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What changed in TOOTSIE ROLL INDUSTRIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TOOTSIE ROLL INDUSTRIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+147 added−164 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in TOOTSIE ROLL INDUSTRIES INC's 2023 10-K

147 paragraphs added · 164 removed · 125 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

11 edited+1 added−2 removed17 unchanged
Biggest changeWe have prioritized the safety of our employees and therefore implemented safety protocols during 2020 and continuing into 2023, to respond to the Covid-19 pandemic as needed. ​ Our net product sales from Wal-Mart Stores, Inc. aggregated approximately 23.0%, 22.7%, and 23.5% of net product sales during the years ended December 31, 2022, 2021 and 2020, respectively.
Biggest changeA copy of our code of conduct can be found on our website, www.tootsie.com. ​ Our net product sales from Wal-Mart Stores, Inc. (“Wal-Mart”) aggregated approximately 22.2%, 23.0%, and 22.7% of net product sales during the years ended December 31, 2023, 2022 and 2021, respectively. Our net sales from Dollar Tree, Inc.
Some of the aforementioned sales to Wal-Mart and Dollar Tree were 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.
Some of the aforementioned sales to Wal-Mart and Dollar Tree were sold to McLane Company (“McLane”), 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.
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. ​ The Company’s backlog of orders as of December 31, 2022 was approximately $16 million and is consistent with the prior year. ​ The Company has historically hedged certain of its future sugar needs with derivatives at such times that it believes that the forward markets are favorable.
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. ​ The Company’s backlog of orders as of December 31, 2023 was approximately $7 million and is consistent with the prior year. ​ The Company has historically hedged certain of its future sugar needs with derivatives at such times that it believes that the forward markets are favorable.
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 2,300 full-time persons at all locations.
The Company maintains quality assurance, food safety and other programs to help ensure that all products the Company manufactures and distributes are safe, 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 to regulate 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 2,300 full-time persons at all locations.
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 20.4% in 2022 and 21.0% in 2021 and 22.1% in 2020. At December 31, 2022 and 2021, the Company’s three largest customers discussed above accounted for approximately 39% and 36% of total accounts receivable, respectively.
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 20.1% in 2023 and 20.4% in 2022 and 22.0% in 2021. At December 31, 2023 and 2022, the Company’s three largest customers discussed above accounted for approximately 39.6% and 39.2% of total accounts receivable, respectively.
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 in order to provide value to its consumers.
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.
Our management teams and all of our employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of our employees must adhere to a code of conduct that sets standards for appropriate behavior. A copy of our code of conduct can be found on our website, Tootsie.com.
Our management teams and all of our employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of our employees must adhere to a code of conduct that sets standards for appropriate behavior.
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. ​ From time to time, the Company will increase its sales prices to recover higher input costs, primarily ingredients, packaging materials, and freight and delivery.
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. ​ Based on increases in its input costs, the Company plans to increase its sales prices to recover higher input costs, primarily ingredients, packaging materials, labor and benefits, manufacturing maintenance, supplies and services, and freight and delivery.
Our net sales from Dollar 4 Table of Contents Tree, Inc. (which includes net sales from Family Dollar which is owned by Dollar Tree) aggregated approximately 12.4%, 12.1%, and 11.7% of net product sales during the years ended December 31, 2022, 2021 and 2020, respectively.
(“Dollar Tree”, which includes net sales from Family Dollar which is owned by Dollar Tree) 4 Table of Contents aggregated approximately 14.2%, 12.4%, and 12.1% of net product sales during the years ended December 31, 2023, 2022 and 2021, respectively.
The Company’s union labor agreement at its Chicago plant was executed in 2018 and expired in September 2022.
The Company’s union labor agreement at its Chicago plant was negotiated and executed in 2023 and expires in September 2027.
Each year, after accounts receivables related to third quarter sales have been collected, the Company invests such funds in various marketable securities. ​ For a summary of sales and long-lived assets of the Company by geographic area see Note 8 of the Notes to Consolidated Financial Statements which is incorporated herein by reference. ​ 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.
Although no customer, other than McLane, Wal-Mart 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. ​ For a summary of sales and long-lived assets of the Company by geographic area see Note 8 of the Notes to Consolidated Financial Statements which is incorporated herein by reference. ​ 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.
Removed
The Company and the union have agreed to continue the existing contract on a month to month basis while negotiations continue (see also risk factor below), which is consistent with past contract negotiation timelines. ​ We believe our employees are among our most important resources and are critical to our continued success.
Added
The Company is currently in negotiations with its labor union at tis Canadian plant and expects this to be concluded sometime in first quarter 2024, however, labor union negotiations always bring some risk of work stoppages. ​ We believe our employees are among our most important resources and are critical to our continued success.
Removed
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. The Company historically offers extended credit terms for sales made under seasonal sales programs, including Halloween.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSoftware failure or corruption, including cyber-based attacks or network security breaches, or catastrophic hardware or software 7 Table of Contents failures or other disasters could disrupt communications, supply chain planning and activities relating to sales demand forecasts, materials procurement, production and inventory planning, customer orders, shipments, and collections, 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. ​ ● 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 which could result if our suppliers are unable to obtain certain raw materials or make timely deliveries, labor strikes or other labor activities, labor shortages to meet higher demand for Company products, including the staffing of seasonal labor needs, logistical delays including materials from foreign locations, operational and/or financial instability of key suppliers, and other vendors or service providers.
Biggest changeSoftware failure or corruption, including cyber-based attacks or network security breaches, or catastrophic hardware or software failures or other disasters could disrupt communications, supply chain planning and activities relating to sales demand forecasts, materials procurement, production and inventory planning, customer orders, shipments, and collections, 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. ​ 7 Table of Contents ● 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 - Disruptions to the manufacturing operations or supply chain, some of which are discussed above, could result from, but are not limited to, unpredictable events such as natural disasters, pandemics, weather, fire or explosion, earthquakes, terrorism or other acts of violence.
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 and other competitive actions could make it more difficult for the Company to maintain its operating margins.
A failure of new or existing products to be favorably received, a failure to retain preferred shelf space at retailers 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 and other competitive actions could make it more difficult for the Company to maintain its operating margins.
In the event of a disaster, such as a fire or earthquake, at a specific plant location, or other disruption, including labor shortages, 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 the event of a disaster, such as a fire or earthquake, at a specific plant location, or other disruption, including labor stoppages or shortages, 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.
