This financial review discusses the Company's financial condition, results of
operations, liquidity and capital resources and other matters. Dollars are
presented in thousands, except per share amounts. This review should be read in
conjunction with the accompanying Condensed Consolidated Financial Statements
and related notes included in this Form 10-Q and with the Company's Consolidated
Financial Statements and related notes and Management's Discussion and Analysis
of Financial Condition and Results of Operations included in the Company's Form
10-K for the year ended December 31, 2019 (the "2019 Form 10-K").
Net product sales were $156,962 in third quarter 2020 compared to $181,913 in
third quarter 2019, a decrease of $24,951 or 13.7%. Nine months 2020 net product
sales were $339,561 compared to $388,953 in nine months 2019, a decrease of
$49,392 or 12.7%. Domestic (U.S.) net product sales in third quarter and nine
months 2020 declined 12.5% and 11.3%, respectively, compared to the
corresponding periods in the prior year. Foreign net product sales, including
exports to foreign markets, had a greater rate of decline than domestic sales in
the comparative periods.
Third quarter net product sales were adversely impacted by the effects of the
Covid-19 pandemic, including mandates and public health guidelines issued by
state, local, federal and foreign governments and agencies. The "closing" of the
economy in second quarter 2020, and its gradual "reopening" in the later part of
the second quarter and third quarter, including mandates and public health
guidelines in 2020, has curtailed and at times completely closed certain
channels of trade where the Company has historically sold its products. Response
to this pandemic has resulted in the disruption and changes in lifestyles,
shopping habits, and daily work routines, all of which have adversely affected
planned consumer purchases of the Company's products for "sharing" and "give
away" occasions, as well as impulse purchases of the Company's products at
retail outlets. Many of the Company's products are consumed at group events,
outings, and other gatherings, which have been significantly curtailed or in
some cases eliminated, due to possible infection or spreading of Covid-19. Third
quarter net product sales have historically included significant pre-Halloween
net product sales which were also adversely affected by the Covid-19 pandemic in
third quarter 2020 for the reasons stated above. The Company has monitored its
retail "sell through" as of Halloween (through October 31, 2020) and has
provided adjustments to its third quarter pre-Halloween net product sales to
reflect the estimated effects of resulting sales realization.
Product cost of goods sold were $99,187 in third quarter 2020 compared to
$112,867 in third quarter 2019, and nine months 2020 product cost of goods sold
were $216,009 compared to $243,668 in nine months 2019. Product cost of goods
sold includes $225 and $8 of certain deferred compensation expenses in third
quarter 2020 and 2019, respectively, and $245 and $254 of certain deferred
compensation expenses in nine months 2020 and 2019, respectively. These deferred
compensation expenses principally result 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 $112,859 in third quarter 2019 to $98,962 in third quarter 2020,
a decrease of $13,897 or 12.3%; and decreased from $243,414 in nine months 2019
to $215,764 in nine months 2020, a decrease of $27,650 or 11.4%. As a percentage
of net product sales, adjusted product cost of goods sold was 63.0% and 62.0% in
third quarter 2020 and 2019, respectively, an unfavorable increase of 1.0
percentage points; and adjusted product cost of goods sold was 63.5% and 62.6%
in nine months 2020 and 2019, respectively, an unfavorable increase of 0.9
percentage points. Lower net product sales and production volumes were the
principal drivers of the above discussed adjusted cost of goods sold as a
percentage of net product sales because these plant manufacturing overhead costs
are primarily fixed and recurring each year, and only partially decline with
lower volumes. Certain cost and expense reductions, which include Company
initiatives to reduce costs, partially offset the decrease in third quarter and
nine months 2020 gross profit margins. The Company is continuing to make
investments in plant manufacturing operations to meet new consumer
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and customer demands, achieve product quality improvements, increase operational
efficiencies and provide genuine value to consumers for the long-term.
