely affected by costs related
to the start-up of new manufacturing
lines as well as unfavorable
experience in certain self-insurance
Net earnings in 2018 were ad-
versely impacted by significantly
higher freight and delivery ex-
penses due to an unprecedented
Earnings per share were $0.99 in
2019, up from $0.86 in the 2018,
due to the combination of higher
earnings and fewer shares
outstanding in 2019.
Earnings were also affected by
increases in manufacturing wag-
es and unfavorable experience in
our self-insured employee benefit
programs, as well as by costs
In order to achieve our profit goals
related to quality improvements in
and still deliver maximum value to
product packaging and start-up of
our consumers, we are challenged
to look for every feasible way to
new manufacturing lines.
keep our operations lean and costs
in check.
Cost pressures of one sort or
another are a pervasive chal-
lenge. We always endeavor to
keep our operations lean so that
we can deliver maximum value to
our consumers and to our share-
holders. We strive to implement
measures that improve every
As a value oriented confectioner,
we deem it essential to be a low
cost producer. We actively pursue
investments in the latest technology
to keep us so. We take a long-term
view of our business and enact only
those measures that improve our
182299_Narative.indd 1
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penses due to an unprecedented
measures that improve every
higher freight and delivery ex-
holders. We strive to implement
versely impacted by significantly
our consumers and to our share-
Net earnings in 2018 were ad-
we can deliver maximum value to
keep our operations lean so that
lenge. We always endeavor to
tax liabilities.
2017 on the Company’s deferred
another are a pervasive chal-
U.S. Tax Cuts and Jobs Act of
Cost pressures of one sort or
share related to the impact of the
ment of $20.3 million or $0.31 per
new manufacturing lines.
income tax accounting adjust-
a one-time favorable deferred
product packaging and start-up of
related to quality improvements in
in the prior year. 2017 included
programs, as well as by costs
were $0.89 as compared to $1.24
our self-insured employee benefit
lion in 2017. Earnings per share
es and unfavorable experience in
million as compared to $80.9 mil-
increases in manufacturing wag-
Net earnings in 2018 were $56.9
Earnings were also affected by
season.
increases.
another good Halloween selling
and had to absorb these
remained strong and we had
cost of delivery to our customers
in 2017. Sales of our core brands
the candy industry, we pay for the
million in 2018 and $515.7 million
ing industry. As is customary in
Net product sales were $515.3
shortage of capacity in the truck-
measures that improve every
penses due to an unprecedented
holders. We strive to implement
higher freight and delivery ex-
our consumers and to our share-
versely impacted by significantly
Net earnings in 2018 were ad-
we can deliver maximum value to
keep our operations lean so that
lenge. We always endeavor to
tax liabilities.
another are a pervasive chal-
2017 on the Company’s deferred
Cost pressures of one sort or
U.S. Tax Cuts and Jobs Act of
share related to the impact of the
new manufacturing lines.
ment of $20.3 million or $0.31 per
product packaging and start-up of
related to quality improvements in
income tax accounting adjust-
a one-time favorable deferred
programs, as well as by costs
in the prior year. 2017 included
our self-insured employee benefit
were $0.89 as compared to $1.24
es and unfavorable experience in
lion in 2017. Earnings per share
increases in manufacturing wag-
million as compared to $80.9 mil-
Earnings were also affected by
Net earnings in 2018 were $56.9
increases.
season.
and had to absorb these
another good Halloween selling
cost of delivery to our customers
remained strong and we had
the candy industry, we pay for the
in 2017. Sales of our core brands
ing industry. As is customary in
million in 2018 and $515.7 million
shortage of capacity in the truck-
Net product sales were $515.3
Ellen R. Gordon, Chairman and Chief Executive Officer
Ellen R. Gordon, Chairman and Chief Executive Officer
Shareholders
To Our
Shareholders
To Our
operating results without jeopardizing the long-term
strength of the Company and its well-known brands.
In this regard, capital expenditures were $20 million in
2019. The Company is continuing its investments in
manufacturing operations to meet new consumer and
customer demands, achieve quality improvements and
increase operational efficiencies. In particular, during
2019, new state of the art production and packaging
equipment was added in a number of our plants.
During 2019, we paid cash dividends of 36 cents per
share and again distributed a 3% stock dividend. This
was the seventy-seventh consecutive year the
Company has paid cash dividends and the fifty-fifth
consecutive year that a stock dividend was distributed.
We also repurchased 922,886 shares of our common
stock in the open market for an aggregate price of
$34.1 million.
We ended 2019 with $308.8 million in cash and
investments net of interest bearing debt and
investments that hedge deferred compensation
liabilities. We remain poised to continue investing in
our business, improving manufacturing productivity and
quality, supporting our brands, paying dividends and
repurchasing common stock. We also continue to seek
appropriate complementary business acquisitions.
We manufacture and sell an appealing range of
confectionery offerings suitable for virtually every major
consumer group and retail format. Our diverse and
highly recognizable brand portfolio is popular across all
trade channels.
During 2019, we again used targeted marketing
initiatives, directed both to the trade and to consumers,
to help move our products into distribution and
subsequently to move them off the retail shelf. We find
that these carefully executed and channel-specific
promotions drive sales by emphasizing high sell-
through and attractive profit margins to the trade and a
high quality, attractive value to the consumer.
Halloween has long been our largest selling period,
with third quarter sales nearly double those of any other
quarter in the year. Especially popular for the
Halloween season are our large bags of Child’s Play
and other mixed candy assortments. These are offered
in a variety of pack sizes and merchandising
presentations including pallet packs, off-shelf displays
and display ready cases.
The candy marketplace is highly competitive and we
are vigilant in keeping our products contemporary even
as they remain iconic. Our product line undergoes
182299_Narative.indd 2
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operating results without jeopardizing the long-term
strength of the Company and its well-known brands.
In this regard, capital expenditures were $20 million in
2019. The Company is continuing its investments in
manufacturing operations to meet new consumer and
customer demands, achieve quality improvements and
increase operational efficiencies. In particular, during
2019, new state of the art production and packaging
equipment was added in a number of our plants.
During 2019, we paid cash dividends of 36 cents per
share and again distributed a 3% stock dividend. This
was the seventy-seventh consecutive year the
Company has paid cash dividends and the fifty-fifth
consecutive year that a stock dividend was distributed.
We also repurchased 922,886 shares of our common
stock in the open market for an aggregate price of
$34.1 million.
We ended 2019 with $308.8 million in cash and
investments net of interest bearing debt and
investments that hedge deferred compensation
liabilities. We remain poised to continue investing in
our business, improving manufacturing productivity and
quality, supporting our brands, paying dividends and
repurchasing common stock. We also continue to seek
appropriate complementary business acquisitions.
We manufacture and sell an appealing range of
confectionery offerings suitable for virtually every major
consumer group and retail format. Our diverse and
highly recognizable brand portfolio is popular across all
trade channels.
During 2019, we again used targeted marketing
initiatives, directed both to the trade and to consumers,
to help move our products into distribution and
subsequently to move them off the retail shelf. We find
that these carefully executed and channel-specific
promotions drive sales by emphasizing high sell-
through and attractive profit margins to the trade and a
high quality, attractive value to the consumer.
Halloween has long been our largest selling period,
with third quarter sales nearly double those of any other
quarter in the year. Especially popular for the
Halloween season are our large bags of Child’s Play
and other mixed candy assortments. These are offered
in a variety of pack sizes and merchandising
presentations including pallet packs, off-shelf displays
and display ready cases.
The candy marketplace is highly competitive and we
are vigilant in keeping our products contemporary even
as they remain iconic. Our product line undergoes
continual refinement in order to retain its appeal to
ever-evolving preferences and life styles.
During 2019, we continued our leadership in the lollipop
category with further growth in our Charms Mini Pops
and Tootsie Mini Pops brands which were reformulated
in 2018 and now come in 18 delicious flavors. These
treats are offered in large stand-up bags along with a
range of other pack sizes that appeal to all classes of
trade.
Theater boxes continue to be a popular candy format.
We have a number of leading items within this
category which generates a high volume of sales
across a variety of trade classes as straight goods, or
in combo packs, display ready cases or floor displays.
Often feature-priced to sell for one dollar, theater
boxes offer consumers an exceptional value. Plus, the
re-sealable boxes are perfect for on the go
consumption or for sharing.
Junior Mints are one of the leading items in the theater
box category, and sales were further strengthened in
2019 by the “Seinfeld 30th Anniversary” promotion,
which included:
● Limited edition packaging featuring images from the
iconic “Junior Mint” episode
●A free download of the episode which was
supported by all media providers (iTunes, Google,
●A special shipper display program supported by a
Amazon, HULU, and Microsoft)
coordinated media campaign.
These elements combined to make the 2019 Junior
Mint/Seinfeld joint promotion an entertaining success.
Stand-up pouches (SUP) are another candy format
which has gained popularity. SUPs offer several
consumer advantages. The front display panel
functions as a highly visible billboard to attract
consumers’ attention, SUPs often feature a
“re-sealable” function which preserves freshness and
supports portion control, and SUP’s have a smaller
“footprint” for convenient storage.
Many of our items are offered in the SUP format and in
2019, two new appealing seasonal items were added
to the Andes line. Andes Peppermint Bark is a
delightful combination of creamy white and dark layers
of melt-in-your mouth Andes Mint candy with an added
touch of peppermint, and Andes Mint Cookie Crunch is
a delicious mix of white and dark layers of Andes Mint
candy sprinkled with crunchy cookie bits.
These tasty treats were well received and meshed well
with the strong selling history of Andes Crème de
Menthe and other Andes items during the Thanksgiving
continual refinement in order to retain its appeal to
ever-evolving preferences and life styles.
During 2019, we continued our leadership in the lollipop
category with further growth in our Charms Mini Pops
and Tootsie Mini Pops brands which were reformulated
in 2018 and now come in 18 delicious flavors. These
treats are offered in large stand-up bags along with a
range of other pack sizes that appeal to all classes of
trade.
Theater boxes continue to be a popular candy format.
We have a number of leading items within this
category which generates a high volume of sales
across a variety of trade classes as straight goods, or
in combo packs, display ready cases or floor displays.
Often feature-priced to sell for one dollar, theater
boxes offer consumers an exceptional value. Plus, the
re-sealable boxes are perfect for on the go
consumption or for sharing.
Junior Mints are one of the leading items in the theater
box category, and sales were further strengthened in
2019 by the “Seinfeld 30th Anniversary” promotion,
which included:
● Limited edition packaging featuring images from the
iconic “Junior Mint” episode
●A free download of the episode which was
supported by all media providers (iTunes, Google,
Amazon, HULU, and Microsoft)
●A special shipper display program supported by a
coordinated media campaign.
These elements combined to make the 2019 Junior
Mint/Seinfeld joint promotion an entertaining success.
Stand-up pouches (SUP) are another candy format
which has gained popularity. SUPs offer several
consumer advantages. The front display panel
functions as a highly visible billboard to attract
consumers’ attention, SUPs often feature a
“re-sealable” function which preserves freshness and
supports portion control, and SUP’s have a smaller
“footprint” for convenient storage.
Many of our items are offered in the SUP format and in
2019, two new appealing seasonal items were added
to the Andes line. Andes Peppermint Bark is a
delightful combination of creamy white and dark layers
of melt-in-your mouth Andes Mint candy with an added
touch of peppermint, and Andes Mint Cookie Crunch is
a delicious mix of white and dark layers of Andes Mint
candy sprinkled with crunchy cookie bits.
These tasty treats were well received and meshed well
with the strong selling history of Andes Crème de
Menthe and other Andes items during the Thanksgiving
182299_Narative.indd 3
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pany to react to future changes
flexibility which will enable the Com-
always mindful to build in maximum
initiatives with great care. They are
professionals plan and design these
Our manufacturing and engineering
for attractive, cost-saving projects.
present innovative opportunities
tion and control systems constantly
Emerging technologies in produc-
improve quality.
add capacity, increase efficiency or
undertake a variety of projects to
facturing enterprise, each year we
of maintaining an expansive manu-
ness, in addition to the complexity
On the operations side of the busi-
Chief Executive Officer
Chairman of the Board and
Ellen R. Gordon
succeed for the future.
and preparing the Company to
success in the present environment
the years. We are committed to
shareholders for their support over
2018. We also thank our fellow
and distributors for their efforts in
customers, suppliers, sales brokers
loyal employees, along with our
wish to pause and thank our many
As Tootsie Roll enters 2019 we do
may never know!”
commitment to our goals.
as intriguing as ever: “The world
vation of the wise old owl remains
go to press it seems that the obser-
this challenging riddle. Yet as we
impeccable ethics and unwavering
the optimal mix of relevant job skills,
diligent in recruiting individuals with
Company become available we are
innumerable estimates in answer to
this regard, as positions within the
Over the years we have received
a television advertising campaign.
Roll center of a Tootsie Pop?” with
does it take to get to the Tootsie
iconic theme of “How many licks
moted our famous Mr. Owl and the
During 2018, we once again pro-
website games.
of prize contests, banner ads and
leading driver of our success. In
ber of our employees has been a
We strongly believe that the cali-
purchases.
we receive maximum value in our
chase contracts to be ensure that
bidding, hedging and forward pur-
to prudently employ competitive
importance. Here we continue
Mr. Owl character through a variety
packaging is of particular
of our brands along with our famous
sourcing of raw materials and
aged 25 to 44. We leveraged many
value for the dollars spent. The
this venue is candy-buying mothers
as to obtain the greatest possible
est. Our primary demographic in
book, Twitter, YouTube and Pinter-
Company are carefully sourced so
services used throughout the
our social media initiatives on Face-
purchasing. All of the goods and
element. During 2018 we continued
ing programs have included a digital
For a number of years our market-
Company, as is our approach to
driver of cost containment in the
Production efficiencies are a key
sumers to savor on the go.
in our operations.
the perfect snacking treat for con-
to deploy leading edge technology
new graphics. Junior Caramels are
financial resources which enable us
able stand-up pouches boast rich
perience. The convenient, re-seal-
milk chocolate for a tasty eating ex-
center enrobed in smooth, creamy
we are fortunate to have sufficient
imperative to long-run viability, and
This type of forward planning is
demanded by the marketplace.
demanded by the marketplace.
This type of forward planning is
imperative to long-run viability, and
we are fortunate to have sufficient
financial resources which enable us
to deploy leading edge technology
in our operations.
On the operating side of the
Company, we continue with our
heritage of seeking innovative ways
to keep our costs as low as possible.
Competitive bidding, selective
hedging and leveraging our high
volume of ingredient and packaging
purchases are some of the means
we use to achieve this.
Production efficiencies are a key
driver of cost containment in the
Company, as is our approach to
purchasing. All of the goods and
services used throughout the
Company are carefully sourced so
as to obtain the greatest possible
value for the dollars spent. The
sourcing of raw materials and
packaging is of particular
importance. Here we continue
to prudently employ competitive
bidding, hedging and forward pur-
chase contracts to be ensure that
we receive maximum value in our
purchases.
We also continually invest capital and
resources in projects that keep our
production and distribution facilities
as efficient as possible. Much of this
investment is driven by continuing
advancements in automation
technology that we can incorporate
on the shop floor.
When new installations are being
designed, considerable effort is made
to maximize their flexibility so that
we can respond to evolving package
configurations or product
assortments demanded by the
market. Incorporating such flexibility
can add significant up-front costs.
We are fortunate to have sufficient
financial resources and are able to
make these necessary investments.
We strongly believe that the cali-
ber of our employees has been a
leading driver of our success. In
this regard, as positions within the
Company become available we are
diligent in recruiting individuals with
the optimal mix of relevant job skills,
impeccable ethics and unwavering
commitment to our goals.
We strongly believe that the caliber
of our many loyal employees has
been a leading driver of the
Company’s success. We wish to
express our appreciation to them
along with our customers,
As Tootsie Roll enters 2019 we do
suppliers, sales brokers and
wish to pause and thank our many
distributors throughout the world for
loyal employees, along with our
their support in 2019. We also thank
customers, suppliers, sales brokers
our fellow shareholders as we remain
and distributors for their efforts in
committed to the pursuit of
2018. We also thank our fellow
excellence in the near term as well
shareholders for their support over
as in the years to come.
the years. We are committed to
success in the present environment
and preparing the Company to
succeed for the future.
and Christmas Holiday seasons.
Andes has also developed into a
considerable baking franchise. Visit
www.tootsie.com to check out a
variety of delicious Andes recipes!
center enrobed in smooth, creamy
milk chocolate for a tasty eating ex-
perience. The convenient, re-seal-
able stand-up pouches boast rich
new graphics. Junior Caramels are
the perfect snacking treat for con-
sumers to savor on the go.
The selling power of floor stand
displays is well established. In this
format we offer a range of items
including theater boxes and bagged
goods in a variety of sizes ranging
from full pallets for high volume
venues all the way down to a
one-eighth size pallet for smaller
retail venues that lack the floor space
or sales volume to support a
traditionally sized display. These
displays normally feature attractive
pricing for the consumer and
increase sales velocity for the
retailer.
For a number of years our market-
ing programs have included a digital
element. During 2018 we continued
our social media initiatives on Face-
book, Twitter, YouTube and Pinter-
est. Our primary demographic in
this venue is candy-buying mothers
aged 25 to 44. We leveraged many
of our brands along with our famous
Mr. Owl character through a variety
of prize contests, banner ads and
website games.
During 2018, we once again pro-
moted our famous Mr. Owl and the
iconic theme of “How many licks
does it take to get to the Tootsie
Roll center of a Tootsie Pop?” with
a television advertising campaign.
Over the years we have received
innumerable estimates in answer to
this challenging riddle. Yet as we
go to press it seems that the obser-
vation of the wise old owl remains
as intriguing as ever: “The world
may never know!”
Throughout 2019, we continued to
use our voice on Social Media to
reach our consumers on many
platforms. This includes Facebook,
Twitter, Instagram and Pinterest as
well as YouTube. We have
continued to strengthen our Social
Media strategy by engaging with our
fans through numerous video
experiences as well as banner ads
and giveaways. We have reinforced
our brand messaging through
photography and motion graphics
in a way that has proven to appeal
to our existing and future shoppers,
building connections to our brands
and also providing a venue for
consumer feedback.
On the operations side of the busi-
ness, in addition to the complexity
of maintaining an expansive manu-
facturing enterprise, each year we
undertake a variety of projects to
add capacity, increase efficiency or
improve quality.
Mr. Owl and the long-standing “How
Many Licks” Tootsie Pop message
are prominently featured in our Social
Media program and in our television
advertising campaigns. This
renowned theme has become part of
Americana, ranging from crossword
puzzles to scientific studies. As we
carefully examine all of the data we
have received on this topic we can
only conclude that the answer to this
riddle remains “the world may never
know!”
Emerging technologies in produc-
tion and control systems constantly
present innovative opportunities
for attractive, cost-saving projects.
Our manufacturing and engineering
professionals plan and design these
initiatives with great care. They are
always mindful to build in maximum
flexibility which will enable the Com-
pany to react to future changes
Ellen R. Gordon
Chairman of the Board and Chief
Executive Officer
Ellen R. Gordon
Chairman of the Board and
Chief Executive Officer
182299_Narative.indd 4
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pany to react to future changes
flexibility which will enable the Com-
always mindful to build in maximum
initiatives with great care. They are
professionals plan and design these
Our manufacturing and engineering
for attractive, cost-saving projects.
present innovative opportunities
tion and control systems constantly
Emerging technologies in produc-
improve quality.
add capacity, increase efficiency or
undertake a variety of projects to
facturing enterprise, each year we
of maintaining an expansive manu-
ness, in addition to the complexity
On the operations side of the busi-
Chief Executive Officer
Chairman of the Board and
Ellen R. Gordon
succeed for the future.
and preparing the Company to
success in the present environment
the years. We are committed to
shareholders for their support over
2018. We also thank our fellow
and distributors for their efforts in
customers, suppliers, sales brokers
loyal employees, along with our
wish to pause and thank our many
As Tootsie Roll enters 2019 we do
may never know!”
commitment to our goals.
as intriguing as ever: “The world
vation of the wise old owl remains
go to press it seems that the obser-
this challenging riddle. Yet as we
impeccable ethics and unwavering
the optimal mix of relevant job skills,
diligent in recruiting individuals with
Company become available we are
innumerable estimates in answer to
this regard, as positions within the
Over the years we have received
a television advertising campaign.
Roll center of a Tootsie Pop?” with
does it take to get to the Tootsie
iconic theme of “How many licks
moted our famous Mr. Owl and the
During 2018, we once again pro-
website games.
of prize contests, banner ads and
leading driver of our success. In
ber of our employees has been a
We strongly believe that the cali-
purchases.
we receive maximum value in our
chase contracts to be ensure that
bidding, hedging and forward pur-
to prudently employ competitive
importance. Here we continue
Mr. Owl character through a variety
packaging is of particular
of our brands along with our famous
sourcing of raw materials and
aged 25 to 44. We leveraged many
value for the dollars spent. The
this venue is candy-buying mothers
as to obtain the greatest possible
est. Our primary demographic in
book, Twitter, YouTube and Pinter-
Company are carefully sourced so
services used throughout the
our social media initiatives on Face-
purchasing. All of the goods and
element. During 2018 we continued
ing programs have included a digital
For a number of years our market-
Company, as is our approach to
driver of cost containment in the
Production efficiencies are a key
sumers to savor on the go.
in our operations.
the perfect snacking treat for con-
to deploy leading edge technology
new graphics. Junior Caramels are
financial resources which enable us
able stand-up pouches boast rich
perience. The convenient, re-seal-
milk chocolate for a tasty eating ex-
center enrobed in smooth, creamy
we are fortunate to have sufficient
imperative to long-run viability, and
This type of forward planning is
demanded by the marketplace.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2019
OR
For the transition period from to
Commission file number 1-1361
TOOTSIE ROLL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Virginia
(State or other jurisdiction of
incorporation or organization)
22-1318955
(IRS Employer Identification No.)