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.
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 demands and growth, profit margins and discount rates.
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 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 and packaging materials, 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, inflation, availability of consumer credit and interest rates on that credit, consumer debt levels, energy costs and other factors.
Circumstances surrounding Halloween could significantly affect the Company’s sales, such as, widespread adverse weather or other widespread events that affect consumer behavior, related media coverage at that time of year, or general changes in consumer interest in Halloween. ​ 6 Table of Contents ● 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 and packaging materials, 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, inflation, availability of consumer credit and interest rates on that credit, consumer debt levels, energy costs and other factors.
The Company is currently unable to determine the ultimate outcome of this matter 8 Table of Contents 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 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.
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 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.
The inability to meet our customers’ needs and achieve efficient production of finished products - Disruptions in our manufacturing operations or supply chain delivery disruptions caused by the loss or disruption of essential manufacturing ingredients, materials, supplies and services, transportation resources, workforce availability, or other manufacturing and distribution capability could have significant adverse effects on our business and financial results. ​ c.
The inability to meet our customers’ needs and achieve efficient production of finished products - Disruptions in our manufacturing operations or supply chain delivery disruptions caused by the loss or 5 Table of Contents disruption of essential manufacturing ingredients, materials, supplies and services, transportation resources, workforce availability, or other manufacturing and distribution capability could have significant adverse effects on our business and financial results. ​ c.
Specific factors that may impact our operations, some of which have had, and in the future could have, an unfavorable impact on our operations as a result of Covid-19, include, but are not limited to: ​ a.
Specific factors that may impact our operations, some of which have had, and in the future could have, an unfavorable impact on our operations as a result of pandemics, such as Covid-19, include, but are not limited to: ​ a.
Higher costs for ingredients and materials, and other input costs may be difficult to pass onto customers and 6 Table of Contents consumers of Company products through price increases, and therefore may adversely affect the Company’s profit margins. ​ ● Risk related to seasonality of sales - The Company’s sales are highest during the Halloween season, although Christmas, Easter and Valentine’s Day are also key seasons for the Company.
Higher costs for ingredients and materials, and other input costs may be difficult to pass onto customers and consumers of Company products through price increases, and therefore may adversely affect the Company’s profit margins. ​ ● Risk related to seasonality of sales - The Company’s sales are highest during the Halloween season, although Christmas, Easter and Valentine’s Day are also key seasons for the Company.
Although the Company believes that these claims and other product labeling 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. ​ ● 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 9 Table of Contents in such countries could be adversely impacted.
Although the Company believes that these claims and other product labeling 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. ​ ● 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 Covid-19, 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.
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. ​ ● Risks associated with climate change and other environmental impacts and regulations, and increased focus and evolving views of our customers and consumers of our products could negatively affect our business and operations - Climate-related changes can increase variability in, or otherwise impact, natural disasters, including weather patterns, with the potential for increased frequency and severity of significant weather events, natural hazards, rising mean temperature and sea levels, and long-term changes in precipitation patterns.
Although precautions are taken to mitigate the impact of possible disruptions, if the Company is unable 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. ​ ● Risks associated with climate change and other environmental impacts and regulations, and increased focus and evolving views of our customers and consumers of our products could negatively affect our business and operations - Climate-related changes such as natural disasters, including weather patterns, with the potential for increased frequency and severity of significant weather events, natural hazards, rising mean temperature and sea levels, and long-term changes in precipitation patterns could increase variability in, or otherwise impact costs.
Adverse changes in any of these variables could affect the carrying value of these intangible assets and the Company’s reported profitability. ​ ● Risk of production interruptions - The majority of the Company’s products are manufactured in a single production facility on specialized equipment.
Adverse 8 Table of Contents changes in any of these variables could affect the carrying value of these intangible assets and the Company’s reported profitability. ​ ● Risk of production interruptions - The majority of the Company’s products are manufactured in a single production facility on specialized equipment.
See also Management’s Discussion and Analysis. ​ ● Risk of dependence on large customers - The Company’s largest customers, McLane Company, Wal-Mart and Dollar Tree, accounted for approximately 37% of net product sales in 2022, and other large national chains are also material to the Company’s sales.
See also Management’s Discussion and Analysis of Financial Condition and Results of Operations. ​ ● Risk of dependence on large customers - The Company’s largest customers, McLane, Wal-Mart and Dollar Tree, accounted for approximately 37% of net product sales in 2023, and other large national chains are also material to the Company’s sales.
New legislation or an enforcement action in this area could harm our reputation and financial results. ​ Risk factors which we believe are principally specific to our Company (although some may apply to varying degrees to competitors in our industry) ​ ● Risks relating to participation in the multi-employer pension plan for certain Company union employees - As outlined in the Note 7 of the Company’s Notes to 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.
Risk factors which we believe are principally specific to our Company (although some may apply to varying degrees to competitors in our industry) ​ ● Risks relating to participation in the multi-employer pension plan for certain Company union employees - As outlined in the Note 7 of the Company’s Notes to Consolidated Financial Statements and discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Company participates in a multi-employer union pension plan (Plan) which is currently in “critical and declining status”, as defined by applicable law.
Significant reductions in demand for one or more of our products - Changes in demand may be caused by, among other things, the temporary inability of consumers to purchase our products due to illness, quarantine, travel restrictions, financial hardship, “shelter in place” directives, or overall fear to return to past behaviors. 5 Table of Contents Shifts in demand for one or more of our products, changes in trade and distribution patterns, or changes in consumer buying habits, if prolonged, could negatively impact our results. ​ b.
Significant reductions in demand for one or more of our products - Changes in demand may be caused by, among other things, the temporary inability of consumers to purchase our products due to illness, quarantine, travel restrictions, financial hardship, “shelter in place” directives, or overall fear to return to past behaviors.
A designation of “critical and declining status” implies that the Plan is expected to become insolvent within the next 20 years. 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.
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 of Financial Condition and Results of Operations.
Changes in consumer behavior, traditions, behaviors, and interest in Halloween activities and events, or changes mandated or recommended by government or health officials, as well as negative media coverage, could significantly affect the Company’s seasonal sales. ​ e.
Changes in consumer behaviors, traditions, and interest in Halloween activities and events, or changes mandated or recommended by government or health officials, as well as negative media coverage, could significantly affect the Company’s seasonal sales. ​ ● Risk of changes in the price and availability of ingredients and raw materials - The principal ingredients used by the Company are subject to price volatility.
