TOOTSIE ROLL INDUSTRIES INC

Previous wording

Net product sales were $148,819 in second quarter 2024 compared to $158,837 in second quarter 2023, a decrease of $10,018 or 6.3%. First half 2024 net product sales were $300,283 compared to $319,548 in first half 2023, a decrease of $19,265 or 6.0%. Domestic (U.S.) net product sales in second quarter and first half 2024 decreased 4.8% and 6.0%, respectively, compared to the corresponding period in the prior year, and, foreign net product sales, including exports to foreign markets, decreased 21.4% and 6.2%, respectively, compared to the corresponding period in the prior year. For the second quarter and first half 2024, domestic sales represented 92.3% and 91.2%, respectively, of total consolidated net product sales. The Company faced a more challenging market in second quarter and first half 2024 as customers and consumers became more resistant to higher price realization which was necessary to restore our margins. The Company expects this adverse sales trend to continue through the second half of 2024. Second quarter and first half 2024 sales were also adversely affected by the timing of seasonal sales, primarily for Easter, between first quarter 2024 and fourth quarter 2023 when compared to the prior year comparative quarterly periods. In addition, second quarter and first half 2024 sales were impacted by customer inventory adjustments, which adversely affected customer orders and sales in second quarter and first half 2024.

Current wording

Net product sales were $223,891 in third quarter 2024 compared to $248,336 in third quarter 2023, a decrease of $24,445 or 9.8%. Nine months 2024 net product sales were $524,174 compared to $567,884 in nine months 2023, a decrease of $43,710 or 7.7%. Domestic (U.S.) net product sales in third quarter and nine months 2024 decreased 9.7% and 7.6%, respectively, compared to the corresponding periods in the prior year, and, foreign net product sales, including exports to foreign markets, decreased 11.2% and 8.4%, respectively, compared to the corresponding periods in the prior year. For the third quarter and nine months 2024, domestic sales represented 91.6% and 91.3%, respectively, of total consolidated net product sales. The Company faced a more challenging market in third quarter and nine months 2024 as customers and consumers became more resistant to higher price realization which was necessary to restore our margins. The Company expects this adverse sales trend to continue through the balance of 2024 and may continue into 2025. Third quarter and nine months 2024 sales were also adversely affected by the timing of certain sales between third and fourth quarters 2024 when compared to the prior year comparative quarterly periods.

Previous wording

Product cost of goods sold was $99,732 in second quarter 2024 compared to $107,075 in second quarter 2023, and first half 2024 product cost of goods sold was $202,464 compared to $218,481 in first half 2023. Product cost of goods sold includes $122 and $256 of certain deferred compensation expenses in second quarter 2024 and 2023, respectively, and $487 and $486 of certain deferred compensation expenses in first half 2024 and 2023, 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. Adjusting for the aforementioned, product cost of goods sold decreased from $106,819 in second quarter 2023 to $99,610 in second quarter 2024, a decrease of $7,209 or 6.7%; and decreased from $217,995 in first half 2023 to $201,977 in first half 2024, a decrease of $16,018 or 7.3%. As a percentage of net product sales, adjusted product cost of goods sold was 66.9% and 67.3% in second quarter 2024 and 2023, respectively, a favorable decrease of 0.4 percentage points; and adjusted product cost of goods sold was 67.3% and 68.2% in first half 2024 and 2023, respectively, a favorable decrease of 0.9 percentage points. Second quarter and first half 2024 gross profit margins benefited from higher price realization, improvements in plant manufacturing operating efficiencies, and more favorable packaging material unit costs. Although we did achieve improvement in gross profit margin, higher overall ingredient costs, and increases in labor, employee benefits, and certain plant manufacturing costs offset some of these benefits in second quarter and first half 2024.

