TOOTSIE ROLL INDUSTRIES INC

Previous wording

Net product sales were $153,190 in second quarter 2025 compared to $148,819 in second quarter 2024, an increase of $4,371 or 2.9%. First half 2025 net product sales were $299,711 compared to $300,283 in first half 2024, a decrease of $572 or 0.2%. Domestic (U.S.) net product sales in second quarter and first half 2025 increased by 4.6% and 1.4% compared to the corresponding period in the prior year; and foreign net product sales, including exports to foreign markets and the effects of foreign translations, decreased 16.8% and 16.5%, respectively, compared to the corresponding period in the prior year. For the second quarter and first half 2025, domestic sales represented 93.8% and 92.6%, respectively, of total consolidated net product sales. Successful marketing and sales programs contributed to higher sales in second quarter 2025 compared to the prior year second quarter, however, the timing of sales, including seasonal sales, between second and third quarter 2025 did provide some additional benefit to second quarter 2025 when compared to second quarter 2024. The Company continued to face a challenging market in second quarter and first half 2025 as customers and consumers have become more resistant to higher price realization.

Current wording

Net product sales were $230,614 in third quarter 2025 compared to $223,891 in third quarter 2024, an increase of $6,723 or 3.0%. Nine months 2025 net product sales were $530,325 compared to $524,174 in nine months 2024, an increase of $6,151 or 1.2%. Domestic (U.S.) net product sales in third quarter and nine months 2025 increased by 3.8% and 2.4% compared to the corresponding period in the prior year; and foreign net product sales, including exports to foreign markets and the effects of foreign translations, decreased 6.1% and 12.2%, respectively, compared to the corresponding periods in the prior year. For the third quarter and nine months 2025, domestic sales represented 92.3% and 92.5%, respectively, of total consolidated net product sales. Successful marketing and sales programs contributed to higher domestic sales in third quarter 2025 compared to the prior year third quarter, however, the timing of sales, including seasonal sales, between second and third quarter 2025 did provide some additional benefit to third quarter 2025 when compared to third quarter 2024. The Company continued to face some challenges in nine months 2025 as customers and consumers became more resistant to higher prices, and these headwinds had some adverse effect on sales in nine months 2025.

Previous wording

Product cost of goods sold was $98,127 in second quarter 2025 compared to $99,732 in second quarter 2024, and $193,627 in first half 2025 compared to $202,464 in first half 2024. Product cost of goods sold includes $467 and $122 of certain deferred compensation expenses in second quarter 2025 and 2024, respectively, and $312 and $487 of certain deferred compensation expenses in first half 2025 and 2024, respectively. These deferred compensation expenses principally resulted from the 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. Excluding the adjustment for deferred compensation expenses, product cost of goods sold decreased from $99,610 in second quarter 2024 to $97,660 in second quarter 2025, a decrease of $1,950 or 2.0%; and from $201,977 in first half 2024 to $193,315 in first half 2025, a decrease of $8,662 or 4.3%. As a percentage of net product sales, adjusted product cost of goods sold was 63.8% and 66.9% in second quarter 2025 and 2024, respectively, a decrease of 3.1 percentage points; and 64.5% and 67.3% in first half 2025 and 2024, respectively, a decrease of 2.8 percentage points. Second quarter and first half 2025 product cost of goods sold and gross profit margins benefited from higher price realization implemented to restore margins, improvements in plant manufacturing operating efficiencies, and certain cost reductions.

Current wording

Product cost of goods sold was $152,741 in third quarter 2025 compared to $148,266 in third quarter 2024, and $346,368 in nine months 2025 compared to $350,730 in nine months 2024. Product cost of goods sold includes $315 and $240 of certain deferred compensation expenses in third quarter 2025 and 2024, respectively, and $627 and $727 of certain deferred compensation expenses in nine months 2025 and 2024, respectively. These deferred compensation expenses principally resulted from the 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. Excluding the adjustment for deferred compensation expenses, product cost of goods sold increased from $148,026 in third quarter 2024 to $152,426 in third quarter 2025, an increase of $4,400 or 3.0%; and decreased from $350,003 in nine months 2024 to $345,741 in nine months 2025, a decrease of $4,262 or 1.2%. As a percentage of net product sales, adjusted product cost of goods sold was 66.1% and 66.1% in third quarter 2025 and 2024, respectively, an increase of 0.1 percentage points; and 65.2% and 66.8% in nine months 2025 and 2024, respectively, a decrease of 1.6 percentage points. Third quarter and nine months 2025 product cost of goods sold and gross profit margins benefited from higher price realization implemented to restore margins, improvements in plant manufacturing operating efficiencies, and certain cost reductions.