Customers, consumers, and government regulators have increasingly focused on the environmental or sustainability practices of companies.
Customers, consumers, and government regulators have increasingly focused on the environmental or sustainability practices of companies. New legislation or an enforcement action in this area could harm our reputation and financial results.
In the event that the parties are unable to reach an agreement, a work stoppage or strike could result at the Company’s Chicago manufacturing plant and distribution center which could have a material effects on the Company’s sales and profits. ​ ● 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, 2022.
The Company’s principal markets are the U.S.A., Canada, and Mexico. ​ 9 Table of Contents ● Risk of union labor stoppages, slowdowns or strikes- - Significant labor stoppages, strikes or possible labor shortages could negatively affect overall operations including production or shipments of finished product to customers which could have material effects on the Company’s sales and profits. ​ ● 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, 2023.
Removed
Risks relating to potential employer liability - The effects of Covid-19 relating to employer liability remains uncertain, and if it is determined that employers are to have liability for employee or other matters related to Covid-19, this could have significant adverse effects on our financial results. ​ ● Risk of changes in the price and availability of ingredients and raw materials - The principal ingredients used by the Company are subject to price volatility.
Added
Shifts in demand for one or more of our products, changes in trade and distribution patterns, or changes in consumer buying habits, if prolonged, could negatively impact our results. ​ b.
Removed
The Company’s principal markets are the U.S.A., Canada, and Mexico. ​ ● Risk of union labor stoppages, slowdowns or strikes- The Company’s union labor agreement at its Chicago plant was executed in 2018 and expired in September 2022.
Added
Adverse tariffs could effectively limit the quantities we may want to acquire or affect the cost of our supplies. Ingredients or packaging materials may not be available if circumstances occur under which our suppliers are unable to obtain certain raw materials or make timely deliveries.
Removed
The Company has been in negotiations with the union, and the parties agreed to extend the prior contract on a month-to-month basis and continue negotiations in good faith. These post-contract negotiations are consistent with past contract negotiations and timelines.
Added
Our suppliers may experience logistical delays involving materials sourced from foreign locations, operational and/or financial instabilities may impact availability, or availability may be indirectly impacted as a result of availability of certain ingredients or packaging materials to our suppliers.
Removed
Unresolved Staff Comments . ​ None. ​ 10 Table of Contents ​
Added
Labor strikes or other labor activities, labor shortages to meet demand for Company products, including the staffing of seasonal labor needs might also disrupt our supply chain.
Added
A designation of “critical and declining status” implies that the Plan is expected to become insolvent within the next 20 years.
Added
The Company has also experienced some litigation claims regarding product and ingredients labeling, and specific state laws that have effectively banned certain ingredients which have not been prohibited by the U.S. Food and Drug Administration.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company also owns domestic manufacturing, warehousing and distribution facilities in Tennessee (Covington), Massachusetts (Cambridge), and Wisconsin (Delavan) and international manufacturing facilities in Mexico (Mexico City), Spain (Barcelona) and two in Canada (Concord, Ontario). In addition, the Company leases manufacturing and warehousing facilities at a second location in Chicago.
Biggest changeThe Company also owns domestic manufacturing, warehousing and distribution facilities in Tennessee (Covington), Massachusetts (Cambridge), and Wisconsin (Delavan) and international manufacturing facilities in Mexico (Mexico City), Spain (Barcelona) and two in Canada (Concord, Ontario). In addition, the Company leases warehouse facilities near it’s Chicago and Covington facilities as well as a smaller manufacturing facility at a second location in Chicago.
The lease is renewable by the Company every five years through June 2041. ​ The Company owns substantially all of the production machinery and equipment located in its plants, warehouses and distribution centers.
The lease for this smaller manufacturing facility is renewable by the Company every five years through June 2041. ​ The Company owns substantially all of the production machinery and equipment located in its plants, warehouses and distribution centers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeExecutive Officers of the Registrant. ​ See the information on Executive Officers set forth in the table in Part III, Item 10. ​ ITEM 4. Mine Safety Disclosure s . ​ None. ​ ​ 11 Table of Contents PART II ​
Biggest changeMine Safety Disclosure s . ​ None. ​ ​ 12 Table of Contents PART II ​
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.
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. ​ ​ ITEM 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, the Company estimates that as of February 13, 2023 there were 124,500 and 1,000 beneficial holders of common and Class B common stock, respectively. ​ The Company does not have a formal dividend policy, but has historically issued quarterly dividends and in 2022 issued a quarterly dividend of $0.09 per share.
Biggest changeIn addition, the Company estimates that as of February 9, 2024 there were 120,300 and 200 beneficial holders of common and Class B common stock, respectively. ​ The following table sets forth information about the shares of its common stock the Company purchased on the open market during the fiscal quarter ended December 31, 2023: ​ ​ Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Maximum Number (or ​ ​ Total ​ Average ​ Shares Purchased ​ Approximate Dollar Value) ​ ​ Number ​ Price ​ as Part of Publicly ​ of Shares that May Yet ​ ​ of Shares ​ Paid per ​ Announced Plans ​ be Purchased Under the Period ​ Purchased ​ Share ​ or Programs ​ Plans or Programs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Oct 1 to Oct 31 180,664 ​ $ 30.76 Not Applicable Not Applicable ​ Nov 1 to Nov 30 — ​ — Not Applicable Not Applicable ​ Dec 1 to Dec 31 — ​ — Not Applicable Not Applicable ​ Total 180,664 ​ $ 30.76 ​ ​ ​ ​ ​ ​ The Company does not have a formal dividend policy, but has historically issued quarterly dividends and in 2023 issued a quarterly dividend of $0.09 per share.
While the Company plans to continue to issue quarterly cash dividends and the annual stock dividend there can be no assurance that it will continue to do so in the future. ​ 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, 2017 to December 31, 2022) 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. ​ 12 Table of Contents ​ ​ ​ ITEM 6. [RESERVED] ​
While the Company plans to continue to issue quarterly cash dividends and the annual stock dividend there can be no assurance that it will continue to do so in the future. ​ 13 Table of Contents ​ 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, 2018 to December 31, 2023) 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. ​ ITEM 6. [RESERVED] ​
ITEM 5. Market for Registrant’s Common Equit y, 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.