Current wording

Product cost of goods sold was $148,266 in third quarter 2024 compared to $164,163 in third quarter 2023, and nine months 2024 product cost of goods sold was $350,730 compared to $382,644 in nine months 2023. Product cost of goods sold includes $240 and $(89) of certain deferred compensation expenses (credits) in third quarter 2024 and 2023, respectively, and $727 and $397 of certain deferred compensation expenses in nine months 2024 and 2023, respectively. These deferred compensation expenses (credits) 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. Adjusting for the aforementioned, product cost of goods sold decreased from $164,252 in third quarter 2023 to $148,026 in third quarter 2024, a decrease of $16,226 or 9.9%; and decreased from $382,247 in nine months 2023 to $350,003 in nine months 2024, a decrease of $32,244 or 8.4%. As a percentage of net product sales, adjusted product cost of goods sold was 66.1% in both third quarter 2024 and 2023; and adjusted product cost of goods sold was 66.8% and 67.3% in nine months 2024 and 2023, respectively, a favorable decrease of 0.5 percentage points. Third quarter and nine months 2024 gross profit margins benefited from higher price realization, improvements in plant manufacturing operating efficiencies, and more favorable packaging material unit costs. Although we did achieve improvement in gross profit margin, higher overall ingredient costs, and increases in labor, employee benefits, and certain plant manufacturing costs offset some of these benefits in third quarter and nine months 2024.

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 this period with the objective of improving sales price realization in order to recover our margin declines. We made progress in restoring our margins in 2023 and continue to do so in 2024. However, cocoa and chocolate costs have been moving significantly higher in the market during 2024, and we expect that these increases will have some adverse effects on our input costs and margins in 2024 and 2025. 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. 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

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 this period with the objective of improving sales price realization in order to recover our margin declines. We made progress in restoring our margins in 2023 and have continued to do so in 2024. However, cocoa and chocolate costs have been moving significantly higher in the market during 2024, and we expect that these increases, as well as increased costs for many of our other ingredients, will have adverse effects on our input costs and margins for the remainder of 2024 and in 2025. 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. 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

compensation expenses in second quarter 2024 and 2023, respectively; and $9,295 and $8,792 of certain deferred compensation expenses in first half 2024 and 2023, 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. Adjusting for the aforementioned deferred compensation expenses, selling, marketing and administrative expenses decreased from $33,182 in second quarter 2023 to $32,670 in second quarter 2024, a decrease of $512 or 1.5%; and selling, marketing and administrative expenses decreased from $66,564 in first half 2023 to $64,663 in first half 2024 a decrease of $1,901 or 2.9%. As a percentage of net product sales, adjusted selling, marketing and administrative expenses increased from 20.9% in second quarter 2023 to 22.0% in second quarter 2024, an unfavorable increase of 1.1 percentage points as a percent of net product sales; and adjusted selling, marketing and administrative expenses increased from 20.8% in first half 2023 to 21.5% in first half 2024, an unfavorable increase of 0.7 percentage points as a percent of net sales. These higher expenses as a percentage of sales reflect the adverse effects of lower sales as certain expenses are generally fixed and do not change significantly with changes in sales.

Current wording

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 deferred compensation expenses, selling, marketing and administrative expenses decreased from $40,896 in third quarter 2023 to $37,265 in third quarter 2024, a decrease of $3,631 or 8.9%; and selling, marketing and administrative expenses decreased from $107,460 in nine months 2023 to $101,928 in nine months 2024 a decrease of $5,532 or 5.1%. As a percentage of net product sales, adjusted selling, marketing and administrative expenses increased from 16.5% in third quarter 2023 to 16.6% in third quarter 2024, an unfavorable increase of 0.1 percentage points as a percent of net product sales; and adjusted selling, marketing and administrative expenses increased from 18.9% in nine months 2023 to 19.4% in nine months 2024, an unfavorable increase of 0.5 percentage points as a percent of net sales. These higher expenses as a percentage of sales reflect the adverse effects of lower sales as certain expenses are generally fixed and do not change significantly with changes in sales.

Previous wording

Selling, marketing and administrative expenses include $13,839 and $15,432 for customer freight, delivery and warehousing expenses in second quarter 2024 and 2023, respectively, a decrease of $1,593 or 10.3%; and $27,455 and $31,665 in first half 2024 and 2023, respectively, a decrease of $4,210 or 13.3%. These expenses were 9.3% and 9.7% of net product sales in second quarter 2024 and 2023, respectively; and were 9.1% and 9.9% of net product sales in first half 2024 and 2023, respectively. Customer freight and delivery unit costs, including the cost per pound shipped, was more favorable in second quarter and first half 2024 compared to the corresponding periods in 2023. Increased over-the-road truck availability in 2024 relative to tight freight markets over the past few years has resulted in a more competitive market and resulting lower costs.