Selling, marketing and administrative expenses were $32,868 in third quarter
2020 compared to $33,578 in third quarter 2019, and nine months 2020 selling,
marketing and administrative expenses were $78,699 compared to $92,902 in nine
months 2019. Selling, marketing and administrative expenses include $4,622 and
$213 of certain deferred compensation expenses in third quarter 2020 and 2019,
respectively, and $4,645 and $6,803 of certain deferred compensation expenses in
nine months 2020 and 2019, 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 $33,365 in third quarter 2019 to $28,246
in third quarter 2020, a decrease of $5,119 or 15.3%; and selling, marketing and
administrative expenses decreased from $86,099 in nine months 2019 to $74,054 in
nine months 2020 a decrease of $12,045 or 14.0%. As a percentage of net product
sales, adjusted selling, marketing and administrative expenses decreased from
18.3% in third quarter 2019 to 18.0% in third quarter 2020, a favorable decrease
of 0.3 percentage points as a percent of net product sales, and adjusted
selling, marketing and administrative expenses decreased from 22.1% in nine
months 2019 to 21.8% in nine months 2020, a favorable decrease of 0.3 percentage
points as a percent of net product sales. The decrease in adjusted selling,
marketing and administrative expenses as a percentage of net product sales in
third quarter 2020 reflects decreases in sales travel and trade shows resulting
from the effects of the Covid-19 pandemic. Selling, marketing and administrative
expenses include $12,356 and $14,536 for customer freight, delivery and
warehousing expenses in third quarter 2020 and 2019, respectively, a decrease of
$2,180 or 15.0%. These expenses were $31,425 and $36,753 in nine months 2020 and
2019, respectively, a decrease of $5,328 or 14.5%. These expenses were 7.9% and
8.0% of net product sales in third quarter 2020 and 2019, and were 9.3% and 9.4%
of net product sales in nine months 2020 and 2019, respectively.
Earnings from operations were $25,529 in third quarter 2020 compared to $36,038
in third quarter 2019, and were $46,766 in nine months 2020 compared to $54,311
in nine months 2019. Earnings from operations include $4,847 and $221 of certain
deferred compensation expenses in third quarter 2020 and 2019; respectively, and
include $4,890 and $7,057 of certain deferred compensation expenses in nine
months 2020 and 2019, respectively, which are discussed above. Adjusting for
these deferred compensation costs and expenses, earnings from operations were
$30,376 and $36,259 in third quarter 2020 and 2019, respectively, a decrease of
$5,883 or 16.2%; and adjusted operating earnings were $51,656 and $61,368 in
nine months 2020 and 2019, respectively, a decrease of $9,712 or 15.8%. As a
percentage of net product sales, these adjusted operating earnings were 19.4%
and 19.9% in third quarter 2020 and 2019, respectively, an unfavorable decrease
of 0.5 percentage points as a percentage of net product sales; and as a
percentage of net product sales, these adjusted operating earnings were 15.2%
and 15.8% in nine months 2020 and 2019, respectively, an unfavorable decrease of
0.6 percentage points as a percentage of net product sales. The decrease in
adjusted operating earnings in both third quarter and nine months 2020
principally reflects the negative impact of lower net product sales, including
the effects of lower gross profit margins, as discussed above.
Management believes the comparisons presented in the preceding paragraphs, after
adjusting for changes in deferred compensation, are more reflective of the
underlying operations of the Company.
Other income, net was $5,863 in third quarter 2020 compared to $1,846 in third
quarter 2019, a favorable increase of $4,017; and other income, net, was $10,096
in nine months 2020 compared to $10,916 in nine months 2019, an unfavorable
decrease of $820. Other income, net for third quarter 2020 and 2019 includes net
gains and investment income of $4,847 and $221, respectively, on trading
securities which provide an economic hedge of the Company's deferred
compensation liabilities; and other income, net for nine months 2020 and 2019
includes net gains and investment income of $4,890 and $7,057, respectively, on
trading securities. These changes in trading securities 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. Other income, net for third quarter 2020
and 2019 includes investment income on available for sale securities of $950 and
$1,160 in 2020 and 2019, respectively; and other income, net for nine months
2020 and 2019 includes investment income on available for sale securities of
$3,051 and $3,341 in 2020 and 2019, respectively. Other income (loss), net also
includes gains (losses) on foreign exchange of $(222) and $181 in third quarter
2020 and 2019, respectively, and $1,440 and $(265) in nine months 2020 and 2019,
respectively.