Previous wording

In response to increases in input costs in recent years, many companies in the consumer products industry have increased selling prices. We have implemented price increases as well during these periods with the objective of improving sales price realization in order to recover our margin declines. Although we made progress in restoring our margins in second quarter and first half 2025, prices of cocoa and chocolate continue at significantly elevated levels compared to historical prices in past years. As a result, we expect to incur even higher cocoa and chocolate unit costs during the balance of 2025 and into 2026 as many of our older supply contracts expire and new contracts at higher costs become effective. Although the Company continues to monitor its input costs, we are mindful of the effects and limits when passing on the above-discussed higher input costs to our customers as well as the final consumers of our products.

Current wording

Many companies in the consumer products industry have increased selling prices in order to improve price realization in response to increasing input costs in recent years. We have implemented price increases as well during this period in order to mitigate certain input cost increases and recover our margin declines. Although we made progress in restoring our margins in third quarter and nine months 2025, certain ingredients and packaging materials unit costs, particularly cocoa and chocolate, have increased in nine months 2025 compared to 2024. Cocoa and chocolate prices continue at significantly elevated levels compared to historical prices in past years. We have experienced continuing higher costs for these ingredients during 2025 and expect this to continue in fourth quarter 2025 and into 2026 because many of our older supply contracts at lower prices expired in early 2025. Although the Company continues to monitor its input costs, we are mindful of the effects and limits when passing on the above-discussed higher input costs to our customers as well as the final consumers of our products.

Previous wording

The Company uses the Last-In-First-Out (LIFO) method of accounting for inventory and costs of goods sold which generally results in lower current net earnings during such periods of increasing costs and higher inflation. As a result, the above-discussed higher cocoa and chocolate costs will have an increasingly adverse effect on our gross profit margins as this year progresses.

Current wording

The Company uses the Last-In-First-Out (LIFO) method of accounting for inventory and costs of goods sold which generally results in lower current net earnings and income taxes during such periods of increasing costs and higher inflation. As a result, the above discussed higher input costs, including cocoa and chocolate, have had increasingly adverse effects on our gross profit margins this year.

Previous wording

2024, respectively. As discussed above, these 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. Excluding the adjustment for deferred compensation expenses, selling, marketing and administrative expenses increased from $32,670 in second quarter 2024 to $33,959 in second quarter 2025, an increase of $1,289 or 3.9%; and from $64,663 in first half 2024 to $66,808 in first half 2025, an increase of $2,145 or 3.3%. As a percentage of net product sales, adjusted selling, marketing and administrative expenses increased from 22.0% in second quarter 2024 to 22.2% in second quarter 2025, an unfavorable change of 0.2 percentage points; and from 21.5% in first half 2024 to 22.3% in first half 2025, an unfavorable change of 0.8 percentage points. These higher expenses as a percentage of sales reflect the adverse effects of lower sales as many of our selling, marketing and administrative expenses are fixed and do not change significantly with changes in sales.

Current wording

and administrative expenses include $7,019 and $4,560 of certain deferred compensation expenses in third quarter 2025 and 2024, respectively, and $13,963 and 13,855 of certain deferred compensation expenses in nine months 2025 and 2024, respectively. As discussed above, these 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. Excluding the adjustment for deferred compensation expenses, selling, marketing and administrative expenses increased from $37,265 in third quarter 2024 to $40,012 in third quarter 2025, an increase of $2,747 or 7.4%; and increased from $101,928 in nine months 2024 to $106,820 in nine months 2025, an increase of $4,892 or 4.8%. As a percentage of net product sales, adjusted selling, marketing and administrative expenses increased from 16.6% in third quarter 2024 to 17.4% in third quarter 2025, an unfavorable change of 0.8 percentage points; and from 19.4% in nine months 2024 to 20.1% in nine months 2025, an unfavorable change of 0.7 percentage points. These higher expenses as a percentage of sales principally reflect higher advertising expense as well as the adverse effects of higher wages, salaries, and benefits, and certain other expenses increasing at a higher rate than sales during these comparative periods. Many of our selling, marketing and administrative expenses are fixed and increase with wage and other inflationary increases and do not change significantly with changes in sales.

Previous wording

Selling, marketing and administrative expenses include $13,047 and $13,839 for customer freight, delivery and warehousing expenses in second quarter 2025 and 2024, respectively, a decrease of $792 or 5.7%; and $26,963 and $27,455 in first half 2025 and 2024, respectively, a decrease of $492 or 1.8%. These expenses were 8.5% and 9.3% of net product sales in second quarter 2025 and 2024, respectively; and 9.0% and 9.1% of net product sales in first half 2025 and 2024, respectively. Customer freight and delivery unit costs, including the cost per pound shipped, were favorable in second quarter 2025 compared to the corresponding period in 2024.