Current wording

Selling, marketing and administrative expenses include $15,442 and $17,997 for customer freight, delivery and warehousing expenses in third quarter 2024 and 2023, respectively, a decrease of $2,555 or 14.2%; and $42,897 and $49,662 in nine months 2024 and 2023, respectively, a decrease of $6,765 or 13.6%. These expenses were 6.9% and 7.2% of net product sales in third quarter 2024 and 2023, respectively; and were 8.2% and 8.7% of net product sales in nine months 2024 and 2023, respectively. Customer freight and delivery unit costs, including the cost per pound shipped, was more favorable in nine months 2024 compared to the corresponding period in 2023. Increased over-the-road truck availability in 2024 relative to tight freight markets over the past few years has resulted in a more competitive market and resulting lower costs.

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 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 arising in the second quarter 2024 that changed Management’s estimated current and future liabilities resulting in a $2,070 reduction in accrued liabilities and an increase in net product sales in second quarter 2024.

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 considerations 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 that changed Management’s estimated current and future liabilities resulting in a $3,725 and $5,965 reduction in accrued liabilities and an increase in net product sales in third quarter and nine months 2024, respectively.

Previous wording

Earnings from operations were $15,435 in second quarter 2024 compared to $14,753 in second quarter 2023; and were $26,545 in first half 2024 compared to $27,549 in first half 2023. Earnings from operations include $2,492 and $4,931 of certain deferred compensation expenses in second quarter 2024 and 2023, respectively; and include $9,782 and $9,278 of certain deferred compensation expenses in first half 2024 and 2023, respectively, which is discussed above. Adjusting for these deferred compensation costs and expenses, adjusted earnings from operations were $17,927 and $19,684 in second quarter 2024 and 2023, respectively, a decrease of $1,757 or 8.9%; and adjusted operating earnings were $36,327 and $36,827 in first half 2024 and 2023, respectively, a decrease of $500 or 1.4%. As a percentage of net product sales, these adjusted operating earnings were 12.0% and 12.4% in second quarter 2024 and 2023, respectively, an unfavorable decrease of 0.4 percentage points; and as a percentage of net product sales, these adjusted operating earnings were 12.1% and 11.5% in first half 2024 and 2023, respectively, a favorable increase of 0.6 percentage points. Unfavorable results relating to our Mexican subsidiary had some adverse effect on our consolidated earnings from operations for second quarter and first half 2024. Higher price realization, as well as a decrease in certain costs as discussed above, mitigated much of the adverse effects of lower sales volumes relating to second quarter and first half 2024 adjusted operating earnings.

Current wording

Earnings from operations were $35,244 in third quarter 2024 compared to $45,900 in third quarter 2023; and were $61,789 in nine months 2024 compared to $73,449 in nine months 2023. Earnings from operations include $4,800 and $(1,685) of certain deferred compensation expenses (credits) in third quarter 2024 and 2023, respectively; and include $14,582 and $7,593 of certain deferred compensation expenses in nine months 2024 and 2023, respectively, which is discussed above. Adjusting for these deferred compensation costs and expenses (credits), adjusted earnings from operations were $40,044 and $44,215 in third quarter 2024 and 2023, respectively, a decrease of $4,171 or 9.4%; and adjusted operating earnings were $76,371 and $81,042 in nine months 2024 and 2023, respectively, a decrease of $4,671 or 5.8%. As a percentage of net product sales, these adjusted operating earnings were 17.9% and 17.8% in third quarter 2024 and 2023, respectively, a favorable increase of 0.1 percentage points; and as a percentage of net product sales, these adjusted operating earnings were 14.6% and 14.3% in nine months 2024 and 2023, respectively, a favorable increase of 0.3 percentage points. Higher price realization, as well as a decrease in certain costs and expenses as discussed above, mitigated some of the adverse effects of lower sales volumes relating to third quarter and nine months 2024 adjusted operating earnings.