ITEM 5. Market for Registrant’s Common Equit y, Related Stockholder Matters and Issuer Purchases of Equity Securities . ​ The Company’s common stock is traded on the New York Stock Exchange under the trading symbol, “TR”. 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 13, 2023 there were approximately 2,300 and 800 registered holders of record of common and Class B common stock, respectively.
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 9, 2024 there were approximately 2,200 and 800 registered holders of record of common and Class B common stock, respectively.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. [RESERVED] 13 ​ ​ ​ ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13 ​ ​ ​ ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 24 ​ ​ ​ ITEM 8. Financial Statements and Supplementary Data 24 ​ ​ ​
Biggest changeITEM 6. [RESERVED] 14 ​ ​ ​ ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14 ​ ​ ​ ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 25 ​ ​ ​ ITEM 8. Financial Statements and Supplementary Data 25 ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThese deferred compensation (credits) 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 $118,587 in 2021 to $138,346 in 2022, an increase of $19,759 or 16.7%.
Biggest changeSelling, marketing and administrative expenses include $14,675 and $(16,370) in certain deferred compensation expenses (credits) in 2023 and 2022, respectively. These deferred compensation expenses (credits) 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.
These trading securities provide an economic hedge of the Company’s deferred compensation liabilities; and the related net (losses) gains and investment income were offset by a like amount of (credit) expense in aggregate product cost of goods sold and selling, marketing, and administrative expenses in the respective years as discussed above.
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 (credit) in aggregate product cost of goods sold and selling, marketing, and administrative expenses in the respective years as discussed above.
Current accounting guidance provides entities an option of performing a qualitative assessment (a "step-zero" test) before performing a quantitative analysis.
Current accounting guidance provides entities an option of performing a qualitative assessment (a "step-zero" test) before performing a quantitative analysis.
All capital expenditures have been and are expected 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 2020, 2021, or 2022, and had no outstanding bank borrowings as of December 31, 2021 or 2022.
All capital expenditures have been and are expected 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 2021, 2022, or 2023, and had no outstanding bank borrowings as of December 31, 2022 or 2023.
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 2022, 2021 or 2020.
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 2023, 2022 or 2021.
Write-offs of bad debts did not exceed 0.1% of net product sales in each of 2022, 2021 and 2020, 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.
Write-offs of bad debts did not exceed 0.1% of net product sales in each of 2023, 2022 and 2021, 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.
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 2023.
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 2024.
During fourth quarter 2022, 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.
During fourth quarter 2023, 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.
For the fair value assessment of certain trademarks where the “step-zero” analysis was not considered appropriate, impairment testing was performed in fourth quarter 2022 (and fourth quarters 2021 and 2020) using discounted cash flows and estimated royalty rates.
For the fair value assessment of certain trademarks where the “step-zero” analysis was not considered appropriate, impairment testing was performed in fourth quarter 2023 (and fourth quarters 2022 and 2021) using discounted cash flows and estimated royalty rates.
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 2022) that this Plan remains in “critical and declining status” and is projected to become insolvent within the next 20 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 2023) that this Plan remains in “critical and declining status” and is projected to become insolvent within the next 20 years.
The prices of these commodities are influenced by changes in global demand, changes in weather and crop yields, including 21 Table of Contents the 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 and military conflict risks.
The prices of these commodities are influenced by changes in global demand, changes in weather and crop yields, including the 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 and military conflict risks.
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. ​ 19 Table of Contents Revenue recognition ​ As further discussed in Note 1 of the Company’s Notes to Consolidated Financial Statements, the Company follows the revenue recognition guidance in ASC 606.
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 further discussed in Note 1 of the Company’s Notes to Consolidated Financial Statements, the Company follows the revenue recognition guidance in ASC 606.
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. ​ The Company has provided a full valuation allowance on its Spanish subsidiaries’ tax loss carry-forward benefits of $4,497 and $4,376 as of December 31, 2022 and 2021, respectively, because the Company has concluded that it is not more-likely-than-not that these losses will be utilized before their expiration dates.
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. ​ The Company has provided a full valuation allowance on its Spanish subsidiaries’ tax loss carry-forward benefits of $4,836 and $4,497 as of December 31, 2023 and 2022, respectively, because the Company has concluded that it is not more-likely-than-not that these losses will be utilized before their expiration dates.
During fourth quarter 2022 (and fourth quarters 2021 and 2020), the Company performed a “step zero” test of its goodwill and certain trademarks, and concluded that there was no impairment based on this guidance.
During fourth quarter 2023 (and fourth quarters 2022 and 2021), the Company performed a “step zero” test of its goodwill and certain trademarks, and concluded that there was no impairment based on this guidance.
Such adjustments have not historically been material to the Company’s operating results. ​ 20 Table of Contents 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.
Such adjustments have not historically been material to the Company’s operating results. ​ 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.
ASC 606 requires adjustments for estimated customer cash discounts upon payment, discounts for price adjustments, product returns, allowances, and certain advertising and promotional costs, including consumer coupons, which are variable consideration and are recorded as a reduction of product sales revenue in the same period the related product sales are recorded.
ASC 606 requires adjustments for estimated customer cash discounts upon 20 Table of Contents payment, discounts for price adjustments, product returns, allowances, and certain advertising and promotional costs, including consumer coupons, which are variable consideration and are recorded as a reduction of product sales revenue in the same period the related product sales are recorded.
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.
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 16 Table of Contents the two step impairment testing process (quantitative analysis) as prescribed in the guidance.
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.
These reviews include an evaluation of the risk factors relating to market place acceptance of such changes and their potential effect on future sales 22 Table of Contents volumes. In addition, the estimated cost of packaging modifications associated with weight changes, if applicable, is evaluated.
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.
Such impairments have not historically been material to the Company’s operating results. 21 Table of Contents ​ 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.
Based on the above, including the Company’s increase in such union labor hours to meet its higher 2022 demand and the Plan’s projected insolvency in the next 20 years, management believes that the Company’s withdrawal liability could increase further in future years. ​ Based on the Company’s most recent actuarial estimates using the information provided by the Plan with respect to the 2021 withdrawal liability and certain provisions in ERISA and laws relating to withdrawal liability payments, management believes that the Company’s liability had the Company withdrawn in 2022 would likely be limited to twenty annual payments of $2,714 which have a present value in the range of $31,851 to $43,741 depending on the interest rate used to discount these payments.