Current wording

Selling, marketing and administrative expenses include $15,434 and $15,442 for customer freight, delivery and warehousing expenses in third quarter 2025 and 2024, respectively, a decrease of $8 or 0.1%; and $42,397 and $42,897 in nine months 2025 and 2024, respectively, a decrease of $500 or 1.2%. These expenses were 6.7% and 6.9% of net product sales in third quarter 2025 and 2024, respectively; and 8.0% and 8.2% of net product sales in nine months 2025 and 2024, respectively. Customer freight and delivery unit costs were favorable in third quarter and nine months 2025 compared to the corresponding periods in 2024.

Previous wording

As outlined in Note 1 to the consolidated financial statements, the Company records revenue from net product sales based on accounting guidance. Adjustments for estimated customer cash discounts upon payment, discounts for price adjustments, product returns, allowances and certain advertising and promotional costs, including consumer coupons, are variable consideration and are recorded as a reduction of net product sales revenue in the same period the related net product sales are record. These estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. The Company identified changes in business conditions in each of the periods presented that changed Management’s estimated current and future liabilities for prior period obligations resulting in a reduction in accrued liabilities and an increase in net product sales of $900 and $2,070 in second quarter 2025 and 2024, respectively; and $1,400 and $2,240 in first half 2025 and 2024, respectively.

Current wording

As outlined in Note 1 to the consolidated financial statements, the Company records revenue from net product sales based on accounting guidance. Adjustments for estimated customer cash discounts upon payment, discounts for price adjustments, product returns, allowances and certain advertising and promotional costs, including consumer coupons, are variable consideration and are recorded as a reduction of net product sales revenue in the same period the related net product sales are recorded. These estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. The Company identified changes in business conditions in each of the periods presented that changed Management’s estimated current and future liabilities for prior period obligations resulting in a reduction in accrued liabilities and an increase in net product sales of $200 and $3,725 in third quarter 2025 and 2024, respectively; and $1,600 and $5,965 in nine months 2025 and 2024, respectively.

Previous wording

Earnings from operations were $12,121 in second quarter 2025 compared to $15,435 in second quarter 2024; and were $35,181 in first half 2025 compared to $26,545 in first half 2024. Earnings from operations include $10,870 and $2,492 of certain deferred compensation expenses in second quarter 2025 and 2024, respectively; and include $7,256 and $9,782 of certain deferred compensation expenses in first half 2025 and 2024, respectively, which is discussed above. Adjusting for this deferred compensation expenses, adjusted earnings from operations were $22,991 and $17,927 in second quarter 2025 and 2024, respectively, an increase of $5,064 or 28.2%; and $42,437 and $36,327 in first half 2025 and 2024, respectively, an increase of $6,110 or 16.8%. As a percentage of net product sales, these adjusted operating earnings were 15.0% and 12.0% in second quarter 2025 and 2024, respectively, a favorable 3.0 percentage point change; and 14.2% and 12.1% in first half 2025 and 2024, respectively, a favorable 2.1 percentage point change. Improvements in gross profit margins, as discussed above, was the principal driver of these favorable changes in operating earnings in second quarter and first half 2025.

Current wording

Earnings from operations were $32,367 in third quarter 2025 compared to $35,244 in third quarter 2024; and were $67,548 in nine months 2025 compared to $61,789 in nine months 2024. Earnings from operations include $7,334 and $4,800 of certain deferred compensation expenses in third quarter 2025 and 2024, respectively; and include $14,590 and $14,582 of certain deferred compensation expenses in nine months 2025 and 2024, respectively, which are discussed above. Adjusting for these deferred compensation expenses, adjusted earnings from operations were $39,701 and $40,044 in third quarter 2025 and 2024, respectively, a decrease of $343 or 0.9%; and $82,138 and $76,371 in nine months 2025 and 2024, respectively, an increase of $5,767 or 7.6%. As a percentage of net product sales, these adjusted operating earnings were 17.2% and 17.9% in third quarter 2025 and 2024, respectively, an unfavorable 0.7 percentage point change; and 15.5% and 14.6% in nine months 2025 and 2024, respectively, a favorable 0.9 percentage point change. The effects of the favorable changes in management’s estimates of certain sales allowances, discounts, and promotions in the prior year 2024 comparative periods, as discussed above, have an adverse effect when compared to third quarter and nine months 2025 adjusted operating earnings. Improvement in gross profit margins, as discussed above, was the principal driver of the improvement in operating earnings in nine months 2025.