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The consolidated effective tax rates were 21.4% and 21.2% in third quarter 2020
and 2019, respectively, and 22.6% and 22.9% in nine months 2020 and 2019,
respectively. Lower state income taxes contributed to these lower effective tax
rates in 2020. On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security ("CARES") Act was signed into U.S. law. The CARES Act has provided a
substantial stimulus and assistance package intended to address the impact of
the Covid-19 pandemic, including tax relief and government loans, grants and
investments. The Canadian government also has enacted a stimulus program,
Canadian Emergency Wage Subsidy ("CEWS"), to respond to the economic impact of
Covid-19. The Company's financial results in third quarter and nine months 2020
did reflect some benefits from these stimulus programs. The U.S. and Canadian
governments may enact additional stimulus legislation in fourth quarter 2020 or
2021, but the Company cannot predict what impact, if any, such additional
stimulus would have on the overall economy and the Company's operating results.
The Company continues to monitor any effects and related benefits that may
result from the above discussed legislation and other stimulus programs.
Net earnings attributable to Tootsie Roll Industries, Inc. were $24,673 (after
$10 net loss attributed to non-controlling interests) in third quarter 2020
compared to $29,854 (after $8 net loss attributed to non-controlling interests)
in third quarter 2019, and earnings per share were $0.37 and $0.44 in third
quarter 2020 and 2019, respectively, a decrease of $0.07 per share, or 15.9%.
Nine months 2020 net earnings attributable to Tootsie Roll Industries, Inc. were
$44,043 (after $22 net loss attributed to non-controlling interests) compared to
nine months 2019 net earnings of $50,365 (after $64 net loss attributed to
non-controlling interests), and net earnings per share were $0.66 and $0.75 in
nine months 2020 and nine months 2019, respectively, a decrease of $0.09 per
share or 12.0%. Net earnings in third quarter and nine months 2020 were
principally impacted by the decline in net product sales as discussed above.
Earnings per share attributable to Tootsie Roll Industries, Inc. for third
quarter and nine months 2020 benefited from the reduction in average shares
outstanding resulting from purchases in the open market by the Company of its
common stock. Average shares outstanding decreased from 67,286 at third quarter
2019 to 66,423 at third quarter 2020, and from 67,541 in nine months 2019 to
66,657 in nine months 2020.
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 2020. The Company's trademarks have indefinite lives and Company
management believes that the adverse effects of the Covid-19 pandemic on net
product sales are temporary and do not significantly affect our business model
and long-term strategy. Therefore, we do not consider COVID-19 to be a
triggering event to accelerate our annual impairments testing. There were no
impairments in the comparative nine months 2020 period or in calendar year 2019.
Although Company management has not identified any trigging events at this time
relating to its intangibles the ultimate effects of the Covid-19 pandemic,
including possible longer term effects on consumer lifestyles and behavior,
could change this assessment in the future, as discussed below and as outlined
in the Company's risk factors discussed on Form 10-K for the year ended December
31, 2019.
Beginning in 2012, the Company received periodic notices from the Bakery,
Confectionery, Tobacco Workers and Grain Millers International Union Pension
Plan (Plan), a multi-employer defined benefit pension plan for certain Company
union employees, that the Plan's actuary certified the Plan to be in "critical
status", the "Red Zone", as defined by the Pension Protection Act (PPA) and the
Pension Benefit Guaranty Corporation (PBGC); and that a plan of rehabilitation
was adopted by the trustees of the Plan in 2012. During 2015, the Company
received notices that the Plan's status was changed to "critical and declining
status", as defined by the PPA and PBGC, for the plan year beginning January 1,
2015, and that the Plan was projected to have an accumulated funding deficiency
for the 2017 through 2024 plan years. A designation of "critical and declining
status" implies that the Plan is expected to become insolvent in the next 20
years. The Company has continued to receive annual notices each year (2016
through 2020) that this Plan remains in "critical and declining status" and is
projected to become insolvent within the next 20 years. These notices have also
advised that the Plan trustees were considering the reduction or elimination of
certain retirement benefits and may seek assistance from the PBGC. Plans in
"critical and declining status" may elect to suspend (temporarily or
permanently) some benefits payable to all categories of participants, including
retired participants, except retirees that are disabled or over the age of 80.
Suspensions must be equally distributed and cannot drop below 110% of what would
otherwise be guaranteed by the PBGC.