Based on the above, including the Company’s increase in such union labor hours to meet its higher product demand in 2022 and 2023, and the Plan’s projected insolvency in the next 20 years, management believes that the Company’s withdrawal liability will likely increase further in future years. ​ Based on the Company’s most recent actuarial estimates using the information provided by the Plan with respect to the 2022 withdrawal liability (which is the most recent information available to the Company) and certain provisions in ERISA and laws relating to withdrawal liability payments, management believes that the Company’s liability had the Company withdrawn in 2022 would likely be limited to twenty annual payments of $2,714 which have a present value in the range of $31,851 to $43,741 depending on the interest rate used to discount these payments.
Discussions comparing the results of the twelve months ended December 31, 2021 as compared to same period of 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Form 10-K for the year ended December 31, 2021. ​ 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.
Discussions comparing the results of the twelve months ended December 31, 2022 as compared to same period of 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Form 10-K for the year ended December 31, 2022. ​ 14 Table of Contents 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.
The Company also invests in variable rate demand notes which have interest rates that 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 22 Table of Contents Company’s exposure to interest rate fluctuations on the principal invested.
The Company also invests in variable rate demand notes which have interest rates that 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 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, 2022, assuming a 10% change in the underlying contract price, was $745.
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, 2023, assuming a 10% change in the underlying contract price, was $4,458.
This section of this Form 10-K generally discusses the twelve months ended December 31, 2022 as compared to the same period of 2021.
This section of this Form 10-K generally discusses the twelve months ended December 31, 2023 as compared to the same period of 2022.
Product cost of goods sold includes $(893) and $687 in certain deferred compensation (credits) expenses in 2022 and 2021, 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.
Product cost of goods sold includes $814 and $(893) in certain deferred compensation expenses (credits) in 2023 and 2022, respectively. These deferred compensation expenses (credits) 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.
The Company’s Spanish subsidiary (97% owned by the Company) incurred an operating loss of $1,430 in 2022 compared to its $598 loss in 2021. Company management expects the competitive and business challenges in Spain to continue, however, Company management believes that we will make progress on reducing this operating loss in 2023.
The Company’s Spanish subsidiary (97% owned by the Company) incurred an operating loss of $828 in 2023 compared to its $1,430 loss in 2022. Company management expects the competitive and business challenges in Spain to continue, however, Company management believes that we will continue to make progress on reducing this operating loss in 2024.
Based on these updated notices, the Plan’s funded percentage (plan investment assets as a percentage of plan liabilities), as defined, were 48.5%, 48.3%, and 50.4% as of the most recent valuation dates available, January 1, 2021, 2020, and 2019, respectively (these valuation dates are as of the beginning of each Plan year).
Based on these updated notices, the Plan’s funded percentage (plan investment assets as a percentage of plan liabilities), as defined, were 49.4%, 48.5%, and 48.3% as of the most recent valuation dates available, January 1, 2022, 2021, and 2020, respectively (these valuation dates are as of the beginning of each Plan year).
Cash dividends of $24,629, $24,136, and $23,810 were paid in 2022, 2021 and 2020, respectively. ​ CRITICAL 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.
Cash dividends of $25,076, $24,629, and $24,136 were paid in 2023, 2022 and 2021, respectively. ​ CRITICAL 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 aforementioned is based on a range of valuations and interest rates which the Company’s actuary has advised is provided under the statute.
The aforementioned is based on a range of valuations and interest rates which the Company’s actuary has advised is 18 Table of Contents provided under the statute.
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 13% and 10%, respectively.
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 approximatel y 14% and 10%, respectively.
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 continue to add upward pressure on the Company’s withdrawal liability.
The Company’s relative share of the Plan’s contribution base, driven by employer withdrawals, has increased in the last several years, and management believes that this trend could continue indefinitely and add upward pressure on the Company’s withdrawal liability.
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.
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, freight and delivery, and plant manufacturing maintenance, supplies and services.
The above discussed increase in net product sales was the principal driver of higher operating earnings in 2022 compared to 2021.
The above discussed increase in net product sales was the principal driver of higher adjusted operating earnings in 2023 compared to 2022.
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 $31,910, $30,184, and $32,055 in 2022, 2021 and 2020, respectively.
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 $33,114, $31,910, and $30,184 in 2023, 2022 and 2021, respectively.
See Note 10 of the Company’s Notes to Consolidated Financial Statements for outstanding foreign exchange forward contracts as of December 31, 2022. ​ 23 Table of Contents ​ ​
See Note 10 of the Company’s Notes to Consolidated Financial Statements for outstanding foreign exchange forward contracts as of December 31, 2023. ​ 24 Table of Contents ​ ​
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 bonds which are held to maturity, generally approximately three to five years.
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 classified as available for sale primarily comprise high quality corporate bonds which are generally not sold prior to maturity, which is typically three to five years.
A contribution of $5,000 was made to this trust in 2022; no contribution was made to the trust during 2020 or 2021. The Company uses these funds to pay the actual cost of such benefits over each union contract period.
A contribution of $20,000 and $5,000 was made to this trust in 2023 and 2022, respectively; no contribution was made to the trust during 2021. The Company uses these funds to pay the actual cost of such benefits over each union contract period.
The Company is currently exploring plant expansions, including additional, and replacement of, certain processing and packaging lines at certain locations, to better meet its higher level of demand for certain products on a more timely and cost effective basis.
The Company is currently exploring a plant expansion, including additional and replacement of, certain processing and packaging lines, to better meet its higher level of demand for certain products on a timelier and more cost effective basis.
Nonetheless, management believes that operating losses will likely continue beyond 2023 and that these future losses, as well as some capital expenditures, will likely require some 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.
Nonetheless, management believes that operating losses at its Spanish subsidiary may continue beyond 2024 and that these future losses, as well as some capital expenditures, may require some 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.
The Plan has recently advised that the all Plan information discussed herein, including the Company’s withdrawal liability, is the most current available information, and that more current information should be available in second quarter 2023. 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.
The Plan has recently advised that the information discussed herein, including the Company’s withdrawal liability, is the most current available information. 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.
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 which mature in three to five years and in variable rate demand notes (VRDNs).
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’s investments classified as available for sale primarily include marketable securities which mature in three to five years and variable rate demand notes (VRDNs).