Securities registered pursuant to Section 12(b) of the Act:
7401 South Cicero Avenue, Chicago, Illinois 60629
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number: (773) 838-3400
Title of each class
Common Stock — Par Value $.69-4/9 Per Share
Trading Symbol
TR
Name of each exchange
on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock — Par Value $.69-4/9 Per Share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
x
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of February 21, 2020, there were outstanding 38,788,652 shares of Common Stock par value $.69-4/9 per share, and 26,253,049 shares of Class B Common Stock
par value $.69-4/9 per share.
As of June 30, 2019 the aggregate market value of the Common Stock (based upon the closing price of the stock on the New York Stock Exchange on such date) held
by non-affiliates was approximately $651,380,000. Class B Common Stock is not traded on any exchange, is restricted as to transfer or other disposition, but is convertible
into Common Stock on a share-for-share basis. Upon such conversion, the resulting shares of Common Stock are freely transferable and publicly traded. Assuming all
26,301,602 shares of outstanding Class B Common Stock were converted into Common Stock, the aggregate market value of Common Stock held by non-affiliates on
June 30, 2019 (based upon the closing price of the stock on the New York Stock Exchange on such date) would have been approximately $815,198,000. Determination of
stock ownership by non-affiliates was made solely for the purpose of this requirement, and the Registrant is not bound by these determinations for any other purpose.
Portions of the Company’s Definitive Proxy Statement for the Company’s Annual Meeting of Shareholders (the “2020 Proxy Statement”) scheduled to be held
on May 4, 2020 are incorporated by reference in Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
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TABLE OF CONTENTS
ITEM 1.
Business
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
Properties
ITEM 3.
Legal Proceedings
ITEM 4. Mine Safety Disclosures
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
ITEM 6.
Selected Financial Data
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 8.
Financial Statements and Supplementary Data
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
ITEM 10. Directors, Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
ITEM 14.
Principal Accounting Fees and Services
ITEM 15. Exhibits, Financial Statement Schedules
ITEM 16. Form 10-K Summary
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Forward-Looking Information
From time to time, in the Company’s statements and written reports, including this report, the
Company discusses its expectations regarding future performance by making certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be
identified by the use of words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “project,” and other words
of similar meaning in connection with a discussion of future operating or financial performance and are subject to certain
factors, risks, trends and uncertainties that could cause actual results and achievements to differ materially from those
expressed in the forward-looking statements. These forward-looking statements are based on currently available
competitive, financial and economic data and management’s views and assumptions regarding future events. Such
forward-looking statements are inherently uncertain, and actual results may differ materially from those expressed or
implied herein. Consequently, the Company wishes to caution readers not to place undue reliance on any forward-
looking statements. Factors, among others, which could cause the Company’s future results to differ materially from the
forward-looking statements, expectations and assumptions expressed or implied herein include general factors, such as
economic conditions, political developments, currency exchange rates, interest and inflation rates, accounting standards,
taxes, and laws and regulations affecting the Company in markets where it competes and those factors described in Item
1A “Risk Factors” and elsewhere in this Form 10-K and in other Company filings with the Securities and Exchange
Commission. The Company does not undertake to update any of these forward-looking statements.
ITEM 1. Business.
PART I
Tootsie Roll Industries, Inc. and its consolidated subsidiaries (the “Company”) have been engaged in
the manufacture and sale of confectionery products for over 100 years. This is the only industry segment in which the
Company operates and is its only line of business. The majority of the Company’s products are sold under the registered
trademarks TOOTSIE ROLL, TOOTSIE POPS, CHILD’S PLAY, CARAMEL APPLE POPS, CHARMS, BLOW-POP,
CHARMS MINI POPS, CELLA’S, DOTS, JUNIOR MINTS, CHARLESTON CHEW, SUGAR DADDY, SUGAR
BABIES, ANDES, FLUFFY STUFF, DUBBLE BUBBLE, RAZZLES, CRY BABY, NIK-L-NIP, and TUTSI POP
(Mexico).
The Company’s products are marketed in a variety of packages designed to be suitable for display and
sale in different types of retail outlets. They are sold through approximately 30 candy and grocery brokers and by the
Company itself to approximately 2,000 customers throughout the United States. These customers include wholesale
distributors of candy and groceries, supermarkets, variety stores, dollar stores, chain grocers, drug chains, discount
chains, cooperative grocery associations, mass merchandisers, warehouse and membership club stores, vending machine
operators, the U.S. military and fund-raising charitable organizations.
The Company’s principal markets are in the United States, Canada and Mexico. The majority of
production from the Company’s Canadian plants is sold in the United States. The majority of production from the
Company’s Mexican plant is sold in Mexico.
The domestic confectionery business is highly competitive. The Company competes primarily with
other manufacturers of confectionery products sold to the above mentioned customers. Although accurate statistics are
not available, the Company believes it is among the ten largest domestic manufacturers in this field. In the markets in
which the Company competes, the main forms of competition comprise brand recognition, as well as competition for
retail shelf space and a fair price for the Company’s products at various retail price points.
2018.
The Company did not have a material backlog of firm orders at the end of the calendar years 2019 or
The Company has historically hedged certain of its future sugar and corn syrup needs with derivatives
at such times that it believes that the forward markets are favorable. The Company’s decision to hedge its major
ingredient requirements is dependent on the Company’s evaluation of forward commodity markets and their comparison
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to vendor quotations, if available, and/or historical costs. The Company has historically hedged some of these major
ingredients with derivatives, primarily commodity futures contracts, before the commencement of the next calendar year
to better ascertain the need for product pricing changes or product weight decline (indirect price change) adjustments to
its product sales portfolio and better manage ingredient costs. The Company will generally purchase forward derivative
contracts (i.e., “long” position) in selected future months that correspond to the Company’s estimated procurement and
usage needs of the respective commodity in the respective forward periods.
to significant changes in ingredient and other input costs.
From time to time, the Company also changes the size and weight of certain of its products in response
The Company does not hold any material patents, licenses, franchises or concessions. The Company’s
major trademarks are registered in the United States, Canada, Mexico and in many other countries. Continued trademark
protection is of material importance to the Company’s business as a whole.
Although the Company does research and develops new products and product line extensions for
existing brands, it also improves the quality of existing products, improves and modernizes production processes, and
develops and implements new technologies to enhance the quality and reduce the costs of products. The Company does
not expend material amounts of money on research or development activities.
The manufacture and sale of consumer food products is highly regulated. In the United States, the
Company’s activities are subject to regulation by various government agencies, including the Food and Drug
Administration, the Department of Agriculture, the Federal Trade Commission, the Department of Commerce and the
Environmental Protection Agency, as well as various state and local agencies. Similar agencies also regulate the
businesses outside of the United States. The Company maintains quality assurance, food safety and other programs to
help ensure that all products the Company manufactures and distributes are safe and of high quality and comply with all
applicable laws and regulations.
The Company’s compliance with federal, state and local regulations which have been enacted or
adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the
environment, has not had a material effect on the capital expenditures, earnings or competitive position of the Company
nor does the Company anticipate any such material effects from presently enacted or adopted regulations.
The Company employs approximately 2,000 persons.
The Company has found that its sales normally maintain a consistent level throughout the year except
for a substantial increase in the third quarter which reflects pre-Halloween and back-to-school sales. In anticipation of
this high sales period, the Company generally begins building inventories in the second quarter of each year. The
Company historically offers extended credit terms for sales made under seasonal sales programs, including Halloween.
Each year, after accounts receivables related to third quarter sales have been collected, the Company invests such funds
in various marketable securities.
Sales revenues from Wal-Mart Stores, Inc. aggregated approximately 24.2%, 24.1%, and 24.0% of net
product sales during the years ended December 31, 2019, 2018 and 2017, respectively. Sales revenues from Dollar Tree,
Inc. (which includes Family Dollar which was acquired by Dollar Tree) aggregated approximately 11.3%, 11.2%, and
10.9% of net product sales during the years ended December 31, 2019, 2018 and 2017, respectively. Some of the
aforementioned sales to Wal-Mart and Dollar Tree are sold to McLane Company, a large national grocery wholesaler,
which services and delivers certain of the Company’s products to Wal-Mart, Dollar Tree and other retailers in the U.S.A.
Net product sales revenues from McLane, which includes these Wal-Mart and Dollar Tree sales as well as sales and
deliveries to other Company customers, were 17.7% in 2019 and 17.4% in 2018 and 16.9% in 2017. At December 31,
2019 and 2018, the Company’s three largest customers discussed above accounted for approximately 30% and 31% of
total accounts receivable, respectively. Although no customer, other than McLane Company, Inc., Wal-Mart Stores, Inc.
and Dollar Tree, accounted for more than 10% of net product sales, the loss of one or more significant customers could
have a material adverse effect on the Company’s business.
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“Notes to Consolidated Financial Statements” which is incorporated herein by reference.
For a summary of sales and long-lived assets of the Company by geographic area see Note 9 of the
Information regarding the Company’s Form 10-K, Form 10-Q, current reports on Form 8-K, and any
amendments to these reports, will be made available, free of charge, upon written request to Tootsie Roll Industries, Inc.,
7401 South Cicero Avenue, Chicago, Illinois 60629, Attention: Barry Bowen, Treasurer and Assistant Secretary. The
Company does not make all such reports available on its website at www.tootsie.com because it believes that they are
readily available from the Securities Exchange Commission at www.sec.gov, and because the Company provides them
free of charge upon request. Interested parties, including shareholders, may communicate to the Board of Directors or
any individual director in writing, by regular mail, addressed to the Board of Directors or an individual director, in care
of Tootsie Roll Industries, Inc., 7401 South Cicero Avenue, Chicago, Illinois 60629, Attention: Ellen R. Gordon,
Chairman and Chief Executive Officer. If an interested party wishes to communicate directly with the Company’s non-
employee directors, it should be noted on the cover of the communication.
ITEM 1A. Risk Factors.
include, without limitation, the following:
Significant factors that could impact the Company’s financial condition or results of operations
• Risk of changes in the price and availability of raw materials - The principal ingredients used by the Company
are subject to price volatility. Although the Company engages in commodity hedging transactions and annual
supply agreements as well as leveraging the high volume of its annual purchases, the Company may experience
price increases in certain ingredients that it may not be able to offset, which could have an adverse impact on
the Company’s results of operations and financial condition. In addition, although the Company has historically
been able to procure sufficient supplies of its ingredients, market conditions could change such that adequate
supplies might not be available or only become available at substantially higher costs. Adverse weather
patterns, including the effects of climate change or supply interruptions, could also significantly affect the cost
and availability of ingredients.
• Risk of changes in product performance and competition - The Company competes with other well-established
manufacturers of confectionery products. A failure of new or existing products to be favorably received, a
failure to retain preferred shelf space at retail or a failure to sufficiently counter aggressive promotional and
price competition could have an adverse impact on the Company’s results of operations and financial condition.
• Risk of discounting and other competitive actions - Discounting and pricing pressure by the Company’s retail
customers, including the effects of import tariffs, and other competitive actions could make it more difficult for
the Company to maintain its operating margins. Actions taken by major customers and competitors may make
shelf space less available for the confectionery product category or some of the Company’s products.
• Risk of pricing actions - Inherent risks in the marketplace, including uncertainties about trade and consumer
acceptance of pricing actions, including related trade discounts, or product weight changes (indirect price
increases), could make it more difficult for the Company to maintain its sales and operating margins.
• Risk related to seasonality of sales - The Company’s sales are highest during the Halloween season.
Circumstances surrounding Halloween, such as, widespread adverse weather or other widespread events that
affect consumer behavior and related media coverage at that time of year or general changes in consumer
interest in Halloween, could significantly affect the Company’s sales.
• Risk of dependence on large customers - The Company’s largest customers, Wal-Mart Stores, Inc., Dollar Tree,
and the McLane Company accounted for approximately 37.1% of net product sales in 2019, and other large
national chains are also material to the Company’s sales. The loss of any of these customers, or one or more
other large customers, or a material decrease in purchases by one or more large customers, could result in
decreased sales and adversely impact the Company’s results of operations and financial condition.
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• Risk of changes in consumer preferences and tastes - Failure to adequately anticipate and react to changing
demographics, consumer trends, consumer health concerns and product preferences, including product
ingredients, could have an adverse impact on the Company’s results of operations and financial condition.
• Risk of economic conditions on consumer purchases - The Company’s sales are impacted by consumer
spending levels and impulse purchases which are affected by general macroeconomic conditions, consumer
confidence, employment levels, disposable income, availability of consumer credit and interest rates on that
credit, consumer debt levels, energy costs and other factors. Volatility in food and energy costs, rising
unemployment and/or underemployment, declines in personal spending, recessionary economic conditions or
other adverse market conditions, could adversely impact the Company’s revenues, profitability and financial
condition.
• Risks related to environmental matters - The Company’s operations are not particularly impactful on the
environment, but, increased government environmental regulation or legislation, including various “green”
initiatives could adversely impact the Company’s profitability.
• Risks relating to participation in the multi-employer pension plan for certain Company union employees - As
outlined in the Notes to the Consolidated Financial Statements and discussed in the Management’s
Discussion and Analysis , the Company participates in a multi-employer pension plan (Plan) which is currently
in “critical and declining status”, as defined by applicable law. A designation of “critical and declining status”
implies that the Plan is expected to become insolvent within the next 20 years. Under terms of a rehabilitation
plan, the Company is to be assessed 5% annual compounded surcharges on its contributions to the Plan until
such time as the Plan emerges from critical status. Should the Company withdraw from the Plan, it would be
subject to a significant withdrawal liability which is discussed in Note 7 of the Company’s Notes to
Consolidated Financial Statements and Management’s Discussion and Analysis. The Company is currently
unable to determine the ultimate outcome of this matter and therefore, is unable to determine the effects on its
consolidated financial statements, but, the ultimate outcome could be material to its consolidated results of
operations in one or more future periods.
• Risk of new governmental laws and regulations - Governmental laws and regulations, including those that affect
food advertising and marketing to children, use of certain ingredients in products, new labeling requirements,
income and other taxes and tariffs, including the effects of changes to international trade agreements, new taxes
targeted toward confectionery products and the environment, both in and outside the U.S.A., are subject to
change over time, which could adversely impact the Company’s results of operations and ability to compete in
domestic or foreign marketplaces.
• Risk of labor stoppages - To the extent the Company experiences any significant labor stoppages, strikes or
possible labor shortages, could negatively affect overall operations including production or shipments of
finished product to customers. The Company’s union labor agreement at its Chicago plant was executed in 2018
and will continue through September 2022.
• Risk of impairment of goodwill or indefinite-lived intangible assets - In accordance with authoritative guidance,
goodwill and indefinite-lived intangible assets are not amortized but are subject to an impairment evaluation
annually or more frequently upon the occurrence of a triggering event. Other long-lived assets are likewise
tested for impairment upon the occurrence of a triggering event. Such evaluations are based on assumptions and
variables including sales growth, profit margins and discount rates. Adverse changes in any of these variables
could affect the carrying value of these intangible assets and the Company’s reported profitability.
• Risk of the cost of energy increasing - Higher energy costs would likely result in higher plant overhead,
distribution, freight and delivery, and other operating costs. The Company may not be able to offset these cost
increases or pass such cost increases onto customers in the form of price increases, which could have an adverse
impact on the Company’s results of operations and financial condition.
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• Risk of a product recall - Issues related to the quality and safety of the Company’s products could result in a
voluntary or involuntary large-scale product recall. Costs associated with a product recall and related litigation
or fines, and marketing costs relating to the re-launch of such products or brands, could negatively affect
operating results. In addition, negative publicity associated with this type of event, including a product recall
relating to product contamination or product tampering, whether valid or not, could negatively impact future
demand for the Company’s products.
• Risk of operational interruptions relating to computer software or hardware failures, including cyber-attacks -
The Company is reliant on computer systems to operate its business and supply chain. Software failure or
corruption, including cyber-based attacks or network security breaches, or catastrophic hardware failures or
other disasters could disrupt communications, supply chain planning and activities relating to sales demand
forecasts, materials procurement, production and inventory planning, customer shipments, and financial and
accounting, all of which could negatively impact sales and profits.
• Risk of releasing sensitive information - Although the Company does not believe that it maintains a large
amount of sensitive data, a system breach, whether inadvertent or perpetrated by hackers, could result in
identity theft, ransomware and/or a disruption in operations which could expose the Company to financial costs
and adversely affect profitability.
• Risk of production interruptions - The majority of the Company’s products are manufactured in a single
production facility on specialized equipment. In the event of a disaster, such as a fire or earthquake, at a specific
plant location, it would be difficult to transfer production to other facilities or a new location in a timely
manner, which could result in loss of market share for the affected products. In addition, from time to time, the
Company upgrades or replaces this specialized equipment. In many cases these are integrated and complex
installations. A failure or delay in implementing such an installation could impact the availability of one or
more of the Company’s products which would have an adverse impact on sales and profits.
• Risk related to international operations - To the extent there are political leadership or legislative changes,
social and/or political unrest, civil war, pandemics such as the Coronavirus, terrorism or significant economic or
social instability in the countries in which the Company operates, the results of the Company’s business in such
countries could be adversely impacted. Currency exchange rate fluctuations between the U.S. dollar and foreign
currencies could also have an adverse impact on the Company’s results of operations and financial condition.
The Company’s principal markets are the U.S.A., Canada, and Mexico.
• Risk related to investments in marketable securities - The Company invests its surplus cash in a diversified
portfolio of highly rated marketable securities, including corporate and tax exempt municipal bonds, with
maturities of generally up to three years, and variable rate demand notes with weekly resets of interest rates and
“puts’ to redeem the investment each week. Nonetheless, such investments could become impaired in the event
of certain adverse economic and/or geopolitical events which, if severe, would adversely affect the Company’s
financial condition.
• Disruption to the Company’s supply chain could impair the Company’s ability to produce or deliver its finished
products, resulting in a negative impact on operating results - Disruption to the manufacturing operations or
supply chain, some of which are discussed above, could result from, but are not limited to adverse tariffs which
could effectively limit supply or make supply more costly, natural disasters, pandemics, weather, fire or
explosion, earthquakes, terrorism or other acts of violence, unavailability of ingredients or packaging materials,
labor strikes or other labor activities, operational and/or financial instability of key suppliers, and other vendors
or service providers. Although precautions are taken to mitigate the impact of possible disruptions, if the
Company is unable, or if it is not financially feasible to effectively mitigate the likelihood or potential impact of
such disruptive events, the Company’s results of operations and financial condition could be negatively
impacted.
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• Risk related to acquisitions - From time to time, the Company has purchased other confectionery companies or
brands. These acquisitions generally come at a high multiple of earnings and are justified based on various
assumptions related to sales growth, and operating margins. Were the Company to make another acquisition and
be unable to achieve the assumed sales and operating margins, it could have an adverse impact on future sales
and profits. In addition it could become necessary to record an impairment which would have a further adverse
impact on reported profits.
• Risk of further losses in Spain - The Company has restructured its Spanish subsidiary and is exploring a variety
of programs to increase sales and profitability. These efforts thus far are resulting in reductions in operating
losses, and our efforts are continuing. Nonetheless, if our efforts are not successful, additional losses and
impairments may be reported from in the future. See also Management’s Discussion and Analysis.
• Risk of “slack fill” litigation - The Company, as well as other confectionery and food companies, have
experienced a number of plaintiff claims that certain products are sold in boxes that are not completely full, and
therefore such “slack filled” products are misleading, and even deceptive, to the consumer. Although the
Company believes that these claims are without merit and has generally been successful in litigation and court
decrees, the Company could be exposed to significant legal fees to defend its position, and in the event that it is
not successful, could be subject to fines and costs of settlement, including class action settlements.
• The Company is a controlled company due to the common stock holdings of the Gordon family - The Gordon
family’s share ownership represents a majority of the combined voting power of all classes of the Company’s
common stock as of December 31, 2019. As a result, the Gordon family has the power to elect the Company’s
directors and approve actions requiring the approval of the shareholders of the Company.
The factors identified above are believed to be significant factors, but not necessarily all of the significant factors, that
could impact the Company’s business. Unpredictable or unknown factors could also have material effects on the
Company.
Additional significant factors that may affect the Company’s operations, performance and business results include the
risks and uncertainties listed from time to time in filings with the Securities and Exchange Commission and the risk
factors or uncertainties listed herein or listed in any document incorporated by reference herein.
ITEM 1B. Unresolved Staff Comments.
None.
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ITEM 2. Properties.
The Company owns its principal manufacturing, warehousing and distribution and offices facilities
which are located in Chicago, Illinois in a building consisting of approximately 2,354,000 square feet. In addition, the
Company leases manufacturing and warehousing facilities at a second location in Chicago which comprises 137,000
square feet. The lease is renewable by the Company every five years through June 2041.