Previous wording

Other income, net was $4,900 in second quarter 2024 compared to $4,804 in second quarter 2023; and $13,932 in first half 2024 compared to $9,584 in first half 2023. Other income, net for second quarter 2024 and 2023 includes net gains and investment income of $2,492 and $4,931, respectively, on trading securities which provide an economic hedge of the Company’s deferred compensation liabilities on trading securities; and other income, net for first half 2024 and 2023 includes net gains and investment income of $9,782 and $9,278, respectively, on trading securities which provide an economic hedge of the Company’s deferred compensation liabilities on trading securities. The investment gains on trading securities in second quarter and first half 2024 and 2023 reflect the overall changes in the equity markets during these periods. These changes in market values were substantially offset by a like amount of

Current wording

Other income (loss), net was $7,188 in third quarter 2024 compared to $(718) in third quarter 2023; and $21,120 in nine months 2024 compared to $8,866 in nine months 2023. Other income, net for third quarter 2024 and 2023 includes net gains (loss) and investment income of $4,800 and $(1,685), respectively, on trading securities which provide an economic hedge of the Company’s deferred compensation liabilities on trading securities; and other income, net for nine months 2024 and 2023 includes net gains and investment income of $14,582 and $7,593, respectively, on trading securities which provide an economic hedge of the Company’s deferred compensation liabilities on trading securities. The investment gains on trading securities in third quarter and nine months 2024 and 2023 reflect the overall changes in the equity markets during these periods. These changes in market values 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.

Previous wording

Other income, net for second quarter 2024 and 2023 includes investment income on available for sale securities of $2,114 and $1,145 in 2024 and 2023, respectively; and other income, net for first half 2024 and 2023 includes investment income on available for sale securities of $3,977 and $2,308 in 2024 and 2023, respectively. The aforementioned increases in 2024 investment income on available for sale securities reflects the higher interest rate environment in 2024 as well as a higher average balance in the investment portfolio of available for sale securities in second quarter and first half 2024 compared to the corresponding periods in the prior year. Other income, net also includes pre-tax gains (loss) on foreign exchange of $140 and $(1,315) in second quarter 2024 and 2023, respectively; and $120 and $(2,060) in first half 2024 and 2023, respectively which contributed to improved net earnings in second quarter and first half 2024 when compared to second quarter and first half 2023. In addition, higher leasing revenue from the leasing of certain real estate to third parties contributed to higher net earnings in second quarter and first half 2024.

Current wording

Other income (loss), net for third quarter 2024 and 2023 includes investment income on available for sale securities of $2,367and $1,227 in 2024 and 2023, respectively; and other income, net for nine months 2024 and 2023 includes investment income on available for sale securities of $6,344 and $3,534 in 2024 and 2023, respectively. The aforementioned increases in 2024 investment income on available for sale securities reflects the higher interest rate environment in 2024 as well as a higher average balance in the investment portfolio of available for sale securities in third quarter and nine months 2024 compared to the corresponding periods in the prior year. Other income (loss), net also includes pre-tax gains (loss) on foreign exchange of $6 and $(130) in third quarter 2024 and 2023, respectively; and $126 and $(2,189) in nine months 2024 and 2023, respectively, which contributed to improved net earnings in third quarter and nine months 2024 when compared to third quarter and nine months 2023. In addition, higher leasing revenue from the leasing of certain real estate to third parties contributed to higher net earnings in third quarter and nine months 2024.

Previous wording

The consolidated effective tax rates were 23.1% and 24.7% in second quarter 2024 and 2023, respectively; and 22.3% and 24.3% in first half 2024 and 2023, respectively. The lower effective income tax rate in second quarter and first half 2024 reflects a reduction in state income taxes and increases in federal income tax credits, which contributed to higher net earnings in second quarter and first half 2024 compared to the corresponding periods in the prior year.

Current wording

The consolidated effective tax rates were 22.6% and 23.9% in third quarter 2024 and 2023, respectively; and 22.4% and 24.1% in nine months 2024 and 2023, respectively. The lower effective income tax rate in third quarter and nine months 2024 reflects a reduction in state income taxes and increases in federal income tax credits, which contributed to higher net earnings in third quarter and nine months 2024 compared to the corresponding periods in the prior year.

Previous wording

Net earnings attributable to Tootsie Roll Industries, Inc. were $15,640 (after $6 net loss attributed to non-controlling interests) in second quarter 2024 compared to $14,726 (after $6 net loss attributed to non-controlling interests) in second quarter 2023, and earnings per share were $0.22 and $0.20 in second quarter 2024 and 2023, respectively, an increase of $0.02 per share, or 10.0%. First half 2024 net earnings attributable to Tootsie Roll Industries, Inc. were $31,474 (after $5 net loss attributed to non-controlling interests) compared to first half 2023 net earnings of $28,127 (after $13 net loss attributed to non-controlling interests), and net earnings per share were $0.44 and $0.39 in first half 2024 and first half 2023, respectively, an increase of $0.05 per share or 12.8%. Earnings per share attributable to Tootsie Roll Industries, Inc. for second quarter and first half 2024 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 72,164 at second quarter 2023 to 71,417 at second quarter 2024, and from 72,231 in first half 2023 to 71,417 in first half 2024.