Previous wording

Other income, net was $14,072 in second quarter 2025 compared to $4,900 in second quarter 2024; and $14,021 in first half 2025 compared to $13,932 in first half 2024. Other income, net includes net gains and investment income of $10,870 and $2,492 for second quarter 2025 and 2024, respectively, and $7,256 and $9,782 in first half 2025 and 2024, respectively, on trading securities which provide an economic hedge of the Company’s deferred compensation liabilities on trading securities. The changes in net investment activity on trading securities in second quarter and first half 2025 and 2024 reflect the overall changes in the equity markets during these periods. These changes were substantially offset by a like amount of deferred compensation expense included in product cost of goods sold and selling, marketing, and administrative expenses in the respective periods as discussed above.

Current wording

Other income, net was $16,233 in third quarter 2025 compared to $7,188 in third quarter 2024; and $30,254 in nine months 2025 compared to $21,120 in nine months 2024. Other income, net also includes net gains and investment income of $7,334 and $4,800 for third quarter 2025 and 2024, respectively, and $14,590 and $14,582 in nine months 2025 and 2024, respectively, on trading securities which provide an economic hedge of the Company’s deferred compensation liabilities on trading securities. The changes in net investment activity on trading securities in third quarter and nine months 2025 and 2024 reflect the overall favorable changes in the equity markets during these periods. These changes were substantially offset by a like amount of deferred compensation expense included in

Previous wording

Other income, net includes investment income from available for sale securities and cash equivalents of $3,485 and $2,114 for second quarter 2025 and 2024, respectively; and $6,946 and $3,977 in first half 2025 and 2024, respectively. The increases in 2025 investment income reflects the higher interest rate environment in 2025, including

Current wording

Other income, net includes investment income from available for sale securities and cash equivalents of $8,614 and $2,367 for third quarter 2025 and 2024, respectively; and $15,560 and $6,344 in nine months 2025 and 2024, respectively. As discussed in Note 1 to the Consolidated Financial Statements, we determined that we were not accreting bond discounts to income as part of our investment portfolio and under-recognized income relating to available for sale investments. We evaluated the error, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated. Therefore, to correct the cumulative error, Other Income, net includes pre-tax out-of-period adjustments of $4,495 and $3,231, for third quarter and nine months 2025, respectively, which resulted from reclassifying unrealized gains from Accumulated other comprehensive loss. The increases in 2025 investment income also reflect the higher interest rate environment in 2025, including the maturities of prior investments at lower yields, as well as higher average balances held in third quarter and nine months 2025 compared to the corresponding period in the prior year. Other Income, Net includes an insurance recovery of $1,307 in nine months 2025 and pre-tax gains (losses) on foreign exchange of $91 and $6 in third quarter 2025 and 2024, respectively, and $(1,297) and $126 in nine months 2025 and 2024, respectively.

Previous wording

The Company’s effective income tax rates were 33.1% and 23.1% in second quarter 2025 and 2024, respectively, and 27.75 and 22.3% in first half 2025 and 2024, respectively. These higher effective tax rates principally reflect the adverse effect of certain deferred compensation that will not be deductible for income taxes when paid in future periods.

Current wording

The Company’s effective income tax rates were 26.7% and 22.6% in third quarter 2025 and 2024, respectively, and 27.2% and 22.4% in nine months 2025 and 2024, respectively. These higher effective tax rates principally reflect the adverse effect of certain deferred compensation that will not be deductible for income taxes when paid in future periods.

Previous wording

Net earnings attributable to Tootsie Roll Industries, Inc. were $17,544 (after $14 net loss attributed to non-controlling interests) in second quarter 2025 compared to $15,640 (after $6 net loss attributed to non-controlling interests) in second quarter 2024, and earnings per share were $0.24 and $0.21 in second quarter 2025 and 2024, respectively, an increase of $0.03 per share, or 14.3%. First half 2025 net earnings attributable to Tootsie Roll Industries, Inc. were $35,602 (after $31 net loss attributed to non-controlling interests) compared to first half 2024 net earnings of $31,474 (after $5 net loss attributed to non-controlling interests), and net earnings per share were $0.49 and $0.43 in first half 2025 and first half 2024, respectively, an increase of $0.06 per share or 14.0%. Earnings per share attributable to Tootsie Roll Industries, Inc. for second quarter and first half 2025 benefited from the reduction in average shares outstanding resulting from purchases in the open market by the Company of its common stock during the preceding twelve months. Average shares outstanding decreased from 73,536 at second quarter 2024 to 72,879 at second quarter 2025, and from 73,536 in first half 2024 to 72,923 in first half 2025.