The Company’s other principal manufacturing, warehousing and distribution facilities, all of which are
owned, are:
Location
Covington, Tennessee
Cambridge, Massachusetts
Delavan, Wisconsin
Concord, Ontario, Canada
Hazleton, Pennsylvania
Mexico City, Mexico
Barcelona, Spain
Square Feet (a)
685,000
142,000
162,000
280,500 (b)
240,000 (c)
90,000
93,000 (d)
Square footage is approximate and includes production, warehousing and office space.
(a)
(b) Two facilities; a third owned facility, comprising 225,000 square feet of warehousing space, and which is
excluded from the reported totals above, is leased to a third party.
(c) Warehousing only.
(d) Excludes 9,500 square feet of unused office space in a separate facility which is leased to a third party.
The Company owns substantially all of the production machinery and equipment located in its plants,
warehouses and distribution centers. The Company also holds four commercial real estate properties for investment
which were acquired with the proceeds from a sale of surplus real estate in 2005.
ITEM 3. Legal Proceedings.
In the ordinary course of business, the Company is, from time to time, subject to a variety of active or
threatened legal proceedings and claims. While it is not possible to predict the outcome of such matters with certainty, in
the Company’s opinion, both individually and in the aggregate, they are not expected to have a material effect on the
Company’s financial condition, results of operations or cash flows.
ADDITIONAL ITEM. Executive Officers of the Registrant.
See the information on Executive Officers set forth in the table in Part III, Item 10.
ITEM 4. Mine Safety Disclosures.
None.
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PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
The Company’s common stock is traded on the New York Stock Exchange. The Company’s Class B
common stock is subject to restrictions on transferability. The Class B common stock is convertible at the option of the
holder into shares of common stock on a share-for-share basis. As of February 28, 2020 there were approximately 2,500
and 1,000 registered holders of record of common and Class B common stock, respectively. In addition, the Company
estimates that as of February 28, 2020 there were 17,500 and 1,000 beneficial holders of common and Class B common
stock, respectively.
purchased on the open market during the fiscal quarter ended December 31, 2019:
The following table sets forth information about the shares of its common stock the Company
Issuer Purchases of Equity Securities
Total
Number
of Shares
Purchased
Average
Price
Paid per
Share
Total Number of Maximum Number (or
Shares Purchased Approximate Dollar Value)
as Part of Publicly
Announced Plans
or Programs
of Shares that May Yet
be Purchased Under the
Plans or Programs
118,083 $ 35.52 Not Applicable
34.19 Not Applicable
— Not Applicable
78,404
—
Not Applicable
Not Applicable
Not Applicable
196,487 $ 34.99
Period
Oct 1 to Oct 31
Nov 1 to Nov 30
Dec 1 to Dec 31
Total
While the Company does not have a formal or publicly announced Company common stock purchase
program, the Company repurchases its common stock on the open market from time to time as authorized by the Board
of Directors.
Quarterly Stock Prices and Dividends
Stock Exchange and quarterly dividends in 2019 and 2018 were:
The high and low quarterly prices for the Company’s common stock, as reported on the New York
2019
2018
4th
3rd
2nd
1st
4th
3rd
2nd
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter Quarter
1st
Quarter
High
Low
Dividends per share
$ 36.93 $ 38.44 $ 40.43 $ 37.80 $ 35.71 $ 32.35 $ 31.45 $ 36.20
28.75
0.09
36.48
0.09
35.24
0.09
31.57
0.09
27.75
0.09
28.41
0.09
28.55
0.09
33.33
0.09
April 6, 2018.
NOTE: In addition to the above cash dividends, a 3% stock dividend was issued on April 5, 2019 and
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Performance Graph
The following performance graph compares the cumulative total shareholder return on the Company’s
common stock for a five-year period (December 31, 2014 to December 31, 2019) with the cumulative total return of
Standard & Poor’s 500 Stock Index (“S&P 500”) and the Dow Jones Industry Food Index (“Peer Group,” which includes
the Company), assuming (i) $100 invested on December 31 of the first year of the chart in each of the Company’s
common stock, S&P 500 and the Dow Jones Industry Food Index and (ii) the reinvestment of cash and stock dividends.
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ITEM 6. Selected Financial Data.
Five Year Summary of Earnings and Financial Highlights
(Thousands of dollars except per share, percentage and ratio figures)
Sales and Earnings Data
Net product sales
Product gross margin
Interest expense
Provision for income taxes
Net earnings attributable to Tootsie Roll
Industries, Inc.
% of net product sales
% of shareholders’ equity
Per Common Share Data (1)
Net earnings attributable to Tootsie Roll
Industries, Inc.
Cash dividends declared
Stock dividends
Additional Financial Data (1)
Working capital
Net cash provided by operating activities
Net cash provided by (used in) investing
activities
Net cash used in financing activities
Property, plant & equipment additions
Net property, plant & equipment
Total assets
Long-term debt
Total Tootsie Roll Industries, Inc.
shareholders’ equity
Average shares outstanding
2019
2018
2017
2016
2015
$ 523,616
194,514
220
20,565
$ 515,251
185,371
181
16,401
$ 515,674
189,263
144
3,907
$ 517,373
196,504
105
30,593
$ 536,692
196,118
76
26,451
64,920
56,893
12.4 %
8.5 %
11.0 %
7.6 %
80,864 (2)
15.7 %
11.0 %
67,510
66,089
13.0 %
9.5 %
12.3 %
9.5 %
$
0.99
0.36
$
0.86
0.36
$
3 %
3 %
1.21 (2) $
0.36
3 %
0.99
0.36
$
0.96
0.35
3 %
3 %
$ 273,786
100,221
$ 242,655
100,929
$ 207,132
42,973
$ 235,739
98,550
$ 221,744
91,073
(15,009)
(57,187)
20,258
188,455
977,864
7,500
(44,510)
(42,353)
27,612
186,101
947,361
7,500
(9,320)
(56,881)
16,673
178,972
930,946
7,500
(51,884)
(51,387)
16,090
180,905
920,101
7,500
(9,672)
(53,912)
15,534
184,586
908,983
7,500
759,854
65,474
750,622
66,130
733,840
66,962
711,364
67,869
698,183
68,886
(1) Per common share data and average shares outstanding adjusted for annual 3% stock dividends.
(2) The 2017 net earnings and earnings per share includes $20,318 or $0.30 per share relating to a favorable accounting
adjustment to revalue the Company’s deferred income tax liabilities resulting from the enactment of the U.S. Tax
Cuts and Jobs Act in December 2017.
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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Thousands of dollars except per share, percentage and ratio figures)
The following discussion should be read in conjunction with the other sections of this report, including the
consolidated financial statements and related notes contained in Item 8 of this Form 10-K.
FINANCIAL REVIEW
This financial review discusses the Company’s financial condition, results of operations, liquidity and capital resources,
significant accounting policies and estimates, new accounting pronouncements, market risks and other matters. It should
be read in conjunction with the Consolidated Financial Statements and related Notes that follow this discussion.
FINANCIAL CONDITION
The Company’s overall financial position remains strong given that aggregate cash, cash equivalents and investments is
$392,435 at December 31, 2019, including $76,183 in trading securities discussed below. Cash flows from 2019
operating activities totaled $100,221 compared to $100,929 in 2018, and are discussed in the section entitled Liquidity
and Capital Resources. During 2019, the Company paid cash dividends of $23,460, purchased and retired $34,116 of its
outstanding shares, and made capital expenditures of $20,258.
The Company’s net working capital was $273,786 at December 31, 2019 compared to $242,655 at December 31, 2018
which reflects higher aggregate cash, cash equivalents and short-term investments. As of December 31, 2019, the
Company’s total cash, cash equivalents and investments, including all long-term investments in marketable securities,
was $392,435 compared to $356,448 at December 31, 2018, an increase of $35,987. The aforementioned includes
$76,183 and $62,260 of investments in trading securities as of December 31, 2019 and 2018, respectively. The Company
invests in trading securities to provide an economic hedge for its deferred compensation liabilities, as further discussed
herein and in Note 7 of the Company’s Notes to Consolidated Financial Statements.
Shareholders’ equity increased from $750,622 at December 31, 2018 to $759,854 as of December 31, 2019, which
principally reflects 2019 net earnings of $64,920, less cash dividends of $23,460 and share repurchases of $34,116.
The Company has a relatively straight-forward financial structure and has historically maintained a conservative
financial position. The Company has no special financing arrangements or “off-balance sheet” special purpose entities.
Cash flows from operations plus maturities of short-term investments are expected to be adequate to meet the
Company’s overall financing needs, including capital expenditures, in 2020. Periodically, the Company considers
possible acquisitions, and if the Company were to pursue and complete such an acquisition, that could result in bank
borrowings or other financing.
RESULTS OF OPERATIONS
2019 vs. 2018
Twelve months 2019 consolidated net sales were $523,616 compared to $515,251 in twelve months 2018, an increase of
$8,365 or 1.6%. Fourth quarter 2019 net sales were $134,663 compared to $127,264 in fourth quarter 2018, an increase
of $7,399 or 5.8%. Successful marketing and sales programs contributed to the increases in sales for both fourth quarter
and twelve months 2019 compared to the corresponding periods in the prior year. Fourth quarter 2019 sales also
benefited from the timing of sales between the third and fourth quarters of 2019, however, foreign currency translation
had some adverse effects on consolidated sales for the twelve months 2019 period compared to 2018.
Product cost of goods sold were $329,102 in 2019 compared to $329,880 in 2018, a decrease of $778 or 0.2%. Product
cost of goods sold includes $408 and $(39) in certain deferred compensation expenses (credits) in 2019 and 2018,
respectively. These deferred compensation expenses principally result from changes in the market value of investments
and investment income from trading securities relating to compensation deferred in previous years and are not reflective
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of current operating results. Adjusting for the aforementioned, product cost of goods sold decreased from $329,919 in
2018 to $328,694 in 2019, a decrease of $1,225 or 0.4%. As a percent of net product sales, these adjusted costs decreased
from 64.0% in 2018 to 62.8% in 2019, a 1.3 favorable percentage point change.
Fourth quarter and twelve months 2019 product cost of goods sold and resulting gross profit margins benefited from
increased sales and higher price realization which allowed the Company to recover some margin decline resulting from
increases in certain input costs in recent years. Plant efficiencies driven by capital investments and ongoing cost
containment programs contributed to the above discussed decreases in adjusted cost of goods sold in 2019. Prior year
2018 gross margin was adversely affected by the implementation and start-up of new manufacturing packaging lines and
resulting operational inefficiencies, as well as unfavorable experience from self-insurance programs. The Company is
continuing its investments in its plant manufacturing operations to meet new consumer and customer demands, achieve
quality improvements, provide genuine value to consumers, and increase operational efficiencies.
Selling, marketing and administrative expenses were $127,802 in 2019 compared to $117,691 in 2018, an increase of
$10,111 or 8.6%. Selling, marketing and administrative expenses include $10,884 and $(1,064) in certain deferred
compensation expenses (credits) in 2019 and 2018, respectively. These deferred compensation expenses principally
result from changes in the market value of investments and investment income from trading securities relating to
compensation deferred in previous years and are not reflective of current operating results. Adjusting for the
aforementioned, selling, marketing and administrative expenses decreased from $118,755 in 2018 to $116,918 in 2019, a
decrease of $1,837 or 1.5%. As a percent of net product sales, these adjusted expenses decreased from 23.0% of net
product sales in 2018 to 22.3% of net product sales in 2019, a 0.7 favorable percentage point change. Higher price
realization, lower general and administrative expenses, primarily legal and professional fees, and lower freight and
delivery unit costs were the principal drivers in these favorable reductions, including reductions as a percentage of sales,
in selling, marketing and administrative expenses in fourth quarter and twelve months 2019.
Selling, marketing and administrative expenses include freight, delivery and warehousing expenses. These expenses
decreased from $49,527 in 2018 to $49,288 in 2019, a decrease of $239 or 0.5%. As a percent of net product sales, these
adjusted expenses decreased from 9.6% in 2018 to 9.4% in 2019, a 0.2 favorable percentage point change. During 2019,
the Company implemented additional freight and delivery computer systems and carrier selection processes, including
enhanced competitive bidding, which facilitated this favorable unit cost reduction in fourth quarter and twelve months
2019.
The Company has foreign operating businesses in Mexico, Canada and Spain, and exports products to many foreign
markets. Such foreign sales were $44,826 and comprised 8.6% of the Company’s consolidated net product sales in 2019.
In fourth quarter 2019 and 2018, the Company recorded a pre-tax impairment charge of $377 and $1,125, respectively,
relating to its Spanish operations. The Company had a 97% ownership of a Spanish company at both December 31, 2019
and 2018. During 2019 and 2018, this Spanish subsidiary incurred operating losses of $1,102 and $2,840, respectively,
and the Company provided approximately $1,399 and $4,484, respectively, of additional cash to finance these losses and
certain capital expenditures. Company management expects the competitive and business challenges in Spain to continue
but expects continued reduction in operating losses in 2020 compared to 2019. Nonetheless, management believes that
operating losses may continue beyond 2019 and that these future losses may require additional cash financing.
The Company believes that the carrying values of its goodwill and trademarks have indefinite lives as they are expected
to generate cash flows indefinitely. In accordance with current accounting guidance, these indefinite-lived intangible
assets are assessed at least annually for impairment as of December 31 or whenever events or circumstances indicate that
the carrying values may not be recoverable from future cash flows. No impairments were recorded in 2019, 2018 or
2017. Current accounting guidance provides entities an option of performing a qualitative assessment (a "step-zero" test)
before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors, that it is
more-likely-than-not that the intangibles (goodwill and certain trademarks) are not impaired, the entity would not need to
proceed to the two step impairment testing process (quantitative analysis) as prescribed in the guidance. During fourth
quarter 2019 (and fourth quarter 2018), the Company performed a “step zero” test of its goodwill and certain trademarks,
and concluded that there was no impairment based on this guidance. For the fair value assessment of certain trademarks
where the “step-zero” analysis was not considered appropriate, impairment testing was performed in fourth quarter 2019
(and fourth quarter 2018) using discounted cash flows and estimated royalty rates. For these trademarks, holding all
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other assumptions constant at the test date, a 100 basis point increase in the discount rate or a 100 basis point decrease in
the royalty rate would reduce the fair value of these trademarks by approximately 16% and 10%, respectively.
Individually, a 100 basis point increase in the discount rate may result in potential impairment of up to $2 million. A
100 basis point decrease in the royalty rate would not result in a potential impairment as of December 31, 2019.
Earnings from operations were $69,214 in 2019 compared to $70,482 in 2018, a decrease of $1,268. Earnings from
operations include $11,292 and $(1,103) in certain deferred compensation expense (credits) in 2019 and 2018,
respectively, which are discussed above. Adjusting for these deferred compensation expenses, adjusted earnings from
operations increased from $69,379 in 2018 to $80,506 in 2019, an increase of $11,127 or 16.0%. Fourth quarter and
twelve months results benefitted from increased sales and higher price realization as well as reductions in certain costs
and expenses discussed above.
Management believes the comparisons presented in the preceding paragraphs, after adjusting for changes in deferred
compensation, are more reflective of the underlying operations of the Company.
Other income, net was $16,190 in 2019 compared to $2,724 in 2018, an increase of $13,466. Other income, net
principally reflects $11,292 and $(1,103) of aggregate net gains (losses) and investment income on trading securities in
2019 and 2018, respectively. These trading securities provide an economic hedge of the Company’s deferred
compensation liabilities; and the related net gains (losses) and investment income were offset by a like amount of
expense in aggregate product cost of goods sold and selling, marketing, and administrative expenses in the respective
years as discussed above. Other income, net includes investment income on available for sale securities of $4,423 and
$3,535 in 2019 and 2018, respectively. Other income, net also includes foreign exchange gains (losses) of $(533) and
$(659) in 2019 and 2018, respectively.
The Company’s effective income tax rate was 27.9% and 23.5% in fourth quarter 2019 and 2018, respectively, and
24.1% and 22.4% in twelve months 2019 and 2018, respectively. The increase in the effective tax rates for the fourth
quarter and twelve months 2019 reflects higher state income taxes, including increases in reserves for uncertain state tax
benefits, and increases in valuation allowances for state income tax credit carry-forwards which are not likely to be fully
realized in the future. A reconciliation of the differences between the U.S. statutory rate and these effective tax rates is
provided in Note 4 of the Company’s Notes to Consolidated Financial Statements.
At December 31, 2019 and 2018, the Company’s deferred tax assets include $617 and $1,844 of income tax benefits
relating to its Canadian subsidiary tax loss carry-forwards. The Company expects to fully utilize this deferred tax asset in
2020 (expiration dates are 2029 through 2031). The Company utilized $1,227 and $1,896 of these Canadian tax carry-
forward benefits in 2019 and 2018, respectively. The Company has concluded that it is more-likely-than-not that it
would realize these deferred tax assets relating to its Canadian tax loss carry-forwards because it is expected that
sufficient levels of taxable income will be generated during the carry-forward periods. The Company has provided a full
valuation allowance on its Spanish subsidiaries’ tax loss carry-forward benefits of $3,967 and $3,651 as of December 31,
2019 and 2018, respectively, because the Company has concluded that it is not more-likely-than-not that these losses will
be utilized before their expiration dates. The Spanish subsidiary has a history of net operating losses and it is not known
when and if they will generate taxable income in the future.
U.S. tax reform (US Tax Cuts and Jobs Act enacted in December 2017) included a one-time toll charge resulting from
the mandatory deemed repatriation of undistributed foreign earnings and profits. The Company determined that there
were no net undistributed foreign earnings and profits subject to this toll charge. U.S. tax reform also changed the United
States approach to the taxation of foreign earnings to a territorial system by providing a one hundred percent dividends
received deduction for certain qualified dividends received from foreign subsidiaries. These provisions of the U.S. tax
reform significantly impact the accounting for the undistributed earnings of foreign subsidiaries, and as a result the
Company distributed $8,200 of the earnings held in excess cash by its foreign subsidiaries in 2019. The tax costs
associated with a future distribution, including foreign withholding taxes, are not material to the Company’s financial
statements. After carefully considering these facts, the Company determined that it would not be asserting permanent
reinvestment of its foreign subsidiaries earnings as of December 31, 2017, and the Company continues to make this
assertion.
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Net earnings attributable to Tootsie Roll Industries, Inc. were $14,555 in fourth quarter 2019 compared to $12,175 in
fourth quarter 2018, and net earnings per share were $0.22 and $0.18 in fourth quarter 2019 and 2018, respectively.
Twelve months 2019 net earnings were $64,920 compared to $56,893 in twelve months 2018, and net earnings per share
were $0.99 and $0.86 in twelve months 2018 and 2017, respectively. Earnings per share in 2019 benefited from the
reduction in average shares outstanding resulting from purchases of the Company’s common stock in the open market by
the Company. Average shares outstanding decreased from 66,130 in 2018 to 65,474 in 2019 which reflects share
repurchases of $34,116 during 2019.
Beginning in 2012, the Company received periodic notices from the Bakery, Confectionery, Tobacco Workers and Grain
Millers International Union Pension Plan (Plan), a multi-employer defined benefit pension plan for certain Company
union employees, that the Plan’s actuary certified the Plan to be in “critical status”, the “Red Zone”, as defined by the
Pension Protection Act (PPA) and the Pension Benefit Guaranty Corporation (PBGC); and that a plan of rehabilitation
was adopted by the trustees of the Plan in 2012. During 2015, the Company received notices that the Plan’s status was
changed to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015,
and that the Plan was projected to have an accumulated funding deficiency for the 2017 through 2024 plan years. A
designation of “critical and declining status” implies that the Plan is expected to become insolvent in the next 20 years.
The Company has continued to receive annual notices each year (2016 to 2019) that this Plan remains in “critical and
declining status” and is projected to become insolvent within the next 20 years. These notices have also advised that the
Plan trustees were considering the reduction or elimination of certain retirement benefits and may seek assistance from
the PBGC. Plans in “critical and declining status” may elect to suspend (temporarily or permanently) some benefits
payable to all categories of participants, including retired participants, except retirees that are disabled or over the age of
80. Suspensions must be equally distributed and cannot drop below 110% of what would otherwise be guaranteed by the
PBGC.
Based on these updated notices, the Plan’s funded percentage (plan investment assets as a percentage of plan liabilities),
as defined, were 51.6%, 54.7%, and 57.0% as of the most recent valuation dates available, January 1, 2018, 2017, and
2016, respectively (these valuation dates are as of the beginning of each Plan year). These funded percentages are based
on actuarial values, as defined, and do not reflect the actual market value of Plan investments as of these dates. If the
market value of investments had been used as of January 1, 2019 the funded percentage would be 54.2% (not 51.6%). As
of the January 1, 2018 valuation date (most recent valuation available), only 18% of Plan participants were current active
employees, 52% were retired or separated from service and receiving benefits, and 30% were retired or separated from
service and entitled to future benefits. The number of current active employee Plan participants as of January 1, 2018 fell
3% from the previous year and 11% over the past two years. When compared to the Plan valuation date of January 1,
2011 (seven years earlier), current active employee participants have declined 39%, whereas participants who were
retired or separated from service and receiving benefits increased 6% and participants who were retired or separated
from service and entitled to future benefits increased 9%. The Company understands that the Plan is continuing to
explore additional restructuring measures which include incentives to participating employers in exchange for providing
additional future cash contributions as well as suspension of certain retirement benefits.