Current wording

Net earnings attributable to Tootsie Roll Industries, Inc. were $32,844 (after $11 net loss attributed to non-controlling interests) in third quarter 2024 compared to $34,382 (after $5 net loss attributed to non-controlling interests) in third quarter 2023, and earnings per share were $0.46 and $0.48 in third quarter 2024 and 2023, respectively, a decrease of $0.02 per share, or 4.2%. Nine months 2024 net earnings attributable to Tootsie Roll Industries, Inc. were $64,318 (after $16 net loss attributed to non-controlling interests) compared to nine months 2023 net earnings of $62,509 (after $18 net loss attributed to non-controlling interests), and net earnings per share were $0.90 and $0.87 in nine months 2024 and nine months 2023, respectively, an increase of $0.03 per share or 3.4%. Earnings per share attributable to Tootsie Roll Industries, Inc. for third quarter and nine months 2024 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 71,696 at third quarter 2023 to 71,379 at third quarter 2024, and from 72,049 in nine months 2023 to 71,402 in nine months 2024.

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 first half 2024. Although Company 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, 2023, 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 nine months 2024. Although Company 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, 2023, could change this assessment in the future.

Previous wording

Beginning in 2012, the Company 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. The Plan’s status was changed to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015, and this status has continued. 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. That determination is based on certain assumptions including an assumption that all employers that negotiated a rehabilitation plan schedule remain on that schedule.

Current wording

Beginning in 2012, the Company 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. The Plan’s status was changed to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015, and this status has continued. 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.

Previous wording

valuation dates are as of the beginning of each Plan year). These funded percentages are based on actuarial values, as defined, and do not reflect the actual market value of Plan investments as of these dates. If the market value of investments had been used as of January 1, 2023, the funded percentage would be 43.6% (not 47.0%). As of the January 1, 2023 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. The number of current active employee Plan participants as of January 1, 2023 fell 1% from the previous year and 6% over the past two years. 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 55%, 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 6%.

Current wording

Based on these updated notices, the Plan’s funded percentage (plan investment assets as a percentage of plan liabilities), as defined, were 47.0%, 49.3%, and 48.5% as of January 1, 2023, 2022, and 2021, respectively (these valuation dates are as of the beginning of each Plan year). These funded percentages are based on actuarial values, as defined, and do not reflect the actual market value of Plan investments as of these dates. If the market value of investments had been used as of January 1, 2023, the funded percentage would be 43.6% (not 47.0%). As of the January 1, 2023 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

Previous wording

The Company’s pension expense for this Plan for first half 2024 and 2023 was $1,770 and $1,951, respectively. The aforementioned expense includes surcharges of $624 and $688 for first half 2024 and 2023, respectively, as required under the amended plan of rehabilitation. The decrease in the first half 2024 expense compared to first half 2023 reflects the effects of lower sales volumes in first half 2024, and corresponding reductions in lower production and labor hours worked. The Company’s twelve months pension expense for this Plan for 2023 and 2022 was $3,516 and $3,510, respectively, which includes surcharges of $1,239 and $1,237, respectively.

Current wording

The Company’s pension expense for this Plan for nine months 2024 and 2023 was $2,579 and $2,785, respectively. The aforementioned expense includes surcharges of $909 and $982 for nine months 2024 and 2023, respectively, as required under the amended plan of rehabilitation. The decrease in the nine months 2024 expense compared to nine months 2023 reflects the effects of lower sales volumes in nine months 2024, and corresponding reductions in lower production and labor hours worked. The Company’s twelve months pension expense for this Plan for 2023 and 2022 was $3,516 and $3,510, respectively, which includes surcharges of $1,239 and $1,237, respectively.