Current wording

Net earnings attributable to Tootsie Roll Industries, Inc. were $35,659 (after $12 net loss attributed to non-controlling interests) in third quarter 2025 compared to $32,844 (after $11 net loss attributed to non-controlling interests) in third quarter 2024, and earnings per share were $0.49 and $0.45 in third quarter 2025 and 2024, respectively, an increase of $0.04 per share, or 8.9%. Nine months 2025 net earnings attributable to Tootsie Roll Industries, Inc. were $71,261 (after $43 net loss attributed to non-controlling interests) compared to nine months 2024 net earnings of $64,318 (after $16 net loss attributed to non-controlling interests), and net earnings per share were $0.98 and $0.87 in nine months 2025 and nine months 2024, respectively, an increase of $0.11 per share or 12.6%. Earnings per share attributable to Tootsie Roll Industries, Inc. for third quarter and nine months 2025 benefited from the reduction in average shares outstanding resulting from purchases in the open market by the Company of its common stock during the preceding twelve months. Average shares outstanding decreased from 73,497 at third quarter 2024 to 72,879 at third quarter 2025, and from 73,520 in nine months 2024 to 72,910 in nine months 2025.

Previous wording

Goodwill and intangibles, principally trademarks, are assessed annually as of December 31 or whenever events or circumstances indicate that the carrying values may not be recoverable from future cash flows. The Company has not identified any triggering events, as defined, or other adverse information that would indicate a material impairment of its goodwill or intangibles in second quarter or first half 2025. Although Management has not identified any trigging events at this time relating to its intangibles, factors outlined in the Company’s risk factors discussed on Form 10-K for the year ended December 31, 2024, could change this assessment in the future.

Current wording

Goodwill and intangibles, principally trademarks, are assessed annually as of December 31 or whenever events or circumstances indicate that the carrying values may not be recoverable from future cash flows. The Company has not identified any triggering events, as defined, or other adverse information that would indicate a material impairment of its goodwill or intangibles in third quarter or nine months 2025. Although management has not identified any trigging events at this time relating to its intangibles, factors outlined in the Company’s risk factors discussed on Form 10-K for the year ended December 31, 2024, could change this assessment in the future.

Previous wording

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. In 2015, the Plan was reclassified to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015. A designation of “critical and declining status” implies that the Plan is expected to become insolvent in the next 20 years. In 2016, the Company received new notices that the Plan’s trustees adopted an updated Rehabilitation Plan effective January 1, 2016, and all annual notices through 2024 have continued to classify the Plan in the “critical and declining status” category. In June 2024, the PBGC announced that it has approved the Plan’s application for Special Financial Assistance under the American Rescue Plan Act of 2021. The Plan was granted approximately $3.4 billion in Special Financial Assistance funds and received those funds in July 2024. As a result of the Special Financial Assistance, the plan status changed to “critical status” for 2024 and will be until the plan year ending in 2051.

Current wording

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. In 2015, the Plan was reclassified to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015. A designation of “critical and declining status” implies that the Plan is expected to become insolvent in the next 20 years. In 2016, the Company received new notices that the Plan’s trustees adopted an updated Rehabilitation Plan effective January 1, 2016, and all annual notices through 2024 have continued to classify the Plan in the “critical and declining status” category. In June 2024, the PBGC announced that it had approved the Plan’s application for Special Financial Assistance under the American Rescue Plan Act of 2021. The Plan was granted approximately $3.4 billion in Special Financial Assistance funds and

Previous wording

The Company’s actuary believes that it still remains unclear if the Plan can remain solvent through the targeted date of 2051 although as a requirement of the American Rescue Plan Act of 2021, the Plan must remain in “critical status” through 2051 regardless of solvency. The regulations under the aforementioned PBGC financial assistance could result in a higher withdrawal liability even with PBGC financial assistance since those regulations require use of settlement interest rates to value all, instead of a portion, of the present value of vested benefits in determining the Company’s withdrawal liability. In addition, for withdrawal liability purposes, PBGC regulations require the Special Financial Assistance to be phased-in over a period of time instead of fully recognized immediately. While it is uncertain how the requirements imposed by the Special Financial Assistance will impact the Company’s withdrawal liability in the future, the Company’s actuary believes any withdrawal will continue to be limited to the twenty annual payments discussed below and that those payments will not be affected by Special Financial Assistance regulation.

Current wording

The Company’s actuary believes that it still remains unclear if the Plan can remain solvent through the targeted date of 2051, even though a requirement of the American Rescue Plan Act of 2021 is that the Plan will remain in “critical status” through 2051 regardless of solvency. The regulations under the aforementioned PBGC financial assistance could result in a higher withdrawal liability even with PBGC financial assistance since those regulations require use of settlement interest rates to determine the present value of all, instead of a portion, of vested benefits in determining the Company’s withdrawal liability. In addition, for withdrawal liability purposes, PBGC regulations require that the Special Financial Assistance be phased-in over a period of time instead of fully recognized immediately. While it is uncertain how the requirements imposed by the Special Financial Assistance will impact the Company’s withdrawal liability in the future, the Company’s actuary believes Plan withdrawals will continue to be limited to the twenty annual payments discussed below and that those payments will not likely be affected by Special Financial Assistance regulation.

