TOOTSIE ROLL INDUSTRIES INC

Previous wording

Developments in economic and fiscal policy, most notably those related to tariffs that were being contemplated by regulatory authorities at the time we filed the 2025 Form 10-K with the SEC, have had a nominal impact on our Company through the first half of 2026. Our products are principally produced and sold in North America. Product shipped between the United States and our Canada and Mexico manufacturing operations qualify under the U.S.-Mexico-Canada Agreement (“USMCA”) and under the current regulation, continue to be tariff-free. If regulators decide to impose tariffs, or other surcharges are levied by Canada and Mexico, on products that previously qualified under USMCA or if there are changes to the USMCA, the impact of tariffs on our cross-border shipments could be significant. In addition, we procure certain ingredients, including edible oils, as well as some packaging and other operating equipment and supplies, from sources outside of the United States which are subject to tariffs. Imposing tariffs on goods we either import directly or purchase from suppliers who import certain products would have a negative impact on our business as well. We may be able to mitigate the impact by evaluating our sourcing strategies or working with our vendors but in most instances the inputs we need are only available from certain areas of the world outside of the USMCA. During fourth quarter 2025, tariffs on cocoa were rescinded and therefore we realized some additional cost reductions on these purchases in 2026 as these lower costs began to be reflected in our supply chain. In addition, following the recent U.S. Supreme Court decision issued in February 2026 that invalidated tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”), the U.S. announced tariffs under different statutory authorities, including a 10% global tariff. The full impact of these governmental actions on macroeconomic conditions and on our business is uncertain, difficult to predict and depends on a number of factors, including the extent and duration of tariffs, changes in the amount and scope of tariffs, any reversal or temporary suspension of announced tariffs, the availability of refunds for tariffs paid under IEEPA, and the imposition of new tariffs and other measures that target countries may take in response to U.S. trade policies. 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 tariffs on our business and have not recorded any adjustments to our financial statements related to potential IEEPA tariff refunds as these potential refunds will be recognized as received.

Current wording

Developments in economic and fiscal policy, most notably those related to tariffs that were being contemplated by regulatory authorities at the time we filed the 2025 Form 10-K with the SEC, continue to have an impact on our Company through nine months of 2026. Our products are principally produced and sold in North America. Product shipped between the United States and our Canada and Mexico manufacturing operations qualify under the U.S.-Mexico-Canada Agreement (“USMCA”) and under the current regulation, continue to be tariff-free. If regulators decide to impose tariffs, or other surcharges are levied by Canada and Mexico, on products that previously qualified under USMCA or if there are changes to the USMCA or if the USMCA is not renewed with these provisions, the impact of tariffs on our cross-border shipments could be significant. In addition, we procure certain ingredients, including edible oils, as well as some packaging and other operating equipment and supplies, from sources outside of the United States which are subject to tariffs. Imposing tariffs on goods we either import directly or purchase from suppliers who import certain products could continue to increase our costs and adversely affect our business. We may be able to mitigate the impact by evaluating our sourcing strategies or working with our vendors but in most instances the inputs we need are only available from certain areas of the world outside of the USMCA. During fourth quarter 2025, tariffs on cocoa were rescinded and therefore we realized some additional cost reductions on these purchases in 2026 as these lower costs began to be reflected in our supply chain. In addition, following the recent U.S. Supreme Court decision issued in February 2026 that invalidated tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”), the U.S. announced tariffs under different statutory authorities, including a 10% temporary global tariff that expired on July 24, 2026 and thereafter additional tariffs were imposed under other governmental authority. The full impact of these governmental actions on macroeconomic conditions and on our business is uncertain, difficult to predict and depends on a number of factors, including the extent and duration of tariffs, changes in the amount and scope of tariffs, any reversal or temporary suspension of announced tariffs, the availability of additional refunds for tariffs paid under IEEPA, and the imposition of new tariffs and other measures that target countries may take in response to U.S. trade policies. 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 tariffs on our business.

Previous wording

With recent activities at the U.S. Department of Health and Human Services and the U.S. Food and Drug Administration (“FDA”) and various state legislation, the food industry is subject to increasing laws and regulations, as well as changes in consumer expectations and behavior, which may impact the ingredients used in our products among other things. For example, in April 2025, it was announced that the FDA intends to phase out the approved use of certain synthetic dyes in food products, which the Company uses in many of its products. Many states, including West Virginia, have passed, or are in the process of passing, legislation that prohibits or restricts the sales of products with certain synthetic dyes within their respective states. As the Company pursues the goal of eliminating synthetic dyes and implementing natural colors, the Company believes that this will likely result in higher costs and that available supplies of such natural colors may not be adequate to meet the needs of this likely major change in the food industry. In addition to legislation regarding synthetic dyes in food products, the Company anticipates continued developments in food industry legislation and regulatory requirements at the federal and state level. The significance of the impact of these changes, including changing consumer expectations and behavior and the ability to pass on this anticipated cost increase to customers and our consumers, remains uncertain at this time.

Current wording

Federal and state legislative and regulatory developments, voluntary phase-out initiatives, and changing consumer preferences and customer expectations are increasing pressure to eliminate certain synthetic colors used in food products. The Company uses synthetic colors in many of its products. The U.S. Food and Drug Administration issued an order in January 2025 revoking authorization for the use of FD&C Red No. 3 in food, effective January 15, 2027, and is working with industry to voluntarily phase out certain other synthetic colors. Many states have enacted or proposed legislation that restricts the use of certain synthetic dyes in food products or the sale of products containing them within their respective states. Regulatory restrictions and voluntary phase-out initiatives differ in scope, timing and legal status, creating uncertainty and potentially increasing the complexity and cost of compliance and reformulation. Reformulation may also affect the appearance and consumer acceptance of certain products. As the Company pursues the goal of eliminating synthetic dyes and implementing natural colors, the Company believes that this will likely result in higher costs and that available supplies of such natural colors may not be adequate to meet industry-wide demand. The significance of the impact of these developments, and the ability to pass on anticipated increased costs to customers and our consumers, remains uncertain at this time.