The Company has been advised that its withdrawal liability would have been $99,800, $81,600, and $82,200 if it had
withdrawn from the Plan during 2019, 2018 and 2017, respectively. The increase from 2018 to 2019 was mainly
attributable to a decrease in the Plan’s assets during 2018, net of market returns, and the withdrawal of a large
contributing employer where their actual withdrawal payments (likely over 20 years as discussed below) are not enough
to fully fund their actual withdrawal liability. The Company’s relative share of the Plan’s contribution base, driven by
employer withdrawals, has increased for the last several years, and management believes that this trend could continue
indefinitely which will add upward pressure on the Company’s withdrawal liability. Based on the above, including the
Plan’s projected insolvency in the year 2030, management believes that the Company’s withdrawal liability could
increase further in future years.
Based on the Company’s updated actuarial study and certain provisions in ERISA and the law relating to withdrawal
liability payments, management believes that the Company’s liability would likely be limited to twenty annual payments
of $3,045 which have a present value in the range of $35,700 to $46,700 depending on the interest rate used to discount
these payments. While the Company’s actuarial consultant does not believe that the Plan will suffer a future mass
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withdrawal (as defined) of participating employers, in the event of a mass withdrawal, the Company’s annual withdrawal
payments would theoretically be payable in perpetuity. Based on the Company’s updated actuarial study, the present
value of such perpetuities is in the range of $49,900 to $104,500 and would apply in the unlikely event that substantially
all employers withdraw from the Plan. The aforementioned is based on a range of valuations and interest rates which the
Company’s actuary has advised is provided under the statute. Should the Company actually withdraw from the Plan at a
future date, a withdrawal liability, which could be higher than the above discussed amounts, could be payable to the
Plan.
The Company and the union concluded a new labor contract in 2018 which requires the Company’s continued
participation in this Plan through September 2022. The amended rehabilitation plan, which also continues, requires that
employer contributions include 5% compounded annual surcharge increases each year for an unspecified period of time
beginning in 2012 as well as certain plan benefit reductions. The Company’s pension expense for this Plan for 2019,
2018 and 2017 was $2,961, $2,836 and $2,617, respectively. The aforementioned expense includes surcharges of $948,
$811 and $656 in 2019, 2018 and 2017, respectively, as required under the amended rehabilitation plan.
The Company understands that the U.S Congress and the U.S Senate have proposed various legislation, including the
“Butch Lewis Act,” that would provide varying degrees of assistance to troubled multi-employer plans similar to this
Plan, including long-term low interest loans to troubled multi-employer plans. Certain provisions proposed would
change the withdrawal liability rules which could increase the Company’s obligation in the event that the Company
withdrew form this Plan, resulting in higher annual payment amounts and payments for a longer period of time in excess
of the maximum twenty year period discussed above. The Company is currently unable to determine the ultimate
outcome of the above discussed multi-employer union pension matter and therefore is unable to determine the effects on
its consolidated financial statements, but the ultimate outcome could be material to its consolidated results of operations
or cash flows in one or more future periods. See also Note 7 in the Company’s Consolidated Financial Statements on
Form 10-K for the year ended December 31, 2019.
2018 vs. 2017
Twelve months 2018 consolidated net sales were $515,251 compared to $515,674 in twelve months 2017, a decrease of
$423 or 0.1%. Fourth quarter 2018 net sales were $127,264 compared to $125,179 in fourth quarter 2017, an increase of
$2,085 or 1.7%. Fourth quarter 2018 sales reflects an increase of 3.4% in U.S. sales in the quarter, however, foreign sales
declined in fourth quarter 2018. The timing of certain foreign sales between third and fourth quarter in the comparative
2018 and 2017 periods adversely affected fourth quarter consolidated 2018 sales. Unfavorable translation of foreign
sales, primarily Mexico, also contributed to lower sales in fourth quarter and twelve months 2018 compared to the prior
year corresponding period. The Company’s unit selling prices and price realization in 2018 was consistent with 2017.
Because of increased pricing pressures and cost increases facing the confectionery industry, companies in the
confectionery industry are taking pricing actions to recover many of the same input cost increases that we have and
continue to experience which are discussed below, including higher freight and delivery expenses. In particular, the
Company has taken selective price increases, effective at the beginning of 2019, to recover these same input cost
increases.
Product cost of goods sold were $329,880 in 2018 compared to $326,411 in 2017, an increase of $3,469 or 1.1%.
Product cost of goods sold includes $(39) and $1,953 in certain deferred compensation expenses (credits) in 2018 and
2017, respectively. These deferred compensation expenses principally result from changes in the market value of
investments and investment income from trading securities relating to compensation deferred in previous years and are
not reflective of current operating results. Adjusting for the aforementioned, product cost of goods sold increased from
$324,458 in 2017 to $329,919 in 2018, an increase of $5,461 or 1.7%. As a percent of net product sales, these adjusted
costs increased from 62.9% in 2017 to 64.0% in 2018, a 1.1 unfavorable percentage point change. Although costs for key
ingredients were more favorable in 2018 compared to 2017, higher manufacturing costs for wages, salaries and benefits
and plant overhead operations contributed to higher product cost of goods sold in 2018 compared to 2017. Increases in
employee healthcare and other benefit costs, principally resulting from unfavorable experience under our self-insurance
programs, adversely affected gross profit margins in 2018 compared to 2017. Costs relating to quality improvements in
product packaging and start-up of new manufacturing packaging lines being phased into service during 2018 also had an
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unfavorable impact on twelve months 2018 gross profit margins when compared to 2017. The above discussed cost
factors also affected fourth quarter 2018 gross profit margins compared to fourth quarter 2017.
Selling, marketing and administrative expenses were $117,691 in 2018 compared to $121,484 in 2017, a decrease of
$3,793 or 3.1%. Selling, marketing and administrative expenses include $(1,064) and $8,024 in certain deferred
compensation expenses (credits) in 2018 and 2017, respectively. These deferred compensation expenses principally
result from changes in the market value of investments and investment income from trading securities relating to
compensation deferred in previous years and are not reflective of current operating results. Adjusting for the
aforementioned, selling, marketing and administrative expenses increased from $113,460 in 2017 to $118,755 in 2018,
an increase of $5,295 or 4.7%. As a percent of net product sales, these adjusted expenses increased from 22.0% of net
product sales in 2017 to 23.1% of net product sales in 2018, a 1.1 unfavorable percentage point change.
Selling, marketing and administrative expenses include freight, delivery and warehousing expenses. These expenses
increased from $44,082 in 2017 to $49,527 in 2018, an increase of $5,445 or 12.4%. As a percent of net product sales,
these adjusted expenses increased from 8.6% in 2017 to 9.6% in 2018, a 1.0 unfavorable percentage point change. These
expenses principally reflect higher freight rates driven by the continuing imbalance between supply and demand for
over-the-road truck delivery as well as higher fuel costs. Freight and delivery expenses began their significant
acceleration in fourth quarter 2017, and therefore, this impact was less significant in the comparative fourth quarters of
2018 and 2017, than for the twelve months 2018 and 2017. Higher legal and professional fees also contributed to this
increase in selling, marketing and administrative expenses in both fourth quarter and twelve months 2018.
The Company has foreign operating businesses in Mexico, Canada and Spain, and exports products to many foreign
markets. Such foreign sales were $43,690 and comprised 8.5% of the Company’s consolidated net product sales in 2018.
In fourth quarter 2018 and 2017, the Company recorded a pre-tax impairment charge of $1,125 and $2,371, respectively,
relating to its Spanish operations. The Company had a 97% ownership of a Spanish company at both December 31, 2018
and 2017. During 2018 and 2017, this Spanish subsidiary incurred operating losses of $2,840 and $3,212, respectively,
and the Company provided approximately $4,484 and $2,734, respectively, of additional cash to finance these losses and
certain capital expenditures.
Earnings from operations were $70,482 in 2018 compared to $70,422 in 2017, an increase of $60. Earnings from
operations include $(1,103) and $9,977 in certain deferred compensation expense (credits) in 2018 and 2017,
respectively, which are discussed above. Adjusting for these deferred compensation expenses, adjusted earnings from
operations decreased from $80,399 in 2017 to $69,379 in 2018, a decrease of $11,020 or 13.7%. Twelve months and
fourth quarter results were adversely affected primarily by higher costs and expenses for freight and delivery and
manufacturing operations as discussed above.
Management believes the comparisons presented in the preceding paragraphs, after adjusting for changes in deferred
compensation, are more reflective of the underlying operations of the Company.
Other income, net was $2,724 in 2018 compared to $14,139 in 2017, a decrease of $11,415. Other income, net
principally reflects $(1,103) and $9,977 of aggregate net gains (losses) and investment income on trading securities in
2018 and 2017, respectively. These trading securities provide an economic hedge of the Company’s deferred
compensation liabilities; and the related net gains (losses) and investment income were offset by a like amount of
expense in aggregate product cost of goods sold and selling, marketing, and administrative expenses in the respective
years as discussed above. Other income, net includes investment income on available for sale securities of $3,535 and
$2,851 in 2018 and 2017, respectively. Other income, net also includes foreign exchange gains (losses) of $(659) and
$259 in 2018 and 2017, respectively.
Fourth quarter and twelve months 2018 net earnings benefited from a lower U.S. federal income tax rate resulting from
U.S. tax reform legislation enacted in December 2017. In connection with this tax reform legislation, the Company
recorded a net tax benefit of $20,318, or $0.30 per share, during fourth quarter 2017. This benefit reflected the estimated
accounting adjustment from the revaluation of the Company’s net deferred income tax liabilities as of December 31,
2017 to reflect the new lower U.S. corporate income tax rate. As a result of this tax legislative change, including the
above discussed revaluation of deferred tax liabilities, the Company’s effective income tax rate was 23.5% in fourth
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quarter 2018 compared to negative 110.9%, a net tax credit, in fourth quarter 2017; and 22.4% in twelve months 2018
compared to 4.6% in twelve months 2017. A reconciliation of the differences between the U.S. statutory rate and these
effective tax rates is provided in Note 4 of the Company’s Notes to Consolidated Financial Statements.
At December 31, 2018 and 2017, the Company’s deferred tax assets include $1,844 and $3,740 of income tax benefits
relating to its Canadian subsidiary tax loss carry-forwards which the Company expects to realize before their expiration
dates (2029 through 2031). The Company utilized $1,896 and $2,606 of these tax carry-forward benefits in 2018 and
2017, respectively. The Company has concluded that it is more-likely-than-not that it would realize these deferred tax
assets relating to its Canadian tax loss carry-forwards because it is expected that sufficient levels of taxable income will
be generated during the carry-forward periods. The Company has provided a full valuation allowance on its Spanish
subsidiaries’ tax loss carry-forward benefits of $3,651 and $3,038 as of December 31, 2018 and 2017, respectively,
because the Company has concluded that it is not more-likely-than-not that these losses will be utilized before their
expiration dates. The Spanish subsidiary has a history of net operating losses and it is not known when and if they will
generate taxable income in the future.
Based on SEC guidance in Staff Accounting Bulletin No. 118, the Company considered its accounting for the effects of
U.S. tax reform to be provisional as of December 31, 2017 and through the first three quarters ended September 30, 2018
because the ultimate impact might have differed from these provisional amounts, due to, among other things, additional
regulatory guidance from the Internal Revenue Service and state authorities. The accounting for Tax Cuts and Jobs Act
was completed as of December 31, 2018 and there were no material adjustment to the previously recorded provisional
amounts.
Net earnings attributable to Tootsie Roll Industries, Inc. were $12,175 in fourth quarter 2018 compared to $31,985 in
fourth quarter 2017, and net earnings per share were $0.18 and $0.48 in fourth quarter 2018 and 2017, respectively. The
prior year fourth quarter 2017 net earnings include a favorable deferred income tax accounting adjustment of $20,318 or
$0.30 per share which is discussed above. Adjusting for the effects of this fourth quarter 2017 tax adjustment,
comparable net earnings per share were $0.18 in both 2018 and 2017. Twelve months 2018 net earnings were $56,893
compared to $80,864 in twelve months 2017, and net earnings per share were $.86 and $1.21 in twelve months 2018 and
2017, respectively. Adjusting for the effects of the 2017 tax adjustment discussed above, comparable net earnings per
share were $0.86 and $0.91, a decrease of $0.05 or 5.5%. Earnings per share in 2018 benefited from the reduction in
average shares outstanding resulting from purchases of the Company’s common stock in the open market by the
Company. Average shares outstanding decreased from 66,962 in 2017 to 66,130 in 2018.
The Company has included the above non-GAAP discussion regarding the impacts of tax reform. The Company
believes this discussion provides meaningful supplemental information to both management and investors that is
indicative of the Company's core net results and facilitates comparison of net results across reporting periods. The
Company uses this non-GAAP measure when evaluating its financial results as well as for internal evaluation and
analysis purposes. This non-GAAP measure should not be viewed as a substitute for the Company's GAAP results.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $100,221, $100,929 and $42,973 in 2019, 2018 and 2017, respectively. The
$708 decrease in cash flows from operating activities from 2018 to 2019 primarily reflects the timing of payments and
refunds of income taxes, combined with increases in prepaid expenses and inventories, offset by a decrease in accounts
receivable as of December 31, 2019. The $57,956 increase in cash flows from operating activities from 2017 to 2018
primarily reflects the timing of payments and refunds of income taxes, an increase in prepaid expenses as of December
31, 2017, and the decrease in deferred compensation payments in 2018.
The Company manages and controls a VEBA trust, to fund the estimated future costs of certain union employee health,
welfare and other benefits. A contribution of $20,024 was made to this trust in 2017; no contribution was made to the
trust during 2018 or 2019. The Company uses these funds to pay the actual cost of such benefits over each union contract
period. At December 31, 2019 and 2018, the VEBA trust held $12,085 and $15,921, respectively, of aggregate cash and
cash equivalents. This asset value is included in prepaid expenses and long-term other assets in the Company’s
Consolidated Statement of Financial Position. These assets are categorized as Level 1 within the fair value hierarchy.
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Cash flows from investing activities reflect capital expenditures of $20,258, $27,612, and $16,673 in 2019, 2018 and
2017, respectively. The changes in amounts from 2018 to 2019 principally reflect new manufacturing packaging lines in
2018 and the timing of expenditures relating to other plant manufacturing capital projects. Company management has
committed approximately $25,000 to a rehabilitation upgrade and expansion of one of its manufacturing plants in the
U.S.A. The Company spent approximately $2,000 in 2019, and management’s projected cash outlays for this project are
approximately $15,000 in 2020 and $8,000 in 2021. All capital expenditures are to be funded from the Company’s cash
flow from operations and internal sources including available for sale securities.
Other than the bank loans and the related restricted cash of the Company’s Spanish subsidiary which are discussed in
Note 1 of the Company’s Notes to Consolidated Financial Statements, the Company had no bank borrowings or
repayments in 2017, 2018, or 2019, and had no outstanding bank borrowings as of December 31, 2018 or 2019.
Nonetheless, the Company would consider bank borrowing or other financing in the event that a business acquisition is
completed.
Financing activities include Company common stock purchases and retirements of $34,116, $19,317, and $34,133 in
2019, 2018 and 2017, respectively. Cash dividends of $23,460, $22,978, and $22,621 were paid in 2019, 2018 and 2017,
respectively.
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
Preparation of the Company’s financial statements involves judgments and estimates due to uncertainties affecting the
application of accounting policies, and the likelihood that different amounts would be reported under different conditions
or using different assumptions. The Company bases its estimates on historical experience and other assumptions, as
discussed herein, that it believes are reasonable. If actual amounts are ultimately different from previous estimates, the
revisions are included in the Company’s results of operations for the period in which the actual amounts become known.
The Company’s significant accounting policies are discussed in Note 1 of the Company’s Notes to Consolidated
Financial Statements.
Following is a summary and discussion of the more significant accounting policies and estimates which management
believes to have a significant impact on the Company’s operating results, financial position, cash flows and footnote
disclosure.
Revenue recognition
As more fully discussed in Note 1, the Company adopted the new accounting revenue recognition guidance (ASC 606)
effective January 1, 2018. As a result of adoption, the cumulative impact to retained earnings at January 1, 2018 was a
net after-tax increase of $3,319 ($4,378 pre-tax). The adoption principally changed the timing of recognition of certain
trade promotions and related adjustments thereto which affect net product sales. The comparative prior information has
not been restated and continues to be reported under the accounting standards in effect for such period. The adoption of
the new standard in 2018 did not have a material effect on 2018 and 2019 results, and management does not believe that
it will have a material effect on results in future years. Revenue for net product sales continues to be recognized at a
point in time when products are delivered to or picked up by the customer, as designated by customers’ purchase orders,
as discussed in Note 1.
Provisions for bad debts are recorded as selling, marketing and administrative expenses. Write-offs of bad debts did not
exceed 0.1% of net product sales in each of 2019, 2018 and 2017, and accordingly, have not been significant to the
Company’s financial position or results of operations.
Intangible assets
The Company’s intangible assets consist primarily of goodwill and acquired trademarks. In accordance with accounting
guidance, goodwill and other indefinite-lived assets, trademarks, are not amortized, but are instead subjected to annual
testing for impairment unless certain triggering events or circumstances are noted. The Company performs its annual
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impairment review and assessment as of December 31. All trademarks have been assessed by management to have
indefinite lives because they are expected to generate cash flows indefinitely. The Company reviews and assesses certain
trademarks (non-amortizable intangible assets) for impairment by comparing the fair value of each trademark with its
carrying value. Current accounting guidance provides entities an option of performing a qualitative assessment (a "step-
zero" test) before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors,
that it is more-likely-than-not that the intangibles (goodwill and certain trademarks) are not impaired, the entity would
not need to proceed to the two step impairment testing process (quantitative analysis) as prescribed in the guidance.
During fourth quarter 2019, the Company performed a “step zero” test of its goodwill and certain trademarks, and
concluded that there was no impairment based on this guidance.
The Company determines the fair value of certain trademarks using discounted cash flows and estimates of royalty rates.
If the carrying value exceeds fair value, such trademarks are considered impaired and is reduced to fair value. The
Company utilizes third-party professional valuation firms to assist in the determination of valuation of certain
trademarks. Impairments have not generally been material to the Company’s historical operating results.
Cash flow projections require the Company to make assumptions and estimates regarding the Company’s future plans,
including sales projections and profit margins, market based discount rates, competitive factors, and economic
conditions; and the Company’s actual results and conditions may differ over time. A change in the assumptions relating
to the impairment analysis including but not limited to a reduction in projected cash flows, the use of a different discount
rate to discount future cash flows or a different royalty rate applied to such trademarks, could cause impairment in the
future.
Customer incentive programs, advertising and marketing
Advertising and marketing costs are recorded in the period to which such costs relate. The Company does not defer the
recognition of any amounts on its consolidated balance sheet with respect to such costs. Customer incentives and other
promotional costs, including consumer coupon (price reduction) incentives, are recorded in accordance with ASU 606 at
the time of the Company’s sale based upon incentive program terms and historical utilization statistics, which are
generally consistent from year to year. The liabilities associated with these programs are reviewed quarterly and adjusted
if utilization rates differ from management’s original estimates. Such adjustments have not historically been material to
the Company’s operating results.
Split dollar officer life insurance
The Company provides split dollar life insurance benefits to an executive officer and records an asset principally equal to
the cumulative premiums paid. The Company will fully recover these premiums in future years under the terms of the
plan. The Company retains a collateral assignment of the cash surrender values and policy death benefits payable to
insure recovery of these premiums.
Valuation of long-lived assets
Long-lived assets, primarily property, plant and equipment, are reviewed for impairment as events or changes in business
circumstances occur indicating that the carrying value of the asset may not be recoverable. The estimated cash flows
produced by assets or asset groups, are compared to the asset carrying value to determine whether impairment exists.
Such estimates involve considerable management judgment and are based upon assumptions about expected future
operating performance. As a result, actual cash flows could differ from management’s estimates due to changes in
business conditions, operating performance, and economic and competitive conditions. Such impairments have not
historically been material to the Company’s operating results.
Income taxes
Deferred income taxes are recognized for future tax effects of temporary differences between financial and income tax
reporting using tax rates in effect for the years in which the differences are expected to reverse. The Company records
valuation allowances in situations where the realization of deferred tax assets, including those relating to net operating
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tax losses, is not more-likely-than-not; and the Company adjusts and releases such valuation allowances when realization
becomes more-likely-than-not as defined by accounting guidance. The Company periodically reviews assumptions and
estimates of the Company’s probable tax obligations and effects on its liability for uncertain tax positions, using
informed judgment which may include the use of third-party consultants, advisors and legal counsel, as well as historical
experience.
Valuation of investments
Investments primarily comprise high quality corporate and municipal (tax-free) bonds, including variable rate demand
notes (generally long term bonds where interest rates are reset weekly, and provide a weekly “put” which allows the
holder to also sell each week with no loss in principal), which are reviewed for impairment at each reporting period by
comparing the carrying value or amortized cost to the fair market value. In the event that an investment security’s fair
value is below carrying value or amortized cost, the Company will record an other-than-temporary impairment or a
temporary impairment based on accounting guidance. The Company’s investment policy, which guides investment
decisions, is focused on high quality investments which mitigates the risk of impairment. The Company does not invest
in Level 3 securities, as defined, but may utilize third-party professional valuation firms as necessary to assist in the
determination of the value of investments that utilize Level 3 inputs (as defined by guidance) should any of its
investments be downgraded to Level 3.