Previous wording

The Company has been advised that its withdrawal liability would have been $97,500, $102,200 and $96,000 if it had withdrawn from the Plan during 2024, 2023 and 2022, respectively (most recent information provided by the Plan). The most recent decrease in the withdrawal liability as advised by the Plan was primarily driven by an increase in the PBGC interest rates used to value a portion of the present value of vested benefits (the Plan uses a blended interest rate assumption). As discussed above, the Plan was granted $3.4 billion in Special Financial Assistance in July 2024. The withdrawal liability, since it is calculated as of the end of 2023 as if the Company were to have withdrawn in 2024, does not include any of the $3.4 billion of assets received. After receiving the Special Financial Assistance, the Plan will be required to use PBGC interest rates to value all, instead of a portion, of the present value of vested benefits to provide an estimate of the Company’s withdrawal liability. In addition, for withdrawal liability purposes, PBGC regulations require the Special Financial Assistance to be phased-in over a period of time instead of fully recognized immediately. The impact of the Special Financial Assistance on the withdrawal liability has not been assessed by the Plan as of the date of this report.

Current wording

The Company has been advised that its withdrawal liability would have been $97,500, $102,200 and $96,000 if it had withdrawn from the Plan during 2024, 2023 and 2022, respectively (most recent information provided by the Plan). The most recent decrease in the withdrawal liability as advised by the Plan was primarily driven by an increase in the PBGC interest rates used to value a portion of the present value of vested benefits (the Plan uses a blended interest rate assumption). As discussed above, the Plan was granted $3.4 billion in Special Financial Assistance in July 2024. The withdrawal liability, since it is calculated as of the end of 2023 as if the Company were to have withdrawn in 2024, does not include any of the $3.4 billion Special Financial Assistance. After receiving the Special Financial Assistance, the Plan will be required to use PBGC interest rates to value all, instead of a portion, of the present value of vested benefits to provide an estimate of the Company’s withdrawal liability. In addition, for withdrawal liability purposes, PBGC regulations require the Special Financial Assistance to be phased-in over a period of time instead of fully recognized immediately. The impact of the Special Financial Assistance on the withdrawal liability has not been assessed by the Plan as of the date of this report.

Previous wording

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. The Trustees advised that they have concluded that continuing increases in surcharges would likely have a long-term adverse effect on the solvency of the Plan. The Trustees concluded that further increases would result in increasing financial hardships and withdrawals of participating employers, and that this change will not have a material effect on the Plan’s insolvency date. 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.

Current wording

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. The Trustees advised that they have concluded that continuing increases in surcharges would likely have a long-term adverse effect on the solvency of the Plan. The Trustees also concluded that further increases would result in increasing financial hardships and withdrawals of participating employers, and that this change will not have a material effect on the Plan’s insolvency date. 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.

Previous wording

The Company’s pension expense for this Plan for first half 2025 and 2024 was $1,744 and $1,770, respectively. The aforementioned expense includes surcharges of $615 and $624 for first half 2025 and 2024, respectively, as required under the amended plan of rehabilitation. The Company’s twelve months pension expense for this Plan for 2024 and 2023 was $3,332 and $3,516 respectively, which includes surcharges of $1,174 and $1,239, respectively.

Current wording

The Company’s pension expense for this Plan for nine months 2025 and 2024 was $2,572 and $2,579, respectively. The aforementioned expense includes surcharges of $907 and $909 for nine months 2025 and 2024, respectively, as required under the amended plan of rehabilitation. The Company’s twelve months pension expense for this Plan for 2024 and 2023 was $3,332 and $3,516 respectively, which includes surcharges of $1,174 and $1,239, respectively.