At December 31, 2022 and 2021, the VEBA trust held $3,879 and $3,941, respectively, of aggregate cash and cash equivalents, which the Company will use to pay certain union employee benefits through part or all of 2023.
At December 31, 2023 and 2022, the VEBA trust held $19,126 and $3,879 respectively, of aggregate cash and cash equivalents, which the Company expects to use to pay certain union employee benefits through part or all of 2027.
As of the January 1, 2021 valuation date (most recent valuation available), 15% of Plan participants were current active employees, 54% were retired or separated from service and receiving benefits, and 31% were retired or separated from service and entitled to future benefits.
As of the January 1, 2022 valuation date (most recent valuation available), only 14% of Plan participants were current active employees, 55% were retired or separated from service and receiving benefits, and 31% were retired or separated from service and entitled to future benefits.
When compared to the Plan valuation date of January 1, 2011 (just prior to the Plan being certified to be in “critical status”), current active employee participants have declined 52%, whereas participants who were retired or separated from service and receiving benefits increased 3% and participants who were retired or separated from service and entitled to future benefits increased 10%. ​ The Company has been advised that its withdrawal liability would have been $104,300, $99,300 and $99,800 if it had withdrawn from the Plan during 2021, 2020 and 2019, respectively.
When compared to the Plan valuation date of January 1, 2011 (just prior to the Plan being certified to be in “critical status”), current active employee participants have declined 54%, whereas participants who were retired or separated from service and receiving benefits increased 3% and participants who were retired or separated from service and entitled to future benefits increased 8%. ​ The Company has been advised that its withdrawal liability would have been $96,000, $104,300, and $99,300 if it had withdrawn from the Plan during 2022, 2021, and 2020, respectively, which is the most recent information available to the Company.
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 $396,926 at December 31, 2022, including $71,208 in trading securities discussed below.
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 $427,028 at December 31, 2023, including $87,800 in trading securities discussed below.
This asset value is included in prepaid expenses in the Company’s Consolidated Statement of Financial Position and is categorized as Level 1 within the fair value hierarchy. ​ Cash flows from investing activities reflect capital expenditures of $23,356, $31,426, and $17,970 in 2022, 2021 and 2020, respectively.
This asset value is included in prepaid expenses and long-term other assets in the Company’s Consolidated Statement of Financial Position and is categorized as Level 1 within the fair value hierarchy. ​ Cash flows from investing activities reflect capital expenditures of $26,796, $23,356, and $31,426 in 2023, 2022 and 2021, respectively.
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 approximately three to five years.
The VRDNs have weekly “puts” which are collateralized by bank letters of credit or other assets, and interest rates are reset weekly. Except for VRDNs, the Company’s marketable securities are generally not sold prior to maturity and such maturities generally approximate three to five years.
Cash flows from 2022 operating activities totaled $72,051 compared to $85,298 in 2021, and are discussed in the section entitled Liquidity and Capital Resources.
Cash flows from 2023 operating activities totaled $94,611 compared to $72,051 in 2022, and are discussed in the section entitled Liquidity and Capital Resources.
The Company invests in trading securities to provide an economic hedge for its deferred compensation liabilities, as further discussed herein and in Note 9 of the Company’s Notes to Consolidated Financial Statements. ​ Shareholders’ equity increased from $769,042 at December 31, 2021 to $783,171 as of December 31, 2022, which principally reflects 2022 net earnings of $75,937, less cash dividends of $24,629 and share repurchases of $31,910. ​ The Company has a relatively straight-forward financial structure and has historically maintained a conservative financial position.
The Company invests in trading securities to provide an economic hedge for its deferred compensation liabilities, as further discussed herein and in Note 9 of the Company’s Notes to Consolidated Financial Statements. ​ Shareholders’ equity increased from $783,171 at December 31, 2022 to $823,422 as of December 31, 2023, which principally reflects 2023 net earnings of $91,912, less cash dividends of $25,076 and share repurchases of $33,114. ​ The Company has a relatively straight-forward financial structure and has historically maintained a conservative financial position.
The liabilities associated with these programs are reviewed quarterly and adjusted if utilization rates differ from management’s original estimates.
The liabilities associated with these programs are reviewed quarterly and adjusted if the expected utilization rate differs from management’s original estimates.
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 maturity dates of generally up to three years. ​ The majority of the Company’s investments, which are classified as available for sale, have been held until their maturity which is generally approximately three to five years, and approximately 20% to 35% of this investment portfolio matures each year.
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 available for sale marketable securities with maturity dates of generally three to five years. ​ The majority of the Company’s investments which are classified as available for sale have generally not been sold prior to their maturity, which is typically three to five years.
Although higher 2022 sales contributed to improved operating earnings compared to the corresponding prior year periods, higher input costs mitigated much of the benefits of increased sales. ​ 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 (expense), net was $(12,614) in 2022 compared to $18,596 in 2021, a decrease of $31,210.
Although higher 2023 sales contributed to improved operating earnings compared to 2022, higher input costs mitigated much of the benefits of increased sales. ​ 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 (expense), net was $18,066 in 2023 compared to $(12,614) in 2022, an increase of $30,680.
In first quarter 2021, the local bargaining union and the Company executed this agreement which resulted in the “freezing” of such surcharges as of December 31, 2020. ​ The Plan advised the Company that it will be applying for benefits available to financial troubled plans under the American Rescue Plan Act of 2021.
In first quarter 2021, the local bargaining union and the Company executed this agreement which resulted in the “freezing” of such surcharges as of December 31, 2020. ​ The Plan advised the Company that it is in the process of applying for benefits available to financial troubled plans under the American Rescue Plan Act of 2021 after having submitted the initial application to the PBGC on March 1, 2023.
Other income, net principally reflects $(17,263) and $14,207 of aggregate net (losses) gains and investment income on trading securities in 2022 and 2021, respectively.
Other income (expense), net principally reflects $15,489 and $(17,263) of aggregate net gains (losses) and investment income on trading securities in 2023 and 2022, respectively.
The Company also maintains ongoing cost reduction and productivity improvement programs under which cost savings initiatives are encouraged and progress monitored.
The Company also maintains ongoing cost reduction and productivity improvement programs under which cost savings initiatives are encouraged and progress monitored, and continuously reviews automation and productivity opportunities requiring capital investments.