Other matters
In the opinion of management, other than contracts for foreign currency forwards and raw materials, including currency
and commodity hedges and outstanding purchase orders for packaging, ingredients, supplies, and operational services, all
entered into in the ordinary course of business, the Company does not have any significant contractual obligations or
future commitments. The Company’s outstanding contractual commitments as of December 31, 2019, all of which are
generally normal and recurring in nature, are summarized in the chart which follows below.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 of the Company’s Notes to Consolidated Financial Statements.
MARKET RISKS
The Company is exposed to market risks related to commodity prices, interest rates, investments in marketable
securities, equity price and foreign exchange.
The Company’s ability to forecast the direction and scope of changes to its major input costs is impacted by significant
potential volatility in crude oil and energy, sugar, corn, edible oils, cocoa and cocoa powder, and dairy products markets.
The prices of these commodities are influenced by changes in global demand, changes in weather and crop yields,
including the possible effects of climate change, changes in import tariffs and governments’ farm policies, including
mandates for ethanol and bio-fuels, environmental matters, fluctuations in the U.S. dollar relative to dollar-denominated
commodities in world markets, and in some cases, geo-political risks. The Company believes that its competitors face the
same or similar challenges.
In order to address the impact of changes in input and other costs, the Company periodically reviews each item in its
product portfolio to ascertain if price realization adjustments or other actions should be taken. These reviews include an
evaluation of the risk factors relating to market place acceptance of such changes and their potential effect on future sales
volumes. In addition, the estimated cost of packaging modifications associated with weight changes, if applicable, is
evaluated. The Company also maintains ongoing cost reduction and productivity improvement programs under which
cost savings initiatives are encouraged and progress monitored. The Company is not able to accurately predict the
outcome of these cost savings initiatives and their effects on its future results.
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Commodity future and foreign currency forward contracts
Commodity price risks relate to ingredients, primarily sugar, cocoa and cocoa powder, chocolate, corn syrup, dextrose,
edible oils, milk, whey and gum base ingredients. The Company believes its competitors face similar risks, and the
industry has historically adjusted prices, and/or product weights, to compensate for adverse fluctuations in commodity
costs. The Company, as well as competitors in the confectionery industry, has historically taken actions, including higher
price realization to mitigate rising input costs for ingredients, packaging, labor and fringe benefits, energy, and freight
and delivery. Although management seeks to substantially recover cost increases over the long-term, there is risk that
higher price realization cannot be fully passed on to customers and, to the extent they are passed on, they could adversely
affect customer and consumer acceptance and resulting sales volume.
The Company utilizes commodity futures contracts, as well as annual supply agreements, to hedge and plan for
anticipated purchases of certain ingredients, including sugar, in order to mitigate commodity cost fluctuation. The
Company also may purchase forward foreign exchange contracts to hedge its costs of manufacturing certain products in
Canada for sale and distribution in the United States (U.S.A.), and periodically does so for purchases of equipment or
raw materials from foreign suppliers. Such commodity futures and currency forward contracts are cash flow hedges and
are effective as hedges as defined by accounting guidance. The unrealized gains and losses on such contracts are deferred
as a component of accumulated other comprehensive loss (or gain) and are recognized as a component of product cost of
goods sold when the related inventory is sold.
The potential change in fair value of commodity and foreign currency derivative instruments held by the Company at
December 31, 2019, assuming a 10% change in the underlying contract price, was $1,268. The analysis only includes
commodity and foreign currency derivative instruments and, therefore, does not consider the offsetting effect of changes
in the price of the underlying commodity or foreign currency. This amount is not significant compared with the net
earnings and shareholders’ equity of the Company.
Interest rates
Interest rate risks primarily relate to the Company’s investments in marketable securities with maturities dates of
generally up to three years.
The majority of the Company’s investments, which are classified as available for sale, have historically been held until
their maturity, which limits the Company’s exposure to interest rate fluctuations. The Company also invests in variable
rate demand notes which have interest rates which are reset weekly and can be “put back” and sold each week through a
remarketing agent, generally a large financial broker, which also substantially eliminates the Company’s exposure to
interest rate fluctuations on the principal invested. The accompanying chart summarizes the maturities of the Company’s
investments in debt securities at December 31, 2019.
Less than 1 year
1 – 2 years
2 – 3 years
Total
$
$
84,163
47,940
45,189
177,292
The Company’s outstanding debt at December 31, 2019 and 2018 was $7,500 in an industrial revenue bond in which
interest rates reset each week based on the current market rate. Therefore, the Company does not believe that it has
significant interest rate risk with respect to its interest bearing debt.
Investment in marketable securities
As stated above, the Company invests primarily in marketable securities including variable rate demand notes (VRDNs).
The VRDNs have weekly “puts” which are collateralized by bank letters of credit or other assets, and interest rates are
reset weekly. Except for VRDN’s the Company’s marketable securities are held to maturity with maturities generally not
exceeding three years. The Company utilizes professional money managers and maintains investment policy guidelines
which emphasize high quality and liquidity in order to minimize the potential loss exposures that could result in the
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event of a default or other adverse event. The Company continues to monitor these investments and markets, as well as
its investment policies, however, the financial markets could experience unanticipated or unprecedented events as it did
in 2008 and 2009, and future outcomes may be less predictable than in the past.
Equity price
Equity price risk relates to the Company’s investments in mutual funds which are principally used to fund and hedge the
Company’s deferred compensation liabilities. These investments in mutual funds are classified as trading securities. Any
change in the fair value of these trading securities is completely offset by a corresponding change in the respective
hedged deferred compensation liability, and therefore the Company does not believe that it has significant equity price
risk with respect to these investments.
Foreign currency
Foreign currency risk principally relates to the Company’s foreign operations in Canada, Mexico and Spain, as well as
periodic purchase commitments of machinery and equipment from foreign sources, generally the European Union where
the EURO is the currency.
Certain of the Company’s Canadian manufacturing costs, including local payroll and plant operations, and a portion of
its packaging and ingredients are sourced in Canadian dollars. The Company may purchase Canadian forward contracts
to receive Canadian dollars at a specified date in the future and uses its Canadian dollar collections on Canadian sales as
a partial hedge of its overall Canadian manufacturing obligations sourced in Canadian dollars. The Company also
periodically purchases and holds Canadian dollars to facilitate the risk management of these currency changes.
From time to time, the Company may use foreign exchange forward contracts and derivative instruments to mitigate its
exposure to foreign exchange risks, as well as those related to firm commitments to purchase equipment from foreign
vendors. See Note 11 of the Company’s Notes to Consolidated Financial Statements for outstanding foreign exchange
forward contracts as of December 31, 2019.
Open Contractual Commitments as of December 31, 2019:
Payable in
Commodity hedges
Foreign currency hedges
Purchase obligations
Interest bearing debt
Operating leases
Total
Total
Less than 1 to 3
Years
1 Year
$ 7,147 $ 7,147 $
5,533
6,566
7,500
1,592
5,533
6,566
—
884
$ 28,338 $ 20,130 $
Years
3 to 5 More than
5 Years
— $ — $ —
—
—
—
—
—
—
7,500
—
—
708
—
—
708 $ — $ 7,500
Note: Commodity hedges and foreign currency hedges reflect the amounts at which the Company will settle the related
contracts. The above amounts exclude deferred income tax liabilities of $47,295, liabilities for uncertain tax positions of
$4,240, postretirement health care benefits of $13,743 and noncurrent deferred compensation of $65,973 because the
timing of payments relating to these items cannot be reasonably determined.
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ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is included under the caption “Market Risk” in Item 7 above.
See also Note 1 of the Notes to Consolidated Financial Statements.
ITEM 8. Financial Statements and Supplementary Data.
Management’s Report on Internal Control Over Financial Reporting
The management of Tootsie Roll Industries, Inc. is responsible for establishing and maintaining adequate internal control
over financial reporting, as such term is defined in the Securities Exchange Act of 1934 (SEC) Rule 13a-15(f). Company
management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2019 as required by SEC Rule 13a-15(c). In making this assessment, the Company used the criteria
established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Based on the Company’s evaluation under the COSO criteria, Company
management concluded that its internal control over financial reporting was effective as of December 31, 2019.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited
by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report which is included
herein.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Tootsie Roll Industries, Inc.
Opinions on the financial statements and internal control over financial reporting
We have audited the accompanying consolidated balance sheets of Tootsie Roll Industries, Inc. (a Virginia corporation)
and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of
earnings and retained earnings, comprehensive income, changes in shareholders’ equity, and cash flows for the two years
then ended and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as
the “financial statements”). We also have audited the Company’s internal control over financial reporting as of
December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two
years in the periods ended December 31, 2019 and 2018 in conformity with accounting principles generally accepted in
the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by COSO.
Basis for opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
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Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Trademark Impairment Assessment
As described in Note 1 and Note 13 to the consolidated financial statements, the Company’s consolidated trademark
balance was $175 million at December 31, 2019, which is allocated to the Company’s brands that were purchased.
Indefinite-lived trademarks are tested for impairment at least annually. For several trademarks, a Step 0 approach is used
to test for impairment based on relevant qualitative factors, as outlined within ASC 350-20 and 350-30. For the fair value
assessment of certain other trademarks where a Step 0 analysis was not considered appropriate, Step 1 impairment
testing is performed annually using discounted cash flows, derived from projected revenue, operating margins and
estimated discount rates. The determination of the fair value of the trademarks subjected to a Step 1 impairment test
requires management to make significant estimates and assumptions related to forecasts of future revenues, operating
margins and discount rates. As disclosed by management, changes in these assumptions could have a significant impact
on either the fair value of the trademark, the amount of any trademark charge, or both.
We identified the Step 1 trademark impairment assessment as a critical audit matter, as auditing management’s
judgments regarding forecasts of future revenue, operating margin and discount rate involves a high degree of
subjectivity.
The primary procedures we performed to address this critical audit matter included:
• Testing the operating effectiveness of controls relating to management’s impairment tests, including controls
over the determination of the fair value of these specific trademarks. Through these tests, we evaluated
management’s review controls over the financial projections, including reperformance and approval of the
reasonableness of the key assumptions and inputs to the analysis, such as discount rates, growth rates, and key
performance indicators such as sales forecast and operating margins.
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• Testing management’s process for determining the fair value of the trademarks. We evaluated the
reasonableness of management’s forecasts of future revenue and operating margin by comparing these forecasts
to historical operating results for the Company’s similar existing platforms, and whether such assumptions were
consistent with evidence obtained in other areas of the audit. Additionally, a sensitivity analysis was performed
using a Capital Asset Pricing Model in order to ensure the assumptions used in management’s model fell within
reasonable ranges based on third-party industry market data.
• Utilizing a valuation specialist to assist in evaluating the reasonableness of and testing the methodology used in
the Company’s discounted cash flow model for the trademarks and certain significant assumptions, including
the discount rate.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2018.
Chicago, Illinois
February 28, 2020
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Tootsie Roll Industries, Inc.:
Opinion on the Financial Statements
We have audited the consolidated statements of earnings and retained earnings, comprehensive earnings and cash flows
of Tootsie Roll Industries, Inc. and its subsidiaries (the “Company”) for the year ended December 31, 2017, including
the related notes and schedule of valuation and qualifying accounts for the year ended December 31, 2017 listed in the
accompanying index appearing under Item 15 (a)(2) (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and
cash flows of the Company for year ended December 31, 2017 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
March 1, 2018
We served as the Company's auditor from 1968 to 2018.
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CONSOLIDATED STATEMENTS OF
Earnings and Retained Earnings
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
Net product sales
Rental and royalty revenue
Total revenue
Product cost of goods sold
Rental and royalty cost
Total costs
Product gross margin
Rental and royalty gross margin
Total gross margin
Selling, marketing and administrative expenses
Earnings from operations
Other income, net
Earnings before income taxes
Provision for income taxes
Net earnings
Less: net earnings (loss) attributable to noncontrolling interests
Net earnings attributable to Tootsie Roll Industries, Inc.
(in thousands except per share data)
For the year ended December 31,
2017
2018
2019
$ 523,616 $ 515,251 $ 515,674
3,615
519,289
326,411
972
327,383
189,263
2,643
191,906
121,484
70,422
14,139
84,561
3,907
80,654
(210)
$ 64,920 $ 56,893 $ 80,864
3,669
518,920
329,880
867
330,747
185,371
2,802
188,173
117,691
70,482
2,724
73,206
16,401
56,805
(88)
3,497
527,113
329,102
995
330,097
194,514
2,502
197,016
127,802
69,214
16,190
85,404
20,565
64,839
(81)
Net earnings attributable to Tootsie Roll Industries, Inc. per share
Average number of shares outstanding
$
0.99 $
0.86 $
65,474
66,130
1.21
66,962
Retained earnings at beginning of period
Net earnings attributable to Tootsie Roll Industries, Inc.
Adopted ASU's (See Note 1)
Cash dividends
Stock dividends
Retained earnings at end of period
(The accompanying notes are an integral part of these statements.)
$ 33,767 $ 57,225 $ 43,833
80,864
—
(22,548)
(44,924)
$ 40,809 $ 33,767 $ 57,225
56,893
2,726
(22,929)
(60,148)
64,920
—
(23,371)
(34,507)
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CONSOLIDATED STATEMENTS OF
Comprehensive Earnings
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
Net earnings
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments
(in thousands)
For the year ended December 31,
2017
2018
2019
$ 64,839 $ 56,805 $ 80,654
791
103
1,198
Pension and postretirement reclassification adjustments:
Unrealized gains (losses) for the period on postretirement and pension benefits
Less: reclassification adjustment for (gains) losses to net earnings
Unrealized gains (losses) on postretirement and pension benefits
(1,230)
(1,522)
(2,752)
1,558
(1,324)
234
(1,009)
(1,462)
(2,471)
Investments:
Unrealized gains (losses) for the period on investments
Less: reclassification adjustment for (gains) losses to net earnings
Unrealized gains (losses) on investments
3,130
34
3,164
(606)
—
(606)
(300)
—
(300)
Derivatives:
Unrealized gains (losses) for the period on derivatives
Less: reclassification adjustment for (gains) losses to net earnings
Unrealized gains (losses) on derivatives
451
677
1,128
(2,734)
1,630
(1,104)
(1,410)
(107)
(1,517)
Total other comprehensive income (loss), before tax
Income tax benefit (expense) related to items of other comprehensive income
Total comprehensive earnings
Comprehensive earnings (loss) attributable to noncontrolling interests
Total comprehensive earnings attributable to Tootsie Roll Industries, Inc.
(The accompanying notes are an integral part of these statements.)
2,331
(354)
66,816
(81)
(3,090)
1,545
79,109
(210)
$ 66,897 $ 55,869 $ 79,319
(1,373)
349
55,781
(88)
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CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
Assets
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Investments
Accounts receivable trade, less allowances of $1,949 and $1,820
Other receivables
Inventories:
Finished goods and work-in-process
Raw materials and supplies
Prepaid expenses
Total current assets
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land
Buildings
Machinery and equipment
Construction in progress
Operating lease right-of-use assets
Less — accumulated depreciation
Net property, plant and equipment
OTHER ASSETS:
Goodwill
Trademarks
Investments
Split dollar officer life insurance
Prepaid expenses and other assets
Deferred income taxes
Total other assets
Total assets
(The accompanying notes are an integral part of these statements.)
(in thousands)
December 31,
2019
2018
$
138,960 $
380
100,444
45,044
3,418
110,899
388
75,140
49,777
2,941
35,909
23,179
5,996
353,330
32,159
22,365
10,377
304,046
21,740
122,843
416,625
4,427
1,580
567,215
378,760
188,455
21,726
121,780
401,037
3,408
—
547,951
361,850
186,101
73,237
175,024
153,031
26,042
8,056
689
436,079
977,864 $
73,237
175,024
170,409
26,042
11,980
522
457,214
947,361
$
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(in thousands except per share data)
Liabilities and Shareholders’ Equity
CURRENT LIABILITIES:
Accounts payable
Bank loans
Dividends payable
Accrued liabilities
Postretirement health care benefits
Operating lease liabilities
Deferred compensation
Total current liabilities
NONCURRENT LIABILITIES:
Deferred income taxes
Postretirement health care benefits
Industrial development bonds
Liability for uncertain tax positions
Operating lease liabilities
Deferred compensation and other liabilities
Total noncurrent liabilities
TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value — 120,000 shares authorized — 38,836 and
38,544, respectively, issued
Class B common stock, $.69-4/9 par value — 40,000 shares authorized — 26,287 and
25,584, respectively, issued
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Treasury stock (at cost) — 90 shares and 88 shares, respectively
Total Tootsie Roll Industries, Inc. shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and shareholders' equity
(The accompanying notes are an integral part of these statements.)
December 31,
2019
2018
$
12,720 $
747
5,861
41,611
598
1,062
16,945
79,544
11,817
373
5,772
42,849
580
—
—
61,391
47,295
13,145
7,500
4,240
518
65,973
138,671
43,941
11,871
7,500
3,816
—
68,345
135,473
26,969
26,767
18,254
696,059
40,809
(20,245)
(1,992)
759,854
(205)
759,649
17,767
696,535
33,767
(22,222)
(1,992)
750,622
(125)
750,497
$ 977,864 $ 947,361
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CONSOLIDATED STATEMENTS OF
Cash Flows
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands)
For the year ended December 31,
2018
2017
2019
$
64,839 $
56,805 $
80,654
18,779
2,832
377
1,282
18,669
2,063
1,126
1,755
18,991
(2,337)
2,371
2,386
5,086
(313)
(4,383)
4,362
1,080
4,336
(1,478)
3,422
100,221
(20,258)
(3,427)
795
(67,730)
75,611
(15,009)
(34,116)
(23,460)
3,582
(3,193)
(57,187)
28
28,053
111,287
(2,445)
2,220
303
9,489
1,648
7,953
(2,484)
3,827
100,929
(27,612)
(4,378)
1,255
(78,377)
64,602
(44,510)
(19,317)
(22,978)
2,491
(2,549)
(42,353)
501
14,567
96,720
(4,012)
(3,146)
1,558
(22,052)
(557)
(11,899)
(1,192)
(17,792)
42,973
(16,673)
(5,089)
22,396
(89,364)
79,410
(9,320)
(34,133)
(22,621)
2,162
(2,289)
(56,881)
421
(22,807)
119,527
96,720
$ 139,340 $ 111,287 $
$
$
$
13,858 $
121 $
70,557 $
5,676 $
112 $
60,538 $
18,854
68
69,739
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation
Deferred income taxes
Impairment of majority-owned foreign subsidiaries
Amortization of marketable security premiums
Changes in operating assets and liabilities:
Accounts receivable
Other receivables
Inventories
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Income taxes payable
Postretirement health care benefits
Deferred compensation and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Purchases of trading securities
Sales of trading securities
Purchase of available for sale securities
Sale and maturity of available for sale securities
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired
Dividends paid in cash
Proceeds from bank loans
Repayment of bank loans
Net cash used in financing activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash equivalents
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Supplemental cash flow information:
Income taxes paid
Interest paid
Stock dividend issued
(The accompanying notes are an integral part of these statements.)
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Notes to Consolidated Financial Statements ($ in thousands except per share data)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES:
Basis of consolidation:
The consolidated financial statements include the accounts of Tootsie Roll Industries, Inc. and its wholly-owned and
majority-owned subsidiaries (the Company), which are primarily engaged in the manufacture and sales of candy
products. Non-controlling interests relating to majority-owned subsidiaries are reflected in the consolidated financial
statements and all significant intercompany transactions have been eliminated. Certain amounts previously reported have
been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported
net earnings.
The preparation of financial statements in conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition:
The Company’s revenues, primarily net product sales, principally result from the sale of goods, reflect the
consideration to which the Company expects to be entitled, generally based on customer purchase orders. The Company
records revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") Topic 606
which became effective January, 1, 2018. Adjustments for estimated customer cash discounts upon payment, discounts
for price adjustments, product returns, allowances, and certain advertising and promotional costs, including consumer
coupons, are variable consideration and are recorded as a reduction of product sales revenue in the same period the
related product sales are recorded. Such estimates are calculated using historical averages adjusted for any expected
changes due to current business conditions and experience. A net product sale is recorded when the Company delivers
the product to the customer, or in certain instances, the customer picks up the goods at the Company’s distribution
center, and thereby obtains control of such product. Amounts billed and due from our customers are classified as
accounts receivables trade on the balance sheet and require payment on a short-term basis. Accounts receivable are
unsecured. Shipping and handling costs of $49,288, $49,527, and $44,082 in 2019, 2018 and 2017, respectively, are
included in selling, marketing and administrative expenses. A minor amount of royalty income (less than 0.2% of our
consolidated net sales) is also recognized from sales-based licensing arrangements, pursuant to which revenue is
recognized as the third-party licensee sales occur. Rental income (less than 1% of our consolidated net sales) is not
considered revenue from contracts from customers.