Previous wording

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. Company management understands that this legislation would provide financial assistance from the PBGC to shore up financially distressed multi-employer plans to ensure that they can remain solvent and continue to pay benefits to retirees through 2051 without any reduction in retiree benefits. The Plan was granted approximately $3.4 billion in Special Financial Assistance funds and received those funds in July 2024. The Company’s actuary believes that it still remains unclear if the Plan can remain solvent through the targeted

Current wording

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. Company management understands that this legislation would provide financial assistance from the PBGC to shore up financially distressed multi-employer plans to ensure that they can remain solvent and continue to pay benefits to retirees through 2051 without any reduction in retiree benefits. The Plan advised the Company that it was granted approximately $3.4 billion in Special Financial Assistance funds and received those funds in July 2024. 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, as defined, and a phase-in of the Special Financial Assistance in determining the Company’s withdrawal liability. While it is uncertain how the requirements imposed by the Special

Previous wording

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, as defined, and a phase-in of the Special Financial Assistance in determining the Company’s withdrawal liability. 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 previously discussed and that those payments will not be affected by Special Financial Assistance regulation.

Current wording

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 previously discussed and that those payments will not be affected by Special Financial Assistance regulation.

Previous wording

Net cash flows provided by (used in) operating activities were $8,777 and $(5,142) in first half 2024 and 2023, respectively, a favorable increase of $13,919. The $13,919 increase in cash flows from operating activities from 2024 to 2023 principally reflects higher net earnings as discussed above and benefits from changes in working capital, primarily more favorable changes in inventories and the timing of income tax payments during first half 2024 compared to first half 2023. The more favorable changes in inventories reflects changes in the Company’s production plan in 2024 for seasonal Halloween sales (principally in third quarter 2024), as well as the effects of lower sales demand for the second half 2024, which trend is generally in line with the first half 2024 sales results when compared to first half 2023.

Current wording

Net cash flows provided by operating activities were $70,102 and $39,606 in nine months 2024 and 2023, respectively, a favorable increase of $30,496. The $30,496 increase in cash flows from operating activities from 2024 to 2023 principally reflects benefits from changes in working capital, primarily more favorable changes in inventories and the timing of pre-payments during nine months 2024 compared to nine months 2023. The favorable changes in inventories reflect changes in the Company’s production plan in 2024, as well as the effects of lower sales demand for the rest of 2024, which trend is generally in line with the nine months 2024 sales results when compared to nine months 2023.

Previous wording

Net cash (used in) provided by investing activities was $(25,918) in first half 2024 compared to $6,432 in first half 2023. Cash flows used in investing activities reflect $55,131 and $48,522 of purchases of available for sale securities during first half 2024 and 2023, respectively, and $38,779 and $66,507 of sales and maturities of available for sale securities during first half 2024 and 2023, respectively. First half 2024 and 2023 investing activities include capital expenditures of $8,421 and $10,723, respectively. The Company is evaluating a plant expansion, including both the addition and replacement of certain processing and packaging lines, to better meet its higher level of projected demand for certain products on a timelier and more cost effective basis. The Company believes that this plant expansion would take place over the next five years, but most of the actual expenditures would likely occur during the next three years. Company management believes that the total cost of this expansion, including new machinery, equipment and food processing infrastructure, will approximate $70,000 to $80,000. 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.

Current wording

Net cash (used in) provided by investing activities was $(32,176) in nine months 2024 compared to $233 in nine months 2023. Cash flows used in investing activities reflect $82,391 and $65,616 of purchases of available for sale securities during nine months 2024 and 2023, respectively, and $65,578 and $86,259 of sales and maturities of available for sale securities during nine months 2024 and 2023, respectively. Nine months 2024 and 2023 investing activities include capital expenditures of $13,911 and $19,458, respectively. The Company is evaluating a plant expansion, including both the addition and replacement of certain processing and packaging lines, to better meet its higher level of projected demand for certain products on a timelier and more cost effective basis. The Company believes that this plant expansion would take place over the next five years, but most of the actual expenditures would likely occur during the next three years. Company management believes that the total cost of this expansion, including new machinery, equipment and food processing infrastructure, will approximate $70,000 to $80,000. 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.

Previous wording

The Company’s consolidated financial statements include bank borrowings of $1,046 and $1,051 at June 30, 2024 and 2023, respectively, all of which relate to its Spanish subsidiary. The Company had no other outstanding bank borrowings at June 30, 2024.

Current wording

The Company’s consolidated financial statements include bank borrowings of $1,078 and $1,018 at September 30, 2024 and 2023, respectively, all of which relate to its Spanish subsidiary. The Company had no other outstanding bank borrowings at September 30, 2024.

Previous wording

Financing activities include Company common stock purchases and retirements of $0 and $16,548 in first half 2024 and 2023, respectively. Cash dividends of $12,634 and $12,531 were paid in first half 2024 and 2023, respectively.