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 ​ 2022 vs. 2021 ​ Twelve months 2022 consolidated net product sales were $681,440 compared to $566,043 in twelve months 2021, an increase of $115,397 or 20.4%.
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 ​ 2023 vs. 2022 ​ The consolidated net product sales for the twelve months of 2023 were $763,252 compared to the twelve months 2022 of $681,440, an increase of $81,812 or 12.0%.
The number of current active employee Plan participants as of January 1, 2021 fell 6% from the previous year and 22% over the past three years.
The number of current active employee Plan participants as of January 1, 2022 fell 5% from the previous year and 10% over the past two years.
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.
The aforementioned expense includes surcharges of $1,239, $1,237 and $1,112 in 2023, 2022 and 2021, respectively, as required under the amended rehabilitation plan 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.
Other income, net also includes foreign exchange gains of $1,307 and $667 in 2022 and 2021, respectively. ​ The Company’s effective income tax rates were 21.2% and 25.7% in fourth quarter 2022 and 2021, respectively, and 22.7% and 23.8% in twelve months 2022 and 2021, respectively The decrease in the effective tax rates in 2022 generally reflects lower rates for state and international income tax provisions.
Other income, net also includes foreign exchange (losses) gains of $(2,803) and $1,307 in 2023 and 2022, respectively. ​ The Company’s effective income tax rates were 21.8% and 21.2% in fourth quarter 2023 and 2022, respectively, and 23.4% and 22.7% in twelve months 2023 and 2022, respectively.
The accompanying chart summarizes the maturities of the Company’s investments in debt securities at December 31, 2022. ​ ​ ​ ​ ​ ​ Less than 1 year $ 96,128 1 – 2 years ​ 90,550 2 – 3 years ​ ​ 47,182 3 – 4 years ​ 38,588 Total ​ $ 272,448 ​ The Company’s outstanding debt at December 31, 2022 and 2021 was $7,500 in an industrial revenue bond in which interest rates reset each week based on the current market rate.
The accompanying chart summarizes the maturities of the Company’s investments in debt securities at December 31, 2023. ​ ​ ​ ​ ​ ​ Less than 1 year $ 95,507 1 – 2 years ​ 47,848 2 – 3 years ​ ​ 46,226 3 – 4 years ​ 73,732 Total ​ $ 263,313 ​ 23 Table of Contents The Company’s outstanding debt at December 31, 2023 and 2022 was $7,500 in an industrial revenue bond in which interest rates reset each week based on the current market rate.
Adjusting for the aforementioned, product cost of goods sold increased from $369,418 in 2021 to $453,445 in 2022, an increase of $84,027 or 22.7%. As a percent of net product sales, these adjusted costs increased from 65.3% in 2021 to 66.5% in 2022, a 1.2 unfavorable percentage point change.
Adjusting for the aforementioned, product cost of goods sold increased from $453,445 in 2022 to $509,923 in 2023, an increase of $56,478 or 12.5%. As a percent of net product sales, these adjusted costs increased from 66.5% in 2022 to 66.8% in 2023, a 0.3 unfavorable percentage point change.
Earnings from operations include $(17,263) and $14,208 in certain deferred compensation (credits) expense in 2022 and 2021, respectively, which are discussed above. Adjusting for these deferred compensation expenses, adjusted earnings from operations increased from $81,341 in 2021 to $93,492 in 2022, an increase of $12,151 or 14.9%.
Earnings from operations include $15,489 and $(17,263) in certain deferred compensation expense (credits) in 2023 and 2022, respectively, which are discussed above. Adjusting for these deferred compensation expenses (credits), adjusted earnings from operations increased from $93,492 in 2022 to $117,317 in 2023, an increase of $23,825 or 25.5%.
Individually, 15 Table of Contents a 100 basis point increase in the discount rate or a 100 basis point decrease in the royalty rate would not result in a potential impairment as of December 31, 2022. ​ Earnings from operations were $110,755 in 2022 compared to $67,133 in 2021, an increase of $43,622.
Individually, a 100 basis point increase in the discount rate or a 100 basis point decrease in the royalty rate would not resul t in a potential impairment as of December 31, 2023. ​ Earnings from operations were $101,828 in 2023 compared to $110,755 in 2022, a decrease of $8,927.
If the market value of investments had been used as of January 1, 2021 the funded percentage would be 52.8% (not 48.5%).
If the market value of investments had been used as of January 1, 2022 the funded percentage would be 56.7% (not 49.4%).
Earnings per share in 2022 benefited from the reduction in average shares outstanding resulting from purchases of the Company’s common stock in the open market by the Company.
Earnings per share in 2023 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 70,868 in 2022 to 69,827 in 2023 which reflects share repurchases of $33,114 during 2023.
The improvement in fourth quarter 2022 margins and net earnings reflects the cumulative benefits of this higher price realization and higher sales as discussed above. ​ 16 Table of Contents Beginning in 2012, the Company has received periodic notices from the Bakery and Confectionery Union and Industry International Pension Fund (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”, 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.
Fourth quarter 2023 and 2022 net earnings attributable to Tootsie Roll Industries, Inc. were 17 Table of Contents $29,403 and $25,344, respectively, and net earnings per share were $0.42 and $0.36, respectively, an increase of $0.06 per share or 16.7%. ​ Beginning in 2012, the Company has received periodic notices from the Bakery and Confectionery Union and Industry International Pension Fund (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”, 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 (the “Trustees”) in 2012.
After carefully considering these facts, the Company determined that it would not be asserting permanent reinvestment of all of its foreign subsidiaries earnings as of December 31, 2017, and the Company continued to take this position as of December 31, 2022. ​ Net earnings were $75,937 in 2022 compared to $65,326 in 2021, and net earnings per share were $1.10 and $0.94 in 2022 and 2021, respectively, an increase of $0.16 per share or 17.0%.
After carefully considering these facts, the Company determined that it asserts the permanent reinvestment of all of its foreign subsidiaries earnings as of December 31, 2023. ​ Net earnings were $91,912 in 2023 compared to $75,937 in 2022, and net earnings per share were $1.32 and $1.07 in 2023 and 2022, respectively, an increase of $0.25 per share or 23.4%.
Fourth quarter 2022 net product sales were $188,180 compared to $166,598 in fourth quarter 2021, an increase of $21,582, or 13.0%. The sales growth in fourth quarter and twelve months 2022 was driven by 13 Table of Contents an overall increase in demand and higher sales price realization.