Leases:
The Company identifies leases by evaluating our contracts to determine if the contract conveys the right to use an
identified asset for a stated period of time in exchange for consideration. The Company considers whether it can control
the underlying asset and has the right to obtain substantially all of the economic benefits or outputs from the
asset. Leases with terms greater than 12 months are classified as either operating or finance leases at the commencement
date. For these leases, we capitalize the present value of the minimum lease payments over the lease terms as a right-of-
use asset with an offsetting lease liability. The discount rate used to calculate the present value of the minimum lease
payments is typically our incremental borrowing rate, as the rate implicit in the lease is generally not known or
determinable. The lease term includes any noncancelable period for which we have the right to use the asset. Currently,
all capitalized leases are classified as operating leases and the Company records lease expense on a straight-line basis
over the term of the lease.
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Cash and cash equivalents:
The Company considers short-term debt securities with an original maturity of three months or less to be cash
equivalents. Substantially all cash and cash equivalents are held at a major U.S. money center bank or its foreign
branches (Bank of America), or its investment broker affiliate (Merrill Lynch). The Company also holds certificates of
deposit (CDs) of U.S. banks selected by this investment broker based on their financial ratings; substantially all such
CDs are invested in separate individual banks which are generally not in excess of the Federal Deposit Insurance
Corporation (FDIC) limit of $250 per bank. The cash in the Company's U.S. banks (primarily Bank of America) is not
fully insured by the FDIC due to the statutory limit of $250. The Company had approximately $9,415 and $15,327 of
cash in foreign banks, principally foreign branches of a U.S. bank (Bank of America), at December 31, 2019 and 2018,
respectively. The Company's cash in its foreign bank accounts is also not fully insured.
Investments:
Investments consist of various marketable securities with maturities of generally up to three years, and variable rate
demand notes with interest rates that are generally reset weekly and the security can be “put” back and sold weekly. The
Company classifies debt and equity securities as either available for sale or trading. Available for sale debt securities are
not actively traded by the Company and are carried at fair value. The Company follows current fair value measurement
guidance and unrealized gains and losses on these securities are excluded from earnings and are reported as a separate
component of shareholders’ equity, net of applicable taxes, until realized or other-than-temporarily impaired. Trading
securities related to deferred compensation arrangements are carried at fair value with gains or losses included in other
income, net. The Company invests in trading securities to economically hedge changes in its deferred compensation
liabilities.
The Company regularly reviews its investments to determine whether a decline in fair value below the cost basis is
other-than-temporary. If the decline in fair value is judged to be other-than-temporary, the cost basis of the security is
written down to fair value and the amount of the write-down is included in other income, net. Further information
regarding the fair value of the Company’s investments is included in Note 10 of the Company’s Notes to Consolidated
Financial Statements.
Derivative instruments and hedging activities:
Authoritative guidance requires qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of derivative instruments and related gains and losses, and disclosures
about credit-risk-related contingent features in derivative agreements.
From time to time, the Company enters into commodity futures and foreign currency forward contracts. Commodity
futures are intended and are effective as hedges of market price risks associated with the anticipated purchase of certain
raw materials (primarily sugar). Foreign currency forward contracts are intended and are effective as hedges of the
Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products
manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers
denominated in a foreign currency. The Company does not engage in trading or other speculative use of derivative
instruments. Further information regarding derivative instruments and hedging activities is included in Note 11 of the
Company’s Notes to Consolidated Financial Statements.
Inventories:
Inventories are stated at lower of cost or net realizable value. The cost of substantially all of the Company’s
inventories ($55,409 and $50,338 at December 31, 2019 and 2018, respectively) has been determined by the last-in, first-
out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $19,174 and $17,062 at
December 31, 2019 and 2018, respectively. The cost of certain foreign inventories ($3,679 and $4,186 at December 31,
2019 and 2018, respectively) has been determined by the first-in, first-out (FIFO) method. Rebates, discounts and other
cash consideration received from vendors related to inventory purchases is reflected as a reduction in the cost of the
related inventory item, and is, therefore, reflected in cost of sales when the related inventory item is sold.
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Property, plant and equipment:
Depreciation is computed for financial reporting purposes by use of the straight-line method based on useful lives of
20 to 40 years for buildings and 5 to 20 years for machinery and equipment. Depreciation expense was $18,779, $18,669
and $18,991 in 2019, 2018 and 2017, respectively.
Carrying value of long-lived assets:
The Company reviews long-lived assets to determine if there are events or circumstances indicating that the amount
of the asset reflected in the Company’s balance sheet may not be recoverable. When such indicators are present, the
Company compares the carrying value of the long-lived asset, or asset group, to the future undiscounted cash flows of
the underlying assets to determine if impairment exists. If applicable, an impairment charge would be recorded to write
down the carrying value to its fair value. The determination of fair value involves the use of estimates of future cash
flows that involve considerable management judgment and are based upon assumptions about expected future operating
performance. The actual cash flows could differ from management’s estimates due to changes in business conditions,
operating performance, and economic conditions. In fourth quarter 2019, 2018 and 2017, the Company recorded charges
of $377, $1,125 and $2,371, respectively, relating to the impairment of assets of a foreign subsidiary which is included in
selling, marketing and administrative expense. Except for the aforementioned, no impairment charges of long-lived
assets were recorded by the Company during 2019, 2018 or 2017.
Postretirement health care benefits:
The Company provides certain postretirement health care benefits to a group of “grandfathered” corporate office and
management employees. The cost of these postretirement benefits is accrued during the employees’ working careers. See
Note 7 of the Company’s Notes to Consolidated Financial Statements for additional information. The Company also
provides split dollar life benefits to an executive officer. The Company records an asset equal to the cumulative
insurance premiums paid that will be recovered upon the death of the covered executive officer or earlier under the terms
of the plan. No premiums were paid in 2019, 2018 or 2017.
Goodwill and indefinite-lived intangible assets:
In accordance with authoritative guidance, goodwill and intangible assets with indefinite lives are not amortized, but
rather reviewed and tested for impairment at least annually unless certain interim triggering events or circumstances
require more frequent testing. All trademarks have been assessed by management to have indefinite lives because they
are expected to generate cash flows indefinitely. Management believes that all assumptions used for the impairment
review and testing are consistent with those utilized by market participants performing similar valuations. No
impairments of intangibles, including trademarks and goodwill, were recorded in 2019, 2018 or 2017.
Current accounting guidance provides entities an option of performing a qualitative assessment (a "step-zero" test)
before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors, that it is
more-likely-than-not that the intangibles (goodwill and certain trademarks) are not impaired, the entity would not need to
proceed to the two step impairment testing process (quantitative analysis) as prescribed in the guidance. During fourth
quarter 2019, the Company performed a “step zero” test of its goodwill and certain trademarks, and concluded that there
was no impairment based on this guidance. For the fair value assessment of certain trademarks where the “step-zero”
analysis was not considered appropriate, impairment testing was performed in fourth quarter 2019 (and fourth quarter
2018) using discounted cash flows and estimated royalty rates. For these trademarks, holding all other assumptions
constant at the test date, a 100 basis point increase in the discount rate or a 100 basis point decrease in the royalty rate
would reduce the fair value of these trademarks by approximately 16% and 10%, respectively. Individually, a 100 basis
point increase in the discount rate may result in potential impairment of up to $2 million. A 100 basis point decrease in
the royalty rate would not result in a potential impairment as of December 31, 2019.
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Income taxes:
Deferred income taxes are recorded and recognized for future tax effects of temporary differences between financial
and income tax reporting. The Company records valuation allowances in situations where the realization of deferred tax
assets is not more-likely-than-not.
Further information regarding U.S. tax reform (U.S. Tax Cuts and Jobs Act) and other income tax matters are
included in Note 4 of the Company’s Notes to Consolidated Financial Statements.
Foreign currency translation:
The U.S. dollar is used as the functional currency where a substantial portion of the subsidiary’s business is indexed
to the U.S. dollar or where its manufactured products are principally sold in the U.S. All other foreign subsidiaries use
the local currency as their functional currency. Where the U.S. dollar is used as the functional currency, foreign currency
remeasurements are recorded as a charge or credit to other income, net in the statement of earnings. Where the foreign
local currency is used as the functional currency, translation adjustments are recorded as a separate component of
accumulated other comprehensive income (loss).
Restricted cash:
Restricted cash comprises certain cash deposits of the Company’s majority-owned Spanish subsidiary with
international banks that are pledged as collateral for letters of credit and bank borrowings.
VEBA trust:
The Company maintains a VEBA trust managed and controlled by the Company, to fund the estimated future costs
of certain employee health, welfare and other benefits. The Company made a $20,024 contribution to the VEBA trust in
2017 but no contributions were made to the trust in 2019 or 2018. The Company will be using the VEBA trust funds to
pay the actual cost of such benefits through 2022. At December 31, 2019 and 2018, the VEBA trust held $12,085 and
$15,921, respectively, of aggregate cash and cash equivalents. This asset value is included in prepaid expenses and long-
term other assets in the Company’s Consolidated Statement of Financial Position. These assets are categorized as Level 1
within the fair value hierarchy.
Bank loans:
Bank loans consist of short term (less than 120 days) borrowings by the Company’s Spanish subsidiary that are held
by international banks. The weighted-average interest rate as of December 31, 2019 and 2018 was 3.0% and 2.0%,
respectively.
Comprehensive earnings:
Comprehensive earnings include net earnings, foreign currency translation adjustments and unrealized gains/losses
on commodity and/or foreign currency hedging contracts, available for sale securities and certain postretirement benefit
obligations.
Earnings per share:
A dual presentation of basic and diluted earnings per share is not required due to the lack of potentially dilutive
securities under the Company’s simple capital structure. Therefore, all earnings per share amounts represent basic
earnings per share.
The Class B common stock has essentially the same rights as common stock, except that each share of Class B
common stock has ten votes per share (compared to one vote per share of common stock), is not traded on any exchange,
38
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is restricted as to transfer and is convertible on a share-for-share basis, at any time and at no cost to the holders, into
shares of common stock which are traded on the New York Stock Exchange.
Use of estimates:
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in
the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used
when accounting for sales discounts, allowances and incentives, product liabilities, assets recorded at fair value, income
taxes, depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual
results may or may not differ from those estimates.
Recently adopted accounting pronouncements:
At the beginning of 2019, the Company adopted Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases
(Subtopic 842), which requires lessees to recognize all leases with a term greater than 12 months on the balance sheet as
right-of-use assets and lease liabilities. Upon adoption, the impact was the recognition of $1,482 in right-of-use assets
and lease liabilities for operating leases. Subsequent to adoption, the Company obtained $652 of right-of-use assets in
exchange for $652 of lease liabilities held as operating leases. The Company adopted ASU 2016-02 utilizing the current-
period adjustment method and did not recast comparative periods upon adoption of the new standard. In addition, we
elected certain practical expedients which permitted us to not reassess whether existing contracts are or contain leases, to
not reassess the lease classification of any existing leases, to not reassess initial direct costs for any existing leases, and to
not separate lease components for all classes of underlying assets. The adoption of this ASU did not have a material
impact on the Company’s consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, guidance that amends hedge accounting. Under the new guidance,
more hedging strategies are eligible for hedge accounting and the application of hedge accounting is simplified. The new
guidance amends presentation and disclosure requirements, and how effectiveness is assessed. The guidance is effective
for fiscal years beginning after December 15, 2018, and interim periods within those years. On January 1, 2019, the
Company adopted ASU 2017-12. The adoption of this ASU did not have a material impact on the Company’s
consolidated financial statements.
Recently issued accounting pronouncements - not yet adopted:
In June 2016, the FASB issued ASU No. 2016-13, which replaces the current incurred loss impairment method with
a new method that reflects expected credit losses. Under this new model an entity would recognize an impairment
allowance equal to its current estimate of credit losses on financial assets measured at amortized cost. ASU 2016-13 is
effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those
fiscal years. Based on the Company's analysis, ASU 2016-13 did not have a material impact on the Company's results of
operations and financial condition upon adoption on January 1, 2020.
NOTE 2—ACCRUED LIABILITIES:
Accrued liabilities are comprised of the following:
Compensation
Other employee benefits
Taxes, other than income
Advertising and promotions
Other
39
December 31,
2019
2018
$ 10,575 $ 10,034
7,947
3,148
15,125
6,595
$ 41,611 $ 42,849
7,509
3,170
14,421
5,936
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NOTE 3—INDUSTRIAL DEVELOPMENT BONDS:
Industrial development bonds are due in 2027. The average floating interest rate, which is reset weekly, was 1.6%
and 1.5% in 2019 and 2018, respectively. See Note 10 of the Company’s Notes to Consolidated Financial Statements for
fair value disclosures.
NOTE 4—INCOME TAXES:
The domestic and foreign components of pretax income are as follows:
Domestic
Foreign
2019
2018
$ 74,978 $ 66,253 $ 76,042
8,519
$ 85,404 $ 73,206 $ 84,561
10,426
6,953
2017
The provision for income taxes is comprised of the following:
2019
2018
2017
Current:
Federal
State
Deferred:
Federal
Foreign
State
$ 15,133 $ 12,414 $ 6,019
369
6,388
1,421
13,835
2,942
18,075
(543)
2,422
611
2,490
(7,191)
3,425
1,285
(2,481)
$ 20,565 $ 16,401 $ 3,907
(577)
2,685
458
2,566
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Significant components of the Company’s net deferred tax liability at year end were as follows:
December 31,
2019
2018
Deferred tax assets:
Accrued customer promotions
Deferred compensation
Postretirement benefits
Other accrued expenses
Foreign subsidiary tax loss carry forward
Outside basis difference in foreign subsidiary
Unrealized capital losses
Deductible state tax depreciation
Tax credit carry forward
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Deductible goodwill and trademarks
Accrued export company commissions
Employee benefit plans
Inventory reserves
Prepaid insurance
Unrealized capital gains
Deferred foreign exchange gain
Deferred gain on sale of real estate
Total deferred tax liabilities
Net deferred tax liability
$
198 $
913
15,872
3,119
4,520
5,731
273
472
390
2,989
34,279
(3,892)
$ 30,583 $ 30,387
19,432
3,439
3,979
4,584
365
—
512
3,059
35,568
(4,985)
36,591
4,367
2,700
2,526
710
1,362
260
5,298
$ 23,375 $ 21,637
35,037
4,211
3,539
2,784
735
—
577
5,286
$ 77,189 $ 73,806
$ 46,606 $ 43,419
At December 31, 2019, the Company has benefits related to state tax credit carry-forwards expiring by year as
follows: $23 in 2019, $672 in 2020, $784 in 2021, $50 in 2028, $131 in 2029, $213 in 2030, $225 in 2031, $238 in 2032,
$211 in 2033 and $205 in 2034. The Company expects that not all the credits will be utilized before their expiration and
has provided a valuation allowance for the expired amounts.
At December 31, 2019, the tax benefits of the Company’s Canadian subsidiary tax loss carry-forwards expiring by
year are as follows: $617 in 2031.
At December 31, 2018, the amounts of the Company’s Spanish subsidiary loss carry-forwards expiring by year are
as follows: $282 in 2026, $60 in 2027, $179 in 2028, $102 in 2029, $310 in 2030, $412 in 2031, $311 in 2032, $125 in
2033, $434 in 2034, $548 in 2035, $797 in 2036 and $407 in 2037. A full valuation allowance has been provided for
these Spanish loss carry-forwards as the Company expects that the losses will not be utilized before their expiration.
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The effective income tax rate differs from the statutory rate as follows:
U.S. statutory rate
State income taxes, net
Exempt municipal bond interest
Foreign tax rates
Qualified domestic production activities deduction
Tax credits receivable
Adjustment of deferred tax balances
Reserve for uncertain tax benefits
Worthless stock deduction
Other, net
Effective income tax rate
2019
21.0 %
0.5
(0.1)
1.4
—
0.5
0.2
0.4
—
0.2
24.1 %
2018
21.0 %
0.5
(0.1)
2.1
—
—
0.1
(1.0)
—
(0.2)
22.4 %
2017
35.0 %
1.6
(0.1)
0.5
(0.8)
(1.4)
(24.2)
(0.3)
(3.8)
(1.9)
4.6 %
The Company’s 2017 effective tax rate reflects a deferred tax benefit of $20,318 resulting from the revaluation of its
net deferred tax liability related to the reduction of the U.S. corporate income tax rate to 21% for tax years beginning
after December 31, 2017 under the 2017 Tax Cuts and Jobs Act as required by accounting guidance.
The 2017 Tax Cuts and Jobs Act changed the United States approach to the taxation of foreign earnings to a
territorial system by providing a one hundred percent dividends received deduction for certain qualified dividends
received from foreign subsidiaries. This provision of the Act significantly impacts the accounting for the undistributed
earnings of foreign subsidiaries and as a result the Company intends to distribute the earnings of its foreign subsidiaries.
The costs associated with a future distribution are not material to the Company’s financial statements. After carefully
considering these facts, the Company has determined that effective December 31, 2017, it will not be asserting
permanent reinvestment of its foreign subsidiaries earnings.
At December 31, 2019 and 2018, the Company had unrecognized tax benefits of $3,678 and $3,339, respectively.
Included in this balance is $2,012 and $1,765, respectively, of unrecognized tax benefits that, if recognized, would
favorably affect the annual effective income tax rate. As of December 31, 2019 and 2018, $562 and $477, respectively,
of interest and penalties were included in the liability for uncertain tax positions.
A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as
follows:
2019
2018
2017
Unrecognized tax benefits at January 1
Increases in tax positions for the current year
Reductions in tax positions for lapse of statute of limitations
Reductions in tax positions for settlements and payments
Increases (decreases) in prior period unrecognized tax benefits due to change in
judgment
Unrecognized tax benefits at December 31
$ 3,339 $ 4,342 $ 4,746
394
(793)
—
1,164
(576)
(249)
448
(751)
—
—
(5)
$ 3,678 $ 3,339 $ 4,342
(700)
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income
taxes on the Consolidated Statements of Earnings and Retained Earnings.
The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. The Company generally
remains subject to examination by U.S. federal and state and foreign tax authorities for the years 2016 through 2018.
With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2015 and prior.
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NOTE 5—SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:
Capital in
Excess
of Par
Shares Amount Shares Amount Shares Amount Value
Class B
Common Stock
Treasury Stock
Common Stock
(000’s)
(000’s)
(000’s)
Balance at January 1, 2017
Issuance of 3% stock dividend
Conversion of Class B common shares to
common shares
Purchase and retirement of common shares
Balance at December 31, 2017
Issuance of 3% stock dividend
Conversion of Class B common shares to
common shares
Purchase and retirement of common shares
Balance at December 31, 2018
Issuance of 3% stock dividend
Conversion of Class B common shares to
common shares
Purchase and retirement of common shares
Balance at December 31, 2019
37,701 $ 26,181 24,221 $ 16,820
504
1,124
781
726
83 $ (1,992) $ 646,768
43,477
—
2
56
(921)
37,960
1,125
53
(594)
38,544
1,150
39
(640)
(56)
—
26,361 24,891
746
781
37
(412)
(53)
—
26,767 25,584
768
798
(39) —
— —
85
3
17,285
519
—
—
(1,992)
—
—
(33,493)
656,752
58,688
(37) —
— —
88
2
17,767
532
—
—
(1,992)
—
—
(18,905)
696,535
32,999
65
(923)
45
(641)
(65)
—
38,836 $ 26,969 26,287 $ 18,254
(45) —
— —
—
—
—
(33,475)
90 $ (1,992) $ 696,059
Average shares outstanding and all per share amounts included in the financial statements and notes thereto have
been adjusted retroactively to reflect annual three percent stock dividends.
While the Company does not have a formal or publicly announced Company common stock purchase program, the
Company’s board of directors periodically authorizes a dollar amount for such share purchases.
Based upon this policy, shares were purchased and retired as follows:
Year
2019
2018
2017
Total Number of Shares
Purchased (000’s)
Average Price Paid Per Share
36.93
32.48
37.01
923 $
594 $
921 $
NOTE 6—OTHER INCOME, NET:
Other income, net is comprised of the following:
Interest and dividend income
Gains (losses) on trading securities relating to deferred compensation plans
Interest expense
Foreign exchange gains (losses)
Capital gains (losses)
Miscellaneous, net
43
2017
2019
2018
$ 4,423 $ 3,535 $ 2,851
9,977
(1,103)
(144)
(181)
259
(659)
25
(11)
1,171
1,143
$ 16,190 $ 2,724 $ 14,139
11,292
(220)
(533)
22
1,206
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NOTE 7—EMPLOYEE BENEFIT PLANS:
Pension plans:
The Company sponsors defined contribution pension plans covering certain non-union employees with over one
year of credited service. The Company’s policy is to fund pension costs accrued based on compensation levels. Total
pension expense for 2019, 2018 and 2017 approximated $3,114, $2,988 and $3,087, respectively. The Company also
maintains certain profit sharing and retirement savings-investment plans. Company contributions in 2019, 2018 and 2017
to these plans were $2,858, $2,734 and $2,512 respectively.