Based on these updated notices, the Plan's funded percentage (plan investment
assets as a percentage of plan liabilities), as defined, were 50.4%, 51.6%, and
54.7% as of the most recent valuation dates available, January 1, 2019,
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2018, and 2017, 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,
2020 the funded percentage would be 48.8% (not 50.4%). As of the January 1, 2019
valuation date (most recent valuation available), only 16% of Plan participants
were current active employees, 53% 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, 2019 fell 14% from the previous year and 17% over the past two
years. When compared to the Plan valuation date of January 1, 2011 (seven years
earlier prior to the first "critical status" funding notice), current active
employee participants have declined 47%, whereas participants who were retired
or separated from service and receiving benefits increased 4% and participants
who were retired or separated from service and entitled to future benefits
increased 14%. The Company understands that the Plan is continuing to explore
additional restructuring measures which include incentives to participating
employers in exchange for providing additional future cash contributions as well
as suspension of certain retirement benefits.
The Company has been advised that its withdrawal liability would have been
$99,800, $81,600, and $82,200 if it had withdrawn from the Plan during 2019,
2018 and 2017, respectively. The increase from 2018 to 2019 was mainly
attributable to a decrease in the Plan's assets during 2018, net of market
returns, and the withdrawal of a large contributing employer where their actual
withdrawal payments (likely over 20 years as discussed below) are not enough to
fully fund their actual withdrawal liability. The Company's relative share of
the Plan's contribution base, driven by employer withdrawals, has increased for
the last several years, and Management believes that this trend could continue
indefinitely which will add upward pressure on the Company's withdrawal
liability. Based on the above, including the Plan's projected insolvency in the
year 2030, Management believes that the Company's withdrawal liability could
increase further in future years.
Based on the Company's updated actuarial study and certain provisions in ERISA
and the law relating to withdrawal liability payments, Management believes that
the Company's liability would likely be limited to twenty annual payments of
$3,045 which have a present value in the range of $35,700 to $46,700 depending
on the interest rate used to discount these payments. While the Company's
actuarial consultant does not believe that the Plan will suffer a future mass
withdrawal (as defined) of participating employers, in the event of a mass
withdrawal, the Company's annual withdrawal payments would theoretically be
payable in perpetuity. Based on the Company's updated actuarial study, the
present value of such perpetuities is in the range of $49,900 to $104,500 and
would apply in the unlikely event that substantially all employers withdraw from
the Plan. The aforementioned is based on a range of valuations and interest
rates which the Company's actuary has advised is provided under the statute.
Should the Company actually withdraw from the Plan at a future date, a
withdrawal liability, which could be higher than the above discussed amounts,
could be payable to the Plan.
The Company's current labor contract requires the Company's continued
participation in this Plan through September 2022. The amended rehabilitation
plan, which also continues, requires that employer contributions include 5%
compounded annual surcharge increases each year for an unspecified period of
time beginning in 2012 as well as certain plan benefit reductions. The Company's
pension expense for this Plan for nine months 2020 and 2019 was $2,226 and
$2,307, respectively, which includes surcharges of $785 and $738, respectively,
as required under the amended rehabilitation plan. Such surcharges for calendar
years 2019 and 2018 were $948 and $811, respectively.
The Company understands that the U.S. Congress and the U.S. Senate have proposed
various legislation, including the "Butch Lewis Act," that would provide varying
degrees of assistance to troubled multi-employer plans similar to this Plan,
including long-term low interest loans to troubled multi-employer plans. Certain
provisions proposed would change the withdrawal liability rules which could
increase the Company's obligation in the event that the Company withdrew from
this Plan, resulting in higher annual payment amounts and payments for a longer
period of time in excess of the maximum twenty-year period discussed above. The
Company is currently unable to determine the ultimate outcome of the above
discussed multi-employer union pension matter and therefore is unable to
determine the effects on its consolidated financial statements, but the ultimate
outcome could be material to its consolidated results of operations or cash
flows in one or more future periods. See also Note 7 in the Company's
Consolidated Financial Statements on Form 10-K for the year ended December 31,
2019.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities were $24,088 and $36,176 in nine
months 2020 and 2019, respectively, an unfavorable decrease of $12,088. The
decrease in nine months 2020 cash flows from operating activities principally
reflects decreased net earnings and changes in deferred compensation,
principally payments of deferred compensation liabilities. The aforementioned
was partially offset by a decrease in accounts receivable which reflects lower
net product sales in third quarter 2020 as well as the timing of net product
sales and collections of accounts receivable trade in the comparative periods.