Previous wording

Our operations and sales are principally in North America, and our cross-border transactions with Canada and Mexico qualify under the USMCA free-trade agreement. Certain ingredients, including cocoa, chocolate, and edible oils, as well as some packaging and other purchases, do have foreign origins outside of USMCA. Until such time that more clarity regarding tariffs, as well as possible retaliatory tariffs, is forthcoming, we are not able to ascertain the effects of more permanent tariffs on our business. Nonetheless, the Company has recently performed an internal analysis of the effects of the current tariffs, some of which are temporary, reciprocal, “base-line” or minimum 10% tariffs, that affect certain foreign sourced ingredients, packaging materials and supplies. Based on this analysis, Management believes that current tariffs are estimated to have approximately $6,800 of adverse annual (12 months) effects on our consolidated earnings from operations. When the permanent tariffs are finally determined, should they be above or below the current tariff rates, our estimated annual increase in tariff costs should be adjusted accordingly. There has been some discussion in the Trump administration that ingredients that cannot be sourced in the USA (e.g. cocoa) may be exempt from future tariffs. In addition, the Company does purchase manufacturing equipment from foreign sources, principally the European Union, and therefore, such purchases will become more costly due to new tariffs being imposed.

Current wording

Our operations and sales are principally in North America, and our cross-border transactions with Canada and Mexico qualify under the USMCA free-trade agreement. Certain ingredients, including cocoa, chocolate, and edible oils, as well as some packaging and other purchases, do have foreign origins outside of USMCA. Until such time that more clarity regarding tariffs, as well as possible retaliatory tariffs, is forthcoming, we are not able to ascertain the effects of more permanent tariffs on our business. Nonetheless, the Company has recently performed an internal analysis of the effects of the current tariffs, some of which are temporary, reciprocal, or “base-line” minimum 10% tariffs, that affect certain foreign sourced ingredients, packaging materials and supplies. Based on this analysis, Management believes that current tariffs are estimated to have approximately $6,900 of adverse annual (12 months) effects on our consolidated earnings from operations. When the permanent tariffs are finally determined, should they be above or below the current tariff rates, our estimated annual increase in tariff costs should be adjusted accordingly. There has been some discussion in the Trump administration that ingredients that cannot be sourced in the USA (e.g. cocoa) may be exempt from future tariffs. In addition, the Company does purchase manufacturing equipment from foreign sources, principally the European Union, and therefore, such purchases will become more costly due to new tariffs being imposed.

Previous wording

Cash flows provided by (used in) investing activities were $5,670 and $(25,918) in first half 2025 and 2024, respectively, a favorable increase of $31,588. The increase in cash flows from investing activities principally reflects a decline in purchases of available for sale securities, and a corresponding increase in cash and cash equivalents during the comparative periods. First half 2025 and 2024 investing activities also include capital expenditures of $10,363 and $8,421, respectively. The Company is currently pursuing a plant expansion, including additions to and replacement of certain processing and packaging lines, to better meet higher level of forecasted demand for certain products on a timelier and more cost-effective basis. The plant expansion is expected to take place over the next five years with most of the capital expenditures expected to occur during 2026 through 2027. The total cost of this expansion will approximate $95,000 to $100,000, which includes estimated normal and recurring capital expenditures at this plant location, and is expected to be funded from the Company’s cash flow from operations and internal sources.

Current wording

Cash flows used in investing activities were $91,843 and $32,176 in nine months 2025 and 2024, respectively, a unfavorable increase of $59,667. The increase in cash flows from investing activities principally reflects an increase in purchases of available for sale securities, and a decrease in sales and maturities of available for sales investments. Nine months 2025 and 2024 investing activities also include capital expenditures of $21,914 and $13,911, respectively. The Company is currently pursuing a plant expansion, including additions to and replacement of certain processing and packaging lines, to better meet higher level of forecasted demand for certain products on a timelier and more cost-effective basis. The plant expansion is expected to take place over the next five years with most of the capital expenditures expected to occur in 2026 and 2027. The total cost of this expansion will approximate $75,000 to $85,000, which includes estimated normal and recurring capital expenditures over the five year period at this plant location, and is expected to be funded from the Company’s cash flow from operations and internal sources.

Previous wording

The Company’s condensed consolidated financial statements include bank borrowings of $1,018 and $1,046 at June 30, 2025 and 2024, respectively, all of which relate to its Spanish subsidiary. The Company had no other outstanding bank borrowings at June 30, 2025 and 2024.

Current wording

The Company’s condensed consolidated financial statements include bank borrowings of $1,011 and $1,078 at September 30, 2025 and 2024, respectively, all of which relate to its Spanish subsidiary. The Company had no other outstanding bank borrowings at September 30, 2025 and 2024.

Previous wording

Financing activities include Company common stock purchases and retirements of $6,483 and $0 in first half 2025 and 2024, respectively. Cash dividends of $12,928 and $12,634 were paid in first half 2025 and 2024, respectively.

Current wording

Financing activities include Company common stock purchases and retirements of $6,483 and $2,196 in nine months 2025 and 2024, respectively. Cash dividends of $19,497 and $19,062 were paid in nine months 2025 and 2024, respectively.