The Company also contributes to a multi-employer defined benefit pension plan for certain of its union employees
under a collective bargaining agreement which is as follows:
Plan name: Bakery and Confectionery Union and Industry International Pension Fund
Employer Identification Number and plan number: 52-6118572, plan number 001
Funded Status as of the most recent year available: 51.60% funded as of January 1, 2018
The Company’s contributions to such plan: $2,943, $2,836 and $2,603 in 2019, 2018 and 2017, respectively
Plan status: Critical and declining as of December 31, 2018
Beginning in 2012, the Company received periodic notices from the Bakery, Confectionery, Tobacco Workers and
Grain Millers International Union Pension Plan (Plan), a multi-employer defined benefit pension plan for certain
Company union employees, that the Plan’s actuary certified the Plan to be in “critical status”, the “Red Zone”, as defined
by the Pension Protection Act (PPA) and the Pension Benefit Guaranty Corporation (PBGC); and that a plan of
rehabilitation was adopted by the trustees of the Plan in 2012. During 2015, the Company received new notices that the
Plan was reclassified to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning
January 1, 2015. A designation of “critical and declining status” implies that the Plan is expected to become insolvent in
the next 20 years. In 2016, the Company received new notices that the Plan’s trustees adopted an updated Rehabilitation
Plan effective January 1, 2016, and all annual notices through 2019 have continued to classify the Plan in the “critical
and declining status” category.
The Company has been advised that its withdrawal liability would have been $99,800, $81,600 and $82,200 if it had
withdrawn from the Plan during 2019, 2018 and 2017, respectively. Should the Company actually withdraw from the
Plan at a future date, a withdrawal liability, which could be higher than the above discussed amounts, could be payable to
the Plan.
The amended rehabilitation plan, which continues, requires that employer contributions include 5% compounded
annual surcharge increases each year for an unspecified period of time beginning January 2013 (in addition to the 5%
interim surcharge initiated in 2012) as well as certain plan benefit reductions. The Company’s pension expense for this
Plan for 2019, 2018 and 2017 was $2,961, $2,836 and $2,617, respectively. The aforementioned expense includes
surcharges of $948, $811 and $656 in 2019, 2018 and 2017, respectively, as required under the plan of rehabilitation as
amended.
The Company is currently unable to determine the ultimate outcome of the above discussed matter and therefore is
unable to determine the effects on its consolidated financial statements, but the ultimate outcome or the effects of any
modifications to the current rehabilitation plan could be material to its consolidated results of operations or cash flows in
one or more future periods.
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Deferred compensation:
The Company sponsors three deferred compensation plans for selected executives and other employees: (i) the
Excess Benefit Plan, which restores retirement benefits lost due to IRS limitations on contributions to tax-qualified
plans, (ii) the Supplemental Plan, which allows eligible employees to defer the receipt of eligible compensation until
designated future dates and (iii) the Career Achievement Plan, which provides a deferred annual incentive award to
selected executives. Participants in these plans earn a return on amounts due them based on several investment options,
which mirror returns on underlying investments (primarily mutual funds). The Company economically hedges its
obligations under the plans by investing in the actual underlying investments. These investments are classified as trading
securities and are carried at fair value. At December 31, 2019 and 2018, these investments totaled $76,183 and $62,260,
respectively. All gains and losses and related investment income from these investments, which are recorded in other
income, net, are equally offset by corresponding increases and decreases in the Company’s deferred compensation
liabilities.
Postretirement health care benefit plans:
The Company maintains a post-retirement health benefits plan for a group of “grandfathered” corporate employees.
The plan as amended in 2013, generally limited future annual cost increases in health benefits to 3%, restricted this
benefit to current employees and retirees with long-term service with the Company, and eliminated all post-retirement
benefits for future employees effective April 1, 2014. Post-retirement benefits liabilities (as amended) were $13,743 and
$12,451 at December 31, 2019 and 2018, respectively.
Amounts recognized in accumulated other comprehensive loss (pre-tax) at December 31, 2019 are as follows:
Prior service credit
Net actuarial gain
Net amount recognized in accumulated other comprehensive loss
$
$
(3,066)
(808)
(3,874)
The estimated actuarial gain and prior service credit to be amortized from accumulated other comprehensive loss
into net periodic benefit income during 2020 are $123 and $1,227, respectively.
The changes in the accumulated postretirement benefit obligation at December 31, 2019 and 2018 consist of the
following:
Benefit obligation, beginning of year
Service cost
Interest cost
Actuarial (gain)/loss
Benefits paid
Benefit obligation, end of year
December 31,
2019
2018
$ 12,451 $ 13,497
337
455
(1,409)
(429)
$ 13,743 $ 12,451
270
499
922
(399)
Net periodic postretirement benefit cost (income) included the following components:
2019
2018
2017
Service cost—benefits attributed to service during the period
Interest cost on the accumulated postretirement benefit obligation
Net amortization
Net periodic postretirement benefit cost (income)
45
$
270 $
499
(1,522)
337 $
455
(1,324)
$
(753) $
(532) $
323
468
(1,462)
(671)
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The Company estimates future benefit payments will be $598, $614, $637, $677 and $692 in 2020 through 2024,
respectively, and a total of $3,687 in 2025 through 2029.
NOTE 8—COMMITMENTS:
Lease expense aggregated $1,032, $793 and $785 in 2019, 2018 and 2017, respectively. Future operating lease
commitments are as follows: $979, $540, and $61 in 2020, 2021 and 2022, respectively.
NOTE 9—SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates as a single reportable segment encompassing the manufacture and sale of confectionery
products. Its principal manufacturing operations are located in the United States and Canada, and its principal market is
the United States. The Company also manufactures confectionery products in Mexico, primarily for sale in Mexico, and
exports products to Canada and other countries worldwide.
The following geographic data includes net product sales summarized on the basis of the customer location and
long-lived assets based on their physical location:
2019
2018
2017
Net product sales:
United States
Canada, Mexico and Other
Long-lived assets:
United States
Canada
Mexico and Other
$ 478,790 $ 471,561 $ 472,222
43,452
$ 523,616 $ 515,251 $ 515,674
44,826
43,690
$ 155,428 $ 151,770 $ 145,210
30,823
2,939
$ 188,455 $ 186,101 $ 178,972
30,412
2,615
31,843
2,488
Sales revenues from Wal-Mart Stores, Inc. aggregated approximately 24.2%, 24.1%, and 24.0% of net product sales
during the years ended December 31, 2019, 2018 and 2017, respectively. Sales revenues from Dollar Tree, Inc. (which
includes Family Dollar which was acquired by Dollar Tree) aggregated approximately 11.3%, 11.2%, and 10.9% of net
product sales during the years ended December 31, 2019, 2018 and 2017, respectively. Some of the aforementioned sales
to Wal-Mart and Dollar Tree are sold to McLane Company, a large national grocery wholesaler, which services and
delivers certain of the Company’s products to Wal-Mart, Dollar Tree and other retailers in the U.S.A. Net product sales
revenues from McLane, which includes these Wal-Mart and Dollar Tree sales as well as sales and deliveries to other
Company customers, were 17.7% in 2019 and 17.4% in 2018 and 16.9% in 2017. At December 31, 2019 and 2018, the
Company’s three largest customers discussed above accounted for approximately 30% and 31% of total accounts
receivable, respectively.
NOTE 10—FAIR VALUE MEASUREMENTS:
Current accounting guidance defines fair value as the price that would be received in the sale of an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. Guidance requires
disclosure of the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in
calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or
changes in net assets, as of the measurement date. Guidance establishes a three-level valuation hierarchy based upon the
transparency of inputs utilized in the measurement and valuation of financial assets or liabilities as of the measurement
date. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include
quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity
rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about
the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable
inputs is reflected in the hierarchy assessment disclosed in the table below.
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As of December 31, 2019 and 2018, the Company held certain financial assets that are required to be measured at
fair value on a recurring basis. These include derivative hedging instruments related to the foreign currency forward
contracts and purchase of certain raw materials, investments in trading securities and available for sale securities. The
Company’s available for sale and trading securities principally consist of corporate and municipal bonds and variable
rate demand notes.
The following tables present information about the Company’s financial assets and liabilities measured at fair value
as of December 31, 2019 and 2018, and indicate the fair value hierarchy and the valuation techniques utilized by the
Company to determine such fair value:
Estimated Fair Value December 31, 2019
Cash and equivalents
Available for sale securities
Foreign currency forward contracts
Commodity futures contracts, net
Trading securities
Total assets measured at fair value
Cash and equivalents
Available for sale securities
Foreign currency forward contracts
Commodity futures contracts, net
Trading securities
Total assets measured at fair value
Total
Fair Value
$ 138,960 $ 138,960 $
Level 1
Input Levels Used
Level 2
177,292
14
121
76,183
3,588
—
121
48,260
$ 392,570 $ 190,929 $ 201,641 $
173,704
14
—
27,923
— $
Level 3
—
—
—
—
—
—
Estimated Fair Value December 31, 2018
Total
Fair Value
$ 110,899 $ 110,899 $
Level 1
Input Levels Used
Level 2
183,289
(407)
(587)
62,260
3,007
—
(587)
36,753
$ 355,454 $ 150,072 $ 205,382 $
180,282
(407)
—
25,507
— $
Level 3
—
—
—
—
—
—
Available for sale securities which utilize Level 2 inputs consist primarily of corporate and municipal bonds and
variable rate demand notes, which are valued based on quoted market prices or alternative pricing sources with
reasonable levels of price transparency.
A summary of the aggregate fair value, gross unrealized gains, gross unrealized losses, realized losses and amortized
cost basis of the Company’s investment portfolio by major security type is as follows:
December 31, 2019
Amortized
Cost
Fair
Value
$
— $
25,845
139,803
3,503
6,978
25,845
140,797
3,588
7,062
Gains
Unrealized
Realized
Losses Losses
— $ — $ — $ —
—
—
—
—
—
—
—
—
—
—
994
85
84
$ 176,129 $ 177,292 $ 1,163 $ — $
Available for Sale:
Municipal bonds
Variable rate demand notes
Corporate bonds
Government securities
Certificates of deposit
47
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Available for Sale:
Municipal bonds
Variable rate demand notes
Corporate bonds
Government securities
Certificates of deposit
December 31, 2018
Amortized
Cost
6,173 $
$
20,195
149,795
2,979
6,148
Fair
Value
Unrealized
Gains Losses
Realized
Losses
5,123 $ — $ (1,050) $ —
—
—
—
—
—
—
(932)
—
(47)
—
—
28
—
20,195
148,863
3,007
6,101
$ 185,290 $ 183,289 $ 28 $ (2,029) $
The fair value of the Company’s industrial revenue development bonds at December 31, 2019 and 2018 were valued
using Level 2 inputs which approximates the carrying value of $7,500 for both periods. Interest rates on these bonds
reset weekly based on current market conditions.
NOTE 11—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
From time to time, the Company uses derivative instruments, including foreign currency forward contracts and
commodity futures contracts to manage its exposures to foreign exchange and commodity prices. Commodity futures
contracts are intended and effective as hedges of market price risks associated with the anticipated purchase of certain
raw materials (primarily sugar). Foreign currency forward contracts are intended and effective as hedges of the
Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products
manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers
denominated in a foreign currency. The Company does not engage in trading or other speculative use of derivative
instruments.
The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Consolidated
Statements of Financial Position. Derivative assets are recorded in other receivables and derivative liabilities are
recorded in accrued liabilities. The Company uses either hedge accounting or mark-to-market accounting for its
derivative instruments. Derivatives that qualify for hedge accounting are designated as cash flow hedges by formally
documenting the hedge relationships, including identification of the hedging instruments, the hedged items and other
critical terms, as well as the Company’s risk management objectives and strategies for undertaking the hedge transaction.
Changes in the fair value of the Company’s cash flow hedges are recorded in accumulated other comprehensive loss,
net of tax, and are reclassified to earnings in the periods in which earnings are affected by the hedged item. Substantially
all amounts reported in accumulated other comprehensive loss for commodity derivatives are expected to be reclassified
to cost of goods sold. Approximately $121 of this accumulated comprehensive gain is expected to be charged to earnings
in 2020. Approximately $14 in accumulated other comprehensive gain for foreign currency derivatives is expected to be
reclassified to other income, net in 2020.
The following table summarizes the Company’s outstanding derivative contracts and their effects on its
Consolidated Statements of Financial Position at December 31, 2019 and 2018:
Derivatives designated as hedging instruments:
Foreign currency forward contracts
Commodity futures contracts
Total derivatives
December 31, 2019
Notional
Amounts
Assets
Liabilities
$ 5,533 $
7,147
$
14 $
205
219 $
—
(84)
(84)
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Derivatives designated as hedging instruments:
Foreign currency forward contracts
Commodity futures contracts
Total derivatives
December 31, 2018
Notional
Amounts
Assets
Liabilities
$ 11,050 $
9,580
$
(407)
— $
(679)
92
92 $ (1,086)
The effects of derivative instruments on the Company’s Consolidated Statement of Earnings, Comprehensive
Earnings and Retained Earnings for years ended December 31, 2019 and 2018 are as follows:
Foreign currency forward contracts
Commodity futures contracts
Total
Foreign currency forward contracts
Commodity futures contracts
Total
For Year Ended December 31, 2019
Gain (Loss)
on Amount Excluded
Gain (Loss) Reclassified from
from Effectiveness
Recognized Accumulated OCI Testing Recognized
Gain (Loss)
in OCI
into Earnings
in Earnings
$
$
359 $
92
451 $
(62) $
(615)
(677) $
—
—
—
For Year Ended December 31, 2018
Gain (Loss)
on Amount Excluded
Gain (Loss) Reclassified from
from Effectiveness
Recognized Accumulated OCI Testing Recognized
Gain (Loss)
in OCI
into Earnings
in Earnings
$
(418) $
(2,316)
$ (2,734) $
67 $
(1,697)
(1,630) $
—
—
—
NOTE 12—ACCUMULATED OTHER COMPREHENSIVE LOSS:
The following table sets forth information with respect to accumulated other comprehensive earnings (loss):
Balance at December 31, 2017
Other comprehensive earnings (loss) before
reclassifications
Reclassifications from accumulated other
comprehensive loss
Other comprehensive earnings (loss) net of
tax
Adoption of ASU 2018-02
Balance at December 31, 2018
Other comprehensive earnings (loss) before
reclassifications
Reclassifications from accumulated other
comprehensive loss
Other comprehensive earnings (loss) net of
tax
Balance at December 31, 2019
Foreign
Currency
Translation
$ (24,262) $
Foreign
Currency
Investments Derivatives
Postretirement
Commodity and Pension
Derivatives
Benefits
(889) $
51 $
20 $
3,289 $
Accumulated
Other
Comprehensive
Earnings (Loss)
(21,791)
103
(459)
(318)
(1,754)
1,172
(1,256)
—
—
(51)
1,286
(1,003)
232
103
-
$ (24,159) $
(459)
(168)
(1,516) $
(369)
9
(309) $
(468)
4
(444) $
169
748
4,206 $
(1,024)
593
(22,222)
791
2,372
272
70
(914)
2,591
—
26
47
466
(1,153)
(614)
791
$ (23,368) $
2,398
882 $
319
10 $
536
92 $
(2,067)
2,139 $
1,977
(20,245)
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The amounts reclassified from accumulated other comprehensive income (loss) consisted of the following:
Details about Accumulated
Other
Comprehensive Income
Components
Investments
Foreign currency derivatives
Commodity derivatives
Postretirement and pension
benefits
Total before tax
Tax expense (benefit)
Net of tax
Year to Date Ended
December 31, 2019 December 31, 2018 Location of (Gain) Loss Recognized in Earnings
$
34 $
62
615
(1,522)
(811)
197
(614) $
$
- Other income, net
(67) Other income, net
1,697 Product cost of goods sold
(1,324) Other income, net
306
(74)
232
NOTE 13—GOODWILL AND INTANGIBLE ASSETS:
All of the Company’s intangible indefinite-lived assets are trademarks.
The changes in the carrying amount of trademarks for 2019 and 2018 were as follows:
Original cost
Accumulated impairment losses as of January 1
Balance at January 1
Current year impairment losses
Balance at December 31
Accumulated impairment losses as of December 31
2019
2018
$ 193,767 $ 193,767
(18,743)
(18,743)
$ 175,024 $ 175,024
—
$ 175,024 $ 175,024
$ (18,743) $ (18,743)
—
The fair value of indefinite-lived intangible assets was primarily assessed using the present value of estimated future
cash flows and relief-from-royalty method.
The Company has no accumulated impairment losses of goodwill.
Note 14 — LEASES:
The Company leases certain buildings, land and equipment that are classified as operating leases. These leases have
remaining lease terms of up to approximately 3 years. In the fourth quarter and twelve months of 2019, operating lease
cost and cash paid for operating lease liabilities totaled $258 and $1,004, respectively, which is classified in cash flows
from operating activities. As of December 31 2019, operating lease right-of-use assets and operating lease liabilities
were both $1,580. The weighted-average remaining lease term related to these operating leases was 1.6 years as of
December 31, 2019. The weighted-average discount rate related to our operating leases was 3.1% as of December 31,
2019. Maturities of operating lease liabilities at December 31, 2019 are as follows: $979 in 2020, $540 in 2021, and
$61 in 2022.
The Company, as lessor, rents certain commercial real estate to third party lessees. The cost and accumulated
depreciation related to these leased properties were $36,378 and $10,252, respectively, as of December 31, 2019. Terms
of such leases, including renewal options, may be extended for up to sixty years, many of which provide for periodic
adjustment of rent payments based on changes in consumer or other price indices. The Company recognizes lease
income on a straight-line basis over the lease term. Lease income in fourth quarter and twelve months 2019 was
$718 and $2,951, respectively, and is classified in cash flows from operating activities.
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NOTE 15—QUARTERLY FINANCIAL DATA (UNAUDITED):
(Thousands of dollars except per share data)
First
Second
Third
Fourth
Year
2019
Net product sales
Product gross margin
Net earnings attributable to Tootsie Roll Industries, Inc.
Net earnings attributable to Tootsie Roll Industries, Inc.
per share
2018
Net product sales
Product gross margin
Net earnings attributable to Tootsie Roll Industries, Inc.
Net earnings attributable to Tootsie Roll Industries, Inc.
per share
$ 101,019 $ 106,021 $ 181,913 $ 134,663 $ 523,616
194,514
64,920
36,163
8,955
69,046
29,854
49,229
14,555
40,076
11,556
0.14
0.18
0.46
0.22
0.99
$ 100,859 $ 105,623 $ 181,505 $ 127,264 $ 515,251
185,371
56,893
35,025
8,125
66,259
26,104
45,945
12,175
38,142
10,489
0.12
0.16
0.40
0.18
0.86
Net earnings per share is based upon average outstanding shares as adjusted for 3% stock dividends issued during the
second quarter of each year as discussed above. The sum of the quarterly per share amounts may not equal annual
amounts due to rounding.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
ITEM 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer have concluded, based on their
evaluation as of the end of the period covered by this report, that the Company’s disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) ) are effective to
ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act
is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
Internal Control over Financial Reporting
(a) See “Management’s Report on Internal Control Over Financial Reporting,” included in Item 8 “Financial
Statements and Supplementary Data,” which is incorporated herein by reference.
(b) See “Report of Independent Registered Public Accounting Firm” included in Item 8 “Financial Statements
and Supplementary Data” for the attestation report of the Company’s independent registered public
accounting firm, which is incorporated herein by reference.
(c) There were no changes in the Company’s internal control over financial reporting during the quarter ended
December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
ITEM 9B. Other Information.
None.
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ITEM 10. Directors, Executive Officers and Corporate Governance.
PART III
See the information with respect to the Directors of the Company which is set forth in the section
entitled “Election of Directors” of the 2020 Proxy Statement, which section of the 2020 Proxy Statement is incorporated
herein by reference. See the information in the section entitled “Section 16(a) Beneficial Ownership Reporting
Compliance” of the Company’s 2020 Proxy Statement, which section is incorporated herein by reference.
The following table sets forth the information with respect to the executive officers of the Company:
Name
Ellen R. Gordon*
G. Howard Ember Jr.
Stephen P. Green
Thomas E. Corr
Barry P. Bowen
Position (1)
Age
Chairman of the Board and Chief Executive Officer 88
Vice President/Finance
Vice President/Manufacturing
Vice President/Marketing and Sales
Treasurer
67
61
71
64
* A member of the Board of Directors of the Company.
(1) All of the above named officers have served in the positions set forth in the table as their principal occupations for
more than the past five years except for Mrs. Gordon and Mr. Green who were appointed to their current positions
on January 20, 2015 and January 16, 2017, respectively. Thomas E. Corr retired effective December 31, 2019, and
Kenneth Naylor was promoted to Vice President/Marketing and Sales effective January 1, 2020.
Code of Ethics
The Company has a Code of Business Conduct and Ethics, which applies to all of the Company’s
directors and employees, and which meets the Securities Exchange Commission criteria for a “code of ethics.” The Code
of Business Conduct and Ethics is available on the Company’s website, located at www.tootsie.com, and the information
in such is available in print to any shareholder who requests a copy.
ITEM 11. Executive Compensation.
Compensation” of the Company’s 2020 Proxy Statement, which are incorporated herein by reference.
See the information set forth in the sections entitled “Executive Compensation” and “Director
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
For information with respect to the beneficial ownership of the Company’s common stock and Class B
common stock by the beneficial owners of more than 5% of said shares and by the management of the Company, see the
sections entitled “Ownership of Common Stock and Class B Common Stock by Certain Beneficial Owners” and
“Ownership of Common Stock and Class B Common Stock by Management” of the 2020 Proxy Statement. These
sections of the 2020 Proxy Statement are incorporated herein by reference. The Company does not have any
compensation plans under which equity securities of the Company are authorized for issuance.
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ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
incorporated herein by reference.