Net cash used in investing activities was $12,117 in nine months 2020 compared
to $15,043 in nine months 2019. Cash flows used in investing activities reflect
$82,862 and $49,999 of purchases of available for sale securities during nine
months 2020 and 2019, respectively, and $67,215 and $51,580 of sales and
maturities of available for sale securities during nine months 2020 and 2019,
respectively. Nine months 2020 and 2019 investing activities include capital
expenditures of $11,425 and $14,151, respectively. Company Management has
committed approximately $25,000 to a rehabilitation upgrade and expansion of one
of its manufacturing plants in the U.S.A. The Company spent approximately $2,400
in 2019, and Management's projected cash outlays for this project are
approximately $9,000 in 2020 and $13,600 in 2021. All capital expenditures are
to be funded from the Company's cash flow from operations and internal sources
including available for sale securities.
Subsequent to September 30, 2020, the Company received $23,527 from certain
split dollar life insurance policies on an executive officer. The Company has
carried this amount as an asset which represents the cumulative premiums
previously paid by the Company on such policies, and therefore, this did not
result in any gain or loss to the Company.
The Company's consolidated financial statements include bank borrowings of $933
and $768 at September 30, 2020 and 2019, respectively, all of which relates to
its Spanish subsidiary. The Company had no other outstanding bank borrowings at
September 30, 2020.
Financing activities include Company common stock purchases and retirements of
$23,505 and $27,232 in nine months 2020 and 2019, respectively. Cash dividends
of $17,850 and $17,592 were paid in nine months 2020 and 2019, respectively.
The Company's current ratio (current assets divided by current liabilities) was
4.0 to 1 at September 30, 2020 compared to 4.4 to 1 at December 31, 2019 and 4.3
to 1 at September 30, 2019. Net working capital was $236,718 at September 30,
2020 compared to $273,786 and $254,897 at December 31, 2019 and September 30,
2019, respectively. The aforementioned net working capital amounts are
principally reflected in aggregate cash and cash equivalents and short-term
investments of $166,529 at September 30, 2020 compared to $239,404 and $164,166
at December 31, 2019 and September 30, 2019, respectively. In addition, long
term investments, principally debt securities comprising corporate bonds, were
$201,698 at September 30, 2020, as compared to $153,031 and $178,808 at December
31, 2019 and September 30, 2019, respectively. Aggregate cash and cash
equivalents and short and long-term investments were $368,227, $392,435, and
$342,974, at September 30, 2020, December 31, 2019 and September 30, 2019,
respectively. The aforementioned includes $66,120, $76,183, and $71,790 at
September 30, 2020, December 31, 2019 and September 30, 2019, respectively,
relating to trading securities which are used as an economic hedge for the
Company's deferred compensation liabilities. Investments in available for sale
securities, primarily high quality corporate bonds, that matured during nine
months 2020 and 2019 were generally used to purchase the Company's common stock
or were replaced with debt securities of similar maturities.
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 is currently using these VEBA funds to
pay the actual cost of such benefits through most of 2022. The VEBA trust held
$9,826, $12,085 and $13,594 of aggregate cash and cash equivalents at September
30, 2020, December 31, 2019 and September 30, 2019, 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.
COVID-19 PANDEMIC
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On March 11, 2020, the World Health Organization designated the recent novel
coronavirus ("COVID-19") as a global pandemic. We continue to actively monitor
COVID-19 and its potential impact on our operations and financial results,
prioritizing employee health and safety. To date, there has not been any
material disruption to our supply chain or our manufacturing capabilities that
has materially affected our ability to meet sales demands.