Previous wording

The Company’s current ratio (current assets divided by current liabilities) was 4.0 to 1 at June 30, 2025 compared to 3.8 to 1 at December 31, 2024 and 3.7 to 1 at June 30, 2024. Net working capital was $273,269 at June 30, 2025 compared to $246,319 and $237,114 at December 31, 2024 and June 30, 2024, respectively. Included in net working capital is cash and cash equivalents and short-term investments totaling $170,531 at June 30, 2025 compared to $194,630 and $131,171 at December 31, 2024 and June 30, 2024, respectively. In addition, long term investments, principally debt securities comprising corporate bonds, were $333,626 at March 31, 2025, as compared to $332,338 and $292,723 at December 31, 2024 and June 30, 2024, respectively. Aggregate cash and cash equivalents and short and long-term investments were $504,157, $526,968, and $423,894, at June 30, 2025, December 31, 2024 and June 30, 2024, respectively, including $112,009, $105,067, and $98,728 at June 30, 2025, December 31, 2024 and June 30, 2024, respectively, relating to trading securities which are used as an economic hedge for the Company’s deferred compensation liabilities.

Current wording

The Company’s current ratio (current assets divided by current liabilities) was 2.8 to 1 at September 30, 2025 compared to 3.8 to 1 at December 31, 2024 and 3.6 to 1 at September 30, 2024. Net working capital was $196,184 at September 30, 2025 compared to $246,319 and $247,685 at December 31, 2024 and September 30, 2024, respectively. Included in net working capital is cash and cash equivalents and short-term investments totaling $119,830 at September 30, 2025 compared to $194,630 and $163,211 at December 31, 2024 and September 30, 2024, respectively. In addition, long term investments, principally debt securities comprising corporate bonds, were $436,532 at September 30, 2025, as compared to $332,338 and $318,344 at December 31, 2024 and September 30, 2024, respectively. Aggregate cash and cash equivalents and short and long-term investments were $556,362, $526,968, and $481,555, at September 30, 2025, December 31, 2024 and September 30, 2024, respectively, including $119,592, $105,067, and $103,876 at September 30, 2025, December 31, 2024 and September 30, 2024, respectively, relating to trading securities which are used as an economic hedge for the Company’s deferred compensation liabilities.

Previous wording

Investments in available for sale securities, primarily high-quality corporate bonds, that matured during first half 2025 and 2024, were generally used in working capital, capital expenditures or were replaced with debt securities of similar maturities. The net unrealized gain (loss) on available for sale investments was approximately $4,600 and $(1,600) at June 30, 2025 and 2024, respectively. The Company expects to hold most of these securities to maturity and therefore does not expect to ultimately realize a substantial portion of any of unrealized losses on individual investments (see also Item 3 below, QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK).

Current wording

Investments in available for sale securities, primarily high-quality corporate bonds, that matured during nine months 2025 and 2024, were generally used in working capital, capital expenditures or were replaced with debt securities of similar maturities. The net unrealized gain (loss) on available for sale investments was approximately $1,600 and $4,300 at September 30, 2025 and 2024, respectively. The Company believes it is likely to hold most of these securities to maturity and therefore does not expect to ultimately realize a substantial portion of any of unrealized losses on individual investments (see also Item 3 below, QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK).

Previous wording

The Company periodically contributes to a VEBA trust, managed and controlled by the Company, to fund the estimated future costs of certain employee health, welfare and other benefits. The Company funded $20,000 to the VEBA trust in 2023. No contribution was made during first half 2025. The Company has and will continue to use these VEBA funds to pay the actual cost of such benefits through part or all of 2027. The VEBA trust held $12,509, $13,926 and $19,436 of aggregate cash and cash equivalents at June 30, 2025, December 31, 2024 and June 30, 2024, respectively. This asset value is included in prepaid expenses and long-term other assets in the Company’s Condensed Consolidated Statement of Financial Position. These assets primarily comprise cash and corporate bonds and are categorized as Level 1 and Level 2 within the fair value hierarchy.

Current wording

The Company periodically contributes to a VEBA trust, managed and controlled by the Company, to fund the estimated future costs of certain employee health, welfare and other benefits. The Company funded $20,000 to the VEBA trust in 2023. No contribution was made during nine months 2025 or 2024. The Company has and will continue to use these VEBA funds to pay the actual cost of such benefits through part or all of 2027. The VEBA trust held $10,989, $13,926 and $16,345 of aggregate cash and cash equivalents at September 30, 2025, December 31, 2024 and September 30, 2024, respectively. This asset value is included in prepaid expenses and long-term other assets in the Company’s Condensed Consolidated Statement of Financial Position. These assets primarily comprise cash and corporate bonds and are categorized as Level 1 and Level 2 within the fair value hierarchy.