See the section entitled “Related Person Transactions” of the 2020 Proxy Statement, which is
The Company’s board of directors has determined that its non-management directors, Mr. Seibert and
Ms. Wardynski and Ms. Lewis-Brent, are independent under the New York Stock Exchange listing standards because
they have no direct or indirect relationship with the Company other than through their service on the Board of Directors.
ITEM 14. Principal Accounting Fees and Services.
See the section entitled “Independent Auditor Fees and Services” of the 2020 Proxy Statement, which
is incorporated herein by reference.
ITEM 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements.
(1) The following financial statements are included in Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings and Retained Earnings for each of the three years
ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Earnings for each of the three years ended
December 31, 2019, 2018 and 2017
Consolidated Statements of Financial Position at December 31, 2019 and 2018
Consolidated Statements of Cash Flows for each of the three years ended in the period
December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
The financial statement schedule included in this Form 10-K is Schedule II - Valuation and Qualifying
Accounts and Reserves for the Years Ended December 31, 2019, 2018 and 2017 (see Schedule II immediately
following ITEM 16 of this Form 10-K).
(3) Exhibits required by Item 601 of Regulation S-K:
See Index to Exhibits which appears following Financial Schedule II.
ITEM 16.
Form 10-K Summary.
None.
53
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SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Description
2019:
Reserve for bad debts
Reserve for cash discounts
Deferred tax asset valuation
2018:
Reserve for bad debts
Reserve for cash discounts
Deferred tax asset valuation
2017:
Reserve for bad debts
Reserve for cash discounts
Deferred tax asset valuation
DECEMBER 31, 2019, 2018 and 2017
Additions
(reductions)
charged
(credited) to
expense
Balance at
beginning
of year
Balance at
Deductions(1)
End of
Year
$
$
$
$
$
$
1,128 $
692
3,892
5,712 $
676 $
9,482
1,093
11,251 $
467 $
9,562
—
10,029 $
1,337
612
4,985
6,934
1,197 $
724
3,269
5,190 $
38 $
9,122
623
9,783 $
107 $
9,154
—
9,261 $
1,128
692
3,892
5,712
1,225 $
659
2,317
4,201 $
27 $
9,268
952
10,247 $
55 $
9,203
—
9,258 $
1,197
724
3,269
5,190
(1) Deductions against reserve for bad debts consist of accounts receivable written off net of recoveries and exchange
rate movements. Deductions against reserve for cash discounts consist of allowances to customers.
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INDEX TO EXHIBITS
3.1
3.2
3.3
4.1
Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 of the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1997.
Amendment to Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.2 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
Amended and Restated By-Laws. Incorporated by reference to Exhibit 3.2 of the Company’s Annual Report
on Form 10-K for the year ended December 31, 1996.
Specimen Class B Common Stock Certificate. Incorporated by reference to Exhibit 1.1 of the Company’s
Registration Statement on Form 8-A dated February 29, 1988.
4.2
Description of Common Stock.
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
Excess Benefit Plan. Incorporated by reference to Exhibit 10.8.1 of the Company’s Annual Report on
Form 10-K for the year ended December 31, 1990.
Amended and Restated Career Achievement Plan of the Company. Incorporated by reference to
Exhibit 10.8.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1998.
Amendment to the Amended and Restated Career Achievement Plan of the Company. Incorporated by
reference to Exhibit 10.8.3 of the Company’s Annual Report on Form 10-K for the year ended December 31,
1999.
Restatement of Split Dollar Agreement (Special Trust) between the Company and the trustee of the Gordon
Family 1993 Special Trust dated January 31, 1997. Incorporated by reference to Exhibit 10.12 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 1996.
Form of Change In Control Agreement dated August, 1997 between the Company and certain executive
officers. Incorporated by reference to Exhibit 10.25 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 1997.
Amendment to Split Dollar Agreement (Special Trust) dated April 2, 1998 between the Company and the
trustee of the Gordon Family 1993 Special Trust, together with related Collateral Assignments. Incorporated
by reference to Exhibit 10.27 of the Company’s Annual Report on Form 10-K for the year ended
December 31, 1998.
Form of Amendment to Change in Control Agreement between the Company and certain executive officers.
Incorporated by reference to Exhibit 10.28 of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008.
Post 2004 Supplemental Savings Plan of the Company. Incorporated by reference to Exhibit 10.29 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
Post 2004 Excess Benefit Plan of the Company. Incorporated by reference to Exhibit 10.30 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
Amended and Restated Career Achievement Plan of the Company. Incorporated by reference to
Exhibit 10.31 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
Exhibit 10.1- Tootsie Roll Industries, Inc. Management Incentive Plan. Incorporated by reference to
Appendix A to the Company’s definitive Proxy Statement filed with the Commission on March 24, 2006.
55
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10.12*
Amendment 2015-1, to the Tootsie Roll Industries, Inc. Post 2004 Excess Benefit Plan. Incorporated by
reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-K for the year ended December 31,
2015.
10.13*
Amendment 2015-1, to the Tootsie Roll Industries, Inc. Career Achievement Plan. Incorporated by reference
to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
21
List of Subsidiaries of the Company.
31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
101.INS
XBRL Instance Document - The instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
104
Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.
*Management compensation plan or arrangement.
56
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Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Tootsie
Roll Industries, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
TOOTSIE ROLL INDUSTRIES, INC.
By: Ellen R. Gordon
Ellen R. Gordon, Chairman of the Board of Directors
and Chief Executive Officer
Date: February 28, 2020
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
Ellen R. Gordon
Ellen R. Gordon
Chairman of the Board of Directors and Chief Executive Officer February 28, 2020
(principal executive officer)
Paula M. Wardynski
Paula M. Wardynski
Director
Lana Jane Lewis-Brent
Lana Jane Lewis-Brent
Director
Barre A. Seibert
Barre A. Seibert
Director
February 28, 2020
February 28, 2020
February 28, 2020
G. Howard Ember, Jr.
G. Howard Ember, Jr.
Vice President, Finance
February 28, 2020
(principal financial officer and principal accounting officer)
57
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DESCRIPTION OF CAPITAL STOCK
Exhibit 4.2
The following description of capital stock of Tootsie-Roll Industries, Inc. (the “Company”) summarizes certain provisions of the
Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), and the Company’s Bylaws, as amended (the
“Bylaws”). The description is intended as a summary, and is qualified in its entirety by reference to the Articles of Incorporation and
Bylaws, copies of which have been filed as exhibits to this Annual Report on Form 10-K.
Our authorized capital stock consists of 160,000,000 shares, consisting of: (i) 120,000,000 shares of Common Stock, par value 69 and
4/9 cents per share; and (iii) 40,000,000 shares of Class B Common Stock, par value 69 and 4/9 cents per share.
Except as otherwise provided in the Articles of Incorporation and except for shares of Class B Common Stock issued in connection
with stock splits, stock dividends and other similar distributions, the Company shall not issue additional shares of Class B Common
Stock after the date shares of Class B Common Stock are first issued by the Company. All shares of Class B Common Stock
surrendered for conversion shall resume the status of authorized but unissued shares of Class B Common Stock.
Voting Rights
At all meetings of the shareholders, unless otherwise required by law or the Articles of Incorporation, if a quorum is present, all
matters shall be decided by a majority of the votes cast, except that in the election of directors those nominees receiving a plurality of
the votes cast shall be elected as directors. Upon demand of twenty-five percent of the shareholders present in person or by proxy and
entitled to vote, the vote on any particular matter shall be taken by ballot.
The holders of our Class B Common Stock are entitled to ten votes per share, and holders of our Common Stock are entitled to one
vote per share. Except as set forth below or required by Virginia law or otherwise, all actions submitted to a vote of stockholders shall
be voted on by the holders of the Common Stock and the Class B Common Stock voting together as a single class.
The holders of the Common Stock and the Class B Common Stock shall each be entitled to vote separately as a class with respect to:
(a) amendments to the Articles of Incorporation that alter or change the powers, preferences or special rights of their
respective class of stock so as to affect them adversely;
(b) amendments to the Articles of Incorporation authorizing additional shares of Common Stock or Class B Common Stock;
(d) such other matters as may require class voting under the Virginia Stock Corporation Act; or
(d) with respect to any proposal to issue authorized but unissued shares of Class B Common Stock, except for shares issued
pursuant to the initial distribution of shares of
Class B Common Stock as a pro rata dividend to the holders of the Common Stock or in connection with stock splits, stock dividends
or similar distributions.
In addition to any other votes which may be required pursuant to the Articles of Incorporation, Virginia law or otherwise, so long as
any shares of Class B Common Stock are outstanding, the affirmative vote of the holders of more than two-thirds of the outstanding
shares of Common Stock and Class B Common Stock, each voting separately as a class, shall be required to authorize:
a) any merger or consolidation of the Company with or into any other corporation or any statutory exchange of shares to which
the Company is a party (unless the other party to the merger or consolidation is a subsidiary of the Company);
b) any dissolution of the Company; or
c) any amendment to the Articles of Incorporation of the provisions summarized in this paragraph.
Dividend Rights
Dividends may be declared and paid to the holders of the Common Stock and the Class B Common Stock in cash, property, or other
securities of the Company out of any net profits or net assets of the Company legally available therefore. If dividends on the Common
Stock and the Class B Common Stock are declared payable from time to time by the Board of Directors, the holders of the Common
Stock and the holders of the Class B Common Stock shall be entitled to share equally, on a per share basis, in such dividends, except
that, if dividends are declared that are payable in shares of Common Stock or Class B Common Stock, dividends shall be declared that
are payable at the same rate on both classes of stock and the dividends payable in shares of Common Stock shall be payable to the
holders of that class of stock and the dividends payable in shares of Class B Common Stock shall be payable to the holders of that
class of stock (except for shares issued pursuant to the initial distribution of shares of Class B Common Stock). If the Company shall
in any manner subdivide or combine the outstanding shares of Common Stock or Class B Common Stock, the outstanding shares of
the other such class of stock shall be proportionally subdivided, or combined in the same manner and on the same basis as the
outstanding shares of Common Stock or Class B Common Stock, as the case may be, have been subdivided or combined.
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Conversion Rights of Class B Common Stock
The holder of each outstanding share of Class B Common Stock shall have the right at any time, or from time to time, at such holder's
option, to convert such share into one fully paid and non-assessable share of Common Stock, on and subject to the terms and
conditions as set forth in the Articles of Incorporation. Upon any conversion of shares of Class B Common Stock into shares of
Common Stock, no adjustment with respect to dividends shall be made; only those dividends shall be payable on the shares of Class B
Common Stock so converted as may be declared and may be payable to holders of record of shares of Class B Common Stock on a
date prior to the conversion date with respect to the shares of Class B Common Stock so converted; and only those dividends shall be
payable on shares of Common Stock issued upon such conversion of shares of Class B Common Stock as may be declared and may
be payable to holders of record of shares of Common Stock on or after such conversion date. All shares of Class B Common Stock
surrendered for conversion into shares of Common Stock as provided in the Articles of Incorporation shall no longer be deemed to be
outstanding, and all rights with respect to such shares of Class B Common Stock, including the rights, if any, to receive notices and to
vote, shall thereupon cease and terminate, except only the right of the holders thereof, shares of Common Stock in exchange for Class
B Common Stock surrendered for conversion.
At any time when the number of outstanding shares of Class B Common Stock as reflected on the stock transfer records of the
Company falls below 14% of the aggregate number of outstanding shares of Common Stock and of Class B Common Stock, then the
outstanding shares of Class B Common Stock shall automatically be converted into shares of Common Stock, on a share-for-share
basis. For purposes of the immediately preceding sentence: (i) the total number of shares of Common Stock and/or Class B Common
Stock "outstanding" at any time shall not include any shares of Common Stock which, after May 15, 1987, are (a) issued in exchange
for the assets or stock of other entities (including pursuant to a merger or other business combination), (b) sold by the Company for
value, (c) issued upon conversion of convertible securities issued in exchange for the assets or stock of other entities or sold by the
Company for value or (d) issued as a stock split or dividend with respect to shares issued or sold pursuant to clause (a), (b) or (c)
above; and (ii) any shares of Common Stock repurchased by the Company shall no longer be deemed outstanding from and after the
date of repurchase. In the event the Common Stock is delisted from the New York Stock Exchange or the New York Stock Exchange
commences proceedings for delisting and the Common Stock will be precluded by rule or law from being quoted on the National
Association of Securities Dealers Automated Quotation System or a successor automated quotation system, the Board of Directors of
the Company shall have the right by resolution adopted by the Board of Directors to cause each share of Class B Common Stock then
issued and outstanding or held as a treasury share to be immediately converted into one share of Common Stock. In the event of any
automatic conversion of the Class B Common Stock, certificates which formerly represented outstanding shares of Class B Common
Stock will thereafter be deemed to represent a like number of shares of Common Stock.
Restrictions on Transfer
No person or persons holding shares of Class B Common Stock may transfer, and the Company shall not register the transfer of, such
shares of Class B Common Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a Permitted
Transferee (as such term is defined in the Articles of Incorporation).
Liquidation
Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the remaining net assets of the
Company shall be distributed pro rata to the holders of the Common Stock and Class B Common Stock in accordance with their
respective rights and interests.
No Preemptive or Similar Rights
No holder of shares of Common Stock or Class B Common Stock shall, by reason of such holding, have any preemptive right to
subscribe to any additional issue of stock of any class or series of the Company nor to any security of the Company convertible into
such stock.
Quorum
At all meetings of the shareholders, the holders of record of a majority of the shares of Common Stock and the shares of Class B
Common Stock, taken together as a single group, entitled to vote at such meeting and present in person or by proxy, shall constitute a
quorum for the transaction of business, unless a greater or different quorum is required by law or the articles of incorporation. In the
absence of a quorum, a majority in interest of those present may adjourn the meeting by resolution to a date, place and time fixed
therein and no further notice thereof shall be required unless a new record date is fixed for the adjourned meeting, which new record
date shall be fixed if the meeting is adjourned to a date more than one hundred twenty days after the date fixed for the original
meeting. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been
transacted at the meeting as originally called.
Stock Exchange
Our Common Stock is listed on the New York Stock Exchange under the symbol “TR.”
Transfer Agent and Registrar
The transfer agent and registrar for our Common Stock is American Stock Transfer & Trust Company.
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NAME
JURISDICTION OF INCORPORATION
LIST OF SUBSIDIARIES OF THE COMPANY
EXHIBIT 21
Andes Candies LLC
Andes Manufacturing LLC
Andes Services LLC
C. G. P., Inc.
Cambridge Brands, Inc.
Cambridge Brands Manufacturing, Inc.
Cambridge Brands Services, Inc.
Cambridge Brands Sales LLC
Cella’s Confections, Inc.
CGCLP, Inc.
Charms LLC
Concord Wax, Inc.
Concord (GP) Inc.
Concord Canada Holdings ULC
Concord Confections Holdings USA, Inc.
Concord Partners LP
Fleer Española,S.L.
Henry Eisen Advertising Agency, Inc.
Impel Movie Line, Inc.
JT Company, Inc.
Rizzle Inversiones 2014, S.L.
Tootsie Roll Industries LLC
Tootsie Roll of Canada ULC
The Tootsie Roll Company, Inc.
Tootsie Roll Management, Inc.
Tootsie Roll Mfg, LLC
Tootsie Rolls - Latin America, Inc.
Tootsie Roll Worldwide, Ltd.
The Sweets Mix Company, Inc.
TRI de Latinoamerica S.A. de C.V.
TRI Captive Insurance Company, Inc.
TRI Finance, Inc.
TRI International, Inc.
TRI-Mass, Inc.
TRI Sales Co.
TRI Sales Services, LLC
Tutsi S. A. de C. V.
World Trade & Marketing Ltd.
Illinois
Illinois
Illinois
Delaware
Delaware
Delaware
Delaware
Illinois
Virginia
Delaware
Illinois
Delaware
Ontario
Nova Scotia
Delaware
Ontario
Spain
New Jersey
Delaware
Delaware
Spain
Illinois
Alberta
Illinois
Illinois
Delaware
Delaware
Illinois
Illinois
Mexico
Nevada
Delaware
Illinois
Massachusetts
Delaware
Illinois
Mexico
British West Indies
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CERTIFICATIONS
Exhibit 31.1
I, Ellen R. Gordon, Chairman and Chief Executive Officer of Tootsie Roll Industries, Inc., certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Tootsie Roll Industries, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 28, 2020
By: /s/ Ellen R. Gordon
Ellen R. Gordon
Chairman and Chief Executive Officer
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CERTIFICATIONS
Exhibit 31.2
I, G. Howard Ember, Jr., Vice President/Finance and Chief Financial Officer of Tootsie Roll Industries, Inc., certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Tootsie Roll Industries, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
7
Date: February 28, 2020
By:
/s/ G. Howard Ember, Jr.
G. Howard Ember, Jr.
Vice President/Finance and Chief Financial Officer
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Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32
Each of the undersigned officers of Tootsie Roll Industries, Inc. certifies that (i) the Annual Report on Form 10-K of
Tootsie Roll Industries, Inc. for the year ended December 31, 2019 (the Form 10-K) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended and (ii) the information
contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of
Tootsie Roll Industries, Inc.
Dated: February 28, 2020
/s/ Ellen R. Gordon
Ellen R. Gordon
Chairman and Chief Executive Officer
Dated: February 28, 2020
/s/ G. Howard Ember, Jr.
G. Howard Ember, Jr.
Vice President/Finance and Chief Financial Officer
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Corporate Profile
Tootsie Roll Industries, Inc. has been engaged in the
manufacture and sale of confectionery products for
over 120 years. Our products are primarily sold under
the familiar brand names: Tootsie Roll, Tootsie Roll Pops,
Caramel Apple Pops, Child’s Play, Charms, Blow Pop,
Blue Razz, Cella’s chocolate covered cherries, Dots,
Crows, Junior Mints, Junior Caramels, Charleston
Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff
cotton candy, Dubble Bubble, Razzles, Cry Baby and
Nik-L-Nip.
Corporate Principles
We believe that the differences among companies are
attributable to the caliber of their people, and therefore
we strive to attract and retain superior people for each
job.
We believe that an open family atmosphere at work
combined with professional management fosters
cooperation and enables each individual to maximize
his or her contribution to the Company and realize the
corresponding rewards.
We do not jeopardize long-term growth for immediate,
short-term results.
We maintain a conservative financial posture in the
deployment and management of our assets.
We run a trim operation and continually strive to
eliminate waste, minimize cost and implement
performance improvements.
We invest in the latest and most productive equipment
to deliver the best quality product to our customers at
the lowest cost.
We seek to outsource functions where appropriate and
to vertically integrate operations where it is financially
advantageous to do so.
We view our well known brands as prized assets to be
aggressively advertised and promoted to each new
generation of consumers.
We conduct business with the highest ethical
standards and integrity which are codified in the
Company’s “Code of Business Conduct and Ethics.”
Financial Highlights
December 31,
2019
2018
(in thousands except per share data)
Board of Directors
Offices, Plants
Ellen R. Gordon
Chairman of the Board and
Chief Executive Officer
Executive Offices
Lana Jane Lewis-Brent(1)(2)
Barre A. Seibert(1)(2)
Paula M. Wardynski(1)(2)
President, Paul Brent
Designer, Inc., an art
publishing, design and
licensing company
Retired First Vice President,
Washington Mutual Bank
Former Senior Vice
President—Finance,
Twenty-First Century Fox
(1)Audit Committee (2)Compensation Committee
Plants/Warehouses
Foreign Sales Offices
7401 S. Cicero Ave.
Chicago, Illinois 60629
www.tootsie.com
Illinois
Tennessee
Massachusetts
Pennsylvania
Wisconsin
Ontario, Canada
Mexico City, Mexico
Barcelona, Spain
Mexico City, Mexico
Ontario, Canada
Barcelona, Spain
Officers
Ellen R. Gordon
Thomas E. Corr
G. Howard Ember, Jr.
Chairman of the Board and
Chief Executive Officer
Vice President,
Marketing & Sales
Vice President, Finance &
Chief Financial Officer
Stephen P. Green
Vice President, Manufacturing
Barry P. Bowen
Treasurer & Assistant
Secretary
Richard F. Berezewski
Controller
Other Information
Stock Exchange
Stock Identification
Stock Transfer Agent and
Stock Registrar
Independent Registered
Public Accounting Firm
General Counsel
Annual Meeting
New York Stock
Exchange, Inc.
(Since 1922)
Ticker Symbol: TR
CUSIP No. 890516 10-7
American Stock Transfer
and Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
1-800-710-0932
www.amstock.com
Grant Thornton LLP
171 North Clark Street,
Suite 200
Chicago, IL 60601
Aronberg Goldgehn Davis &
Garmisa
330 North Wabash Avenue
Chicago, IL 60611
May 4, 2020
Mutual Building, Room 1200
909 East Main Street
Richmond, VA 23219
Net Product Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $523,616
64,920
Net Earnings Attributable to Tootsie Roll Industries, Inc. . . . . . . . . . . . . . . . . .
273,786
Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188,455
Net Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
759,854
Average Shares Outstanding* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per Share Items*
Net Earnings Attributable to Tootsie Roll Industries, Inc. . . . . . . . . . . . . . . . . .
Cash Dividends Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,474
$515,251
56,893
242,655
186,101
750,622
66,130
$0.99 $0.86
0.36
0.36
*Adjusted for stock dividends.
Printed on recycled paper.
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