The Covid-19 pandemic, and resulting "shelter in place" and closures of
"nonessential" businesses by many state and local governments, as well as
foreign governments, has had a significant adverse impact on the overall
economy. The aforementioned has resulted in the curtailment or complete closing
of certain trade channels where our products are historically distributed and
sold. The aforementioned has resulted in changes in consumer behavior and
consumption, shopping habits, and work and personal routines. Many of the
Company's products are larger confectionary products where a high value is
provided to consumers, and such products are often consumed at many "sharing"
and "give-a-way" events including group gatherings and activities. However, many
of these consumption occasions as well as impulse purchases of our products have
been adversely affected or completely curtailed by "shelter in place" mandates,
public health guidelines, and consumer fears of returning to their previous
lifestyles. As a result, the Company has experienced significant declines in
both third quarter and nine months 2020 net product sales. Company management
expects some decline in fourth quarter 2020 net product sales but to a lesser
extent than in third quarter 2020, however, a resurgence of Covid-19 in fourth
quarter 2020 and the colder winter months could result in a continued
significant net product sales decline in fourth quarter 2020 and into 2021. The
effects of this pandemic are unprecedented and its future effects, including the
full "reopening up the economy" which is likely very dependent on the timing and
effectiveness of a vaccine, are very uncertain. Therefore, the Company is not
able to predict the effects of this pandemic on the fourth quarter 2020 and
beyond.
Although the Company has not yet experienced any material disruptions to its
business operations, the Covid-19 pandemic could also result in the following:
Disruption to supply chain resulting in the unavailability or untimely delivery
? of raw materials and supplies as well as key services by third parties for the
manufacture and distribution of products.
Disruption to manufacturing due to plant closures which could result in a lack
of labor and supervision because of employee Covid-19 positive tests or related
? quarantine of employees, excessive sickness, fears or unwillingness of
employees to come to work, union demands and resistance to work, or closures
mandated by local, state or federal governmental authorities.
? Disruption to shipping and delivery of inventory, supplies and products to
distribution centers and customers where third-party carriers are used.
Changes in consumer attitudes and participation in key holidays and seasonal
? events, including Halloween which has historically comprised approximately 50%
of third quarter net product sales.
Deteriorating economic conditions, which are discussed below and in the Company
? Risk Factors on Form 10-K for the year ended December 31, 2019, including high
unemployment, declining consumer confidence and spending, and effects of lower
GDP, any of which could change the demand for one or more of our products.
Impairment in the carrying value of trademarks should the adverse effects of
? the Covid-19 have a long-term effect on net product sales which could result
from changes in consumer behavior, lifestyles, and shopping habits and some or
all changes become permanent.
We have prioritized the safety of our employees and therefore the Company has
taken many steps to provide our employees with a safe and healthy work
environment, including increased sanitation, social distancing measures at all
Company locations, having office employees work remotely where possible,
curtailing visitors at Company locations, and limiting all airline and other
business travel by employees. Because the Company has a sizable investment in
marketable securities (see Liquidity and Capital Resources section above) it is
well positioned financially to respond to the adverse effects of this pandemic
in the short-term, as well as for a longer period of time if necessary.
ACCOUNTING PRONOUNCEMENTS
See Note 1 of the Company's Condensed Consolidated Financial Statements.
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FORWARD-LOOKING STATEMENTS
This discussion and certain other sections contain forward-looking statements
that are based largely on the Company's current expectations and are made
pursuant to the safe harbor provision of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements can be identified by the use of
words such as "anticipated," "believe," "expect," "intend," "estimate,"
"project," "plan" and other words of similar meaning in connection with a
discussion of future operating or financial performance and are subject to
certain factors, risks, trends and uncertainties that could cause actual results
and achievements to differ materially from those expressed in the
forward-looking statements. Such factors, risks, trends and uncertainties, which
in some instances are beyond the Company's control, include the overall
competitive environment in the Company's industry, changes in assumptions and
judgments discussed above under the heading "Significant Accounting Policies and
Estimates," and factors identified and referred to above under the heading "Risk
Factors" in this report and under the heading "Risk Factors" in the Company's
2019 Form 10-K.
The risk factors identified and referred to above, including the effects of the
Covid-19 pandemic, are believed to be significant factors, but not necessarily
all of the significant factors that could cause actual results to differ from
those expressed in any forward-looking statement. Readers are cautioned not to
place undue reliance on such forward-looking statements, which are made only as
of the date of this report. The Company undertakes no obligation to update such
forward-looking statements.
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TOOTSIE ROLL INDUSTRIES, INC. 