Current wording

Financing activities include Company common stock purchases and retirements of $2,196 and $27,550 in nine months 2024 and 2023, respectively. Cash dividends of $19,062 and $18,825 were paid in nine months 2024 and 2023, respectively.

Previous wording

The Company’s current ratio (current assets divided by current liabilities) was 3.7 to 1 at June 30, 2024 compared to 3.6 to 1 at December 31, 2023 and 3.5 to 1 at June 30, 2023. Net working capital was $237,114 at June 30, 2024 compared to $245,763 and $223,596 at December 31, 2023 and June 30, 2023, respectively. Included in net working capital is cash and cash equivalents and short-term investments totaling $131,171 at June 30, 2024 compared to

Current wording

The Company’s current ratio (current assets divided by current liabilities) was 3.6 to 1 at September 30, 2024 compared to 3.6 to 1 at December 31, 2023 and 3.2 to 1 at September 30, 2023. Net working capital was $247,685 at September 30, 2024 compared to $245,763 and $230,426 at December 31, 2023 and September 30, 2023, respectively. Included in net working capital is cash and cash equivalents and short-term investments totaling $163,211 at September 30, 2024 compared to $171,422 and $135,400 at December 31, 2023 and September 30, 2023, respectively. In addition, long term investments, principally debt securities comprising corporate bonds, were $318,344 at September 30, 2024, as compared to $255,606 and $243,205 at December 31, 2023 and September 30, 2023, respectively. Aggregate cash and cash equivalents and short and long-term investments were $481,555, $427,028, and $378,605, at September 30, 2024, December 31, 2023 and September 30, 2023, respectively, including $103,875,

Previous wording

$171,422 and $109,212 at December 31, 2023 and June 30, 2023, respectively. In addition, long term investments, principally debt securities comprising corporate bonds, were $292,723 at June 30, 2024, as compared to $255,606 and $252,459 at December 31, 2023 and June 30, 2023, respectively. Aggregate cash and cash equivalents and short and long-term investments were $423,894, $427,028, and $361,671, at June 30, 2024, December 31, 2023 and June 30, 2023, respectively, including $98,728, $87,800, and $81,319 at June 30, 2024, December 31, 2023 and June 30, 2023, respectively, relating to trading securities which are used as an economic hedge for the Company’s deferred compensation liabilities.

Current wording

$87,800, and $79,754 at September 30, 2024, December 31, 2023 and September 30, 2023, 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 second quarter 2024 and 2023 were generally used in working capital or were replaced with debt securities of similar maturities. The net unrealized loss on available for sale investments was approximately $1,600 and $7,200 at June 30, 2024 and 2023, respectively, which principally reflects the increase in market interest rates since such securities were purchased. The Company expects to hold most of these securities to maturity and therefore does not expect to ultimately realize a substantial portion of the aforementioned unrealized losses (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 2024 and 2023, were generally used in working capital or were replaced with debt securities of similar maturities. The net unrealized loss on available for sale investments was approximately $4,300 and $6,600 at September 30, 2024 and 2023, respectively, which principally reflects the increase in market interest rates since such securities were purchased. The Company expects to hold most of these securities to maturity and therefore does not expect to ultimately realize a substantial portion of the aforementioned unrealized losses (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 added $20,000 in additional funding to the VEBA trust in 2023. No contribution was made during first half 2024. The Company expects to use these VEBA funds to pay the actual cost of such benefits through part or all of 2027. The VEBA trust held $19,436, $19,126 and $1,942 of aggregate cash and cash equivalents at June 30, 2024, December 31, 2023 and June 30, 2023, respectively. This asset value is included in prepaid expenses and long-term other assets in the Company’s Consolidated Statement of Financial Position. These assets are categorized as Level 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 added $20,000 in additional funding to the VEBA trust in 2023. No contribution was made during nine months 2024. The Company expects to use these VEBA funds to pay the actual cost of such benefits through part or all of 2027. The VEBA trust held $16,345, $19,126 and $21,965 of aggregate cash and cash equivalents at September 30, 2024, December 31, 2023 and September 30, 2023, respectively. This asset value is included in prepaid expenses and long-term other assets in the Company’s Consolidated Statement of Financial Position. These assets are categorized as Level 2 within the fair value hierarchy.