Fourth quarter 2023 net product sales were $195,368 compared to $188,180 in fourth quarter 2022, an increase of $7,188, or 3.8%. The sales growth in fourth quarter and twelve months 2023 was driven primarily by higher sales price realization.
The aforementioned expense includes surcharges of $1,237, $1,112 and $1,010 in 2022, 2021 and 2020, respectively, as required under the amended rehabilitation plan. ​ In fourth quarter 2020, the Plan Trustees advised the Company that the surcharges would no longer increase annually and therefore be “frozen” at the rates and amounts in effect as of December 31, 2020 provided that the local bargaining union and the Company executed a formal consent agreement by March 31, 2021.
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. ​ In fourth quarter 2020, the Plan Trustees advised the Company that the surcharges would no longer increase annually and therefore be “frozen” at the rates and amounts in effect as of December 31, 2020 provided that the local bargaining union and the Company executed a formal consent agreement by March 31, 2021.
This “ladder” approach to investing limits the Company’s exposure to interest rate fluctuations.
Approximately 20% to 35% of this investment portfolio matures each year. This “ladder” approach to investing limits the Company’s exposure to interest rate fluctuations.
The $10,588 increase in cash flows from operating activities from 2020 to 2021 primarily reflects increases in net earnings as a result of higher sales revenue and higher price realization as discussed above. ​ The Company manages and controls a VEBA trust, to fund the estimated future costs of certain union employee health, welfare and other benefits.
The $13,247 decrease in cash flows from operating activities from 2021 to 2022 primarily reflects increases in inventories during 2022 including higher unit costs for materials, offset by increases in net earnings and accounts receivable due to increased sales. ​ The Company manages and controls a VEBA trust, to fund the estimated future costs of certain union employee health, welfare and other benefits.
Although the Company continues to monitor these higher input costs and price increases in the industry, we are mindful of the effects and limits of passing on all of the above discussed higher input costs to consumers of our products. ​ The Company has foreign operating businesses in Mexico, Canada and Spain, and exports products to many foreign markets.
Although the Company continues to monitor its input costs, we are mindful of the effects and limits of passing on all of the above-discussed higher input costs to our customers as well as the final consumers of our products.
Our input unit costs moved significantly higher in 2022 compared to 2021 as most of our supply contracts for ingredients, packaging materials and manufacturing supplies and services expired at the end of 2021 and new supply agreements at higher prices became effective in early 2022.
Certain cost and expense reductions did provide some benefit to 2023 gross profit margins. ​ Our input unit costs for ingredients, packaging materials and many manufacturing repairs, supplies and services moved significantly higher in 2023 from 2022 as new supply agreements at higher prices became effective in early 2023.
The Company uses the Last-In-First-Out (LIFO) method of accounting for inventory and costs of goods sold which results in lower current income taxes during such periods of increasing costs and higher inflation, but this method does charge the most current costs to cost of goods sold and thereby accelerates the realization of these higher costs. ​ Our supply chain was extremely challenging in 2022, as our supplier lead times expanded greatly and some suppliers were unable to meet some promised delivery dates.
The Company uses the Last-In-First-Out (LIFO) method of accounting for inventory and costs of goods sold which results in lower current income taxes during such periods of increasing costs and higher inflation, but this method does charge the most current costs to cost of goods sold and thereby accelerates the realization of these higher costs. ​ In response to these higher input costs, many companies in the consumer products industry have increased selling prices during the 2021 through 2023 period.
These provisions of U.S. tax reform significantly impact the accounting for the undistributed earnings of foreign subsidiaries. The tax costs associated with a future distribution, including foreign withholding taxes, are not material to the Company’s financial statements.
These provisions of U.S. tax reform significantly impact the accounting for the undistributed earnings of foreign subsidiaries.
The Company’s actuary advised that the regulations under the aforementioned PBGC financial assistance could result in a higher withdrawal liability even with PBGC financial assistance.
The Company’s actuary advised that the regulations under the aforementioned PBGC financial assistance could result in a higher withdrawal liability even with PBGC financial assistance. ​ During second quarter 2023, the Company and the union concluded negotiations and entered into a new contract, which expires in September 2027, replacing a prior contract, which expired in September 2022.
However, as a percent of net product sales, these adjusted expenses decreased from 21.0% of net product sales in 2021 to 20.3% of net product sales in 2022, a 0.7 favorable percentage point change. ​ Selling, marketing and administrative expenses include freight, delivery and warehousing expenses.
Adjusting for the aforementioned, selling, marketing and administrative expenses increased from $138,346 in 2022 to $140,337 in 2023, an increase of $1,991 or 1.4%. As a percent of net product sales, these adjusted expenses decreased from 20.3% of net product sales in 2022 to 18.4% of net product sales in 2023, a 1.9 favorable percentage point change.
As of December 31, 2022, the Company’s total cash, cash equivalents and investments, including all long-term investments, was $396,926 compared to $436,983 at December 31, 2021, a decrease of $40,057. See Liquidity And Capital Resources section below for discussion. The aforementioned includes $71,208 and $89,736 of investments in trading securities as of December 31, 2022 and 2021, respectively.
This increase principally reflects the effects of increased short-term investments and inventories which is discussed below. As of December 31, 2023, the Company’s total cash, cash equivalents and investments, including all long-term investments, was $427,028 compared to $396,926 at December 31, 2022, an increase of $30,102. See Liquidity And Capital Resources section below for discussion.
During 2022, the Company paid cash dividends of $24,629, purchased and retired $31,910 of its outstanding shares, and made capital expenditures of $23,356. ​ The Company’s net working capital was $218,894 at December 31, 2022 compared to $188,333 at December 31, 2021. This increase principally reflects the effects of increased short-term investments and inventories which is discussed below.
During 2023, the Company paid cash dividends of $25,076, purchased and retired $33,114 of its outstanding shares, and made capital expenditures of $26,796, all of which was financed from internal sources. ​ The Company’s net working capital was $245,763 at December 31, 2023 compared to $218,894 at December 31, 2022.
The Company does not defer the recognition of any amounts on its consolidated balance sheet with respect to such costs.
The Company does not defer the recognition of any amounts on its consolidated balance sheet with respect to such costs. The expected cost of future payments to customers for incentives and other trade promotional programs is recorded at the time sale as a reduction of Net product sales.

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