TR 10-K & 10-Q changes, risk factors and insider trading

The Company has a relatively straight-forward financial structure and has historically maintained a conservative financial position. The Company has no special financing arrangements or “off-balance sheet” special purpose entities. Cash flows from operations plus maturities of short-term investments are expected to be adequate to meet the Company’s overall financing needs, including capital expenditures, in 2025.2026. Periodically, theThe Company considersis continuously alert to possible acquisitions, and if the Company were to pursue and complete such an acquisition, that could result in the sale of marketable securities held for investment, bank borrowings or other financing.

The consolidated net product sales for the twelve months of 20242025 were $715,530$724,675 compared to the twelve months 20232024 of $763,252,$715,530, aan decreaseincrease of $47,722$9,145 or 6.3%.1.3%. Fourth quarter 20242025 net product sales were $191,356$194,350 compared to $195,368$191,356 in fourth quarter 2023,2024, aan decreaseincrease of $4,012,$2,994, or 2.1%.1.6%. The sales declineincrease in fourth quarter and twelve months 20242025 was driven primarily by lowerprice increases taken during the year, as well as successful marketing and sales volumes.programs. The Company facedcontinued ato moreface challengingsome marketchallenges in 20242025 as customers and consumers became more resistant to higher pricesprices, forand ourthese products.headwinds whichhad weresome implementedadverse toeffects helpon restoresales ourthroughout margins.2025.

Product cost of goods sold were $468,056$472,127 in 20242025 compared to $510,737$468,056 in 2023,2024, aan decreaseincrease of $42,681$4,071 or 8.4%.0.9%. Product cost of goods sold includes $803$698 and $814$803 in certain deferred compensation expenses in 20242025 and 2023,2024, respectively. These deferred compensation expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Adjusting for the aforementioned, product cost of goods sold decreasedincreased from $509,923 in 2023 to $467,253 in 2024,2024 ato decrease$471,429 in 2025, an increase of $42,670$4,176 or 8.4%.0.9%. As a percent of net product sales, these adjusted costs decreased from 66.8% in 2023 to 65.3% in 2024,2024 to 65.1% in 2025, a 1.50.2 favorable percentage point change. CertainHigher price realizations, as well as certain cost and expense reductions, as well as higher price realizations helped benefit 2024benefited cost of goods sold and gross profit margins.margins in both 2025 and 2024.

In response to increases in input costs in recent years, manyMany companies in the consumer products industry have increased selling prices.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 with the objective of improving sales price realization in order to mitigate certain input cost increases and recover our margin declines. Although we made progress in restoring our margins in 2024,2025, certain ingredients and packaging materials unit costs, particularly cocoa and chocolatechocolate, continued to increase in 2025. Cocoa commodities markets have now retreated from their recent high price levels, but still remain above historical levels. As these lower costs havebegin movedto significantlybe higherreflected in theour marketssupply thischain year, andcosts, we expect to experiencerealize even higherlower cocoa and chocolate costs in 2025late as many of our older supply contracts expire2026 and newinto contracts at higher costs become effective.2027. 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.

Selling, marketing and administrative expenses were $152,675$157,503 in 20242025 compared to $155,012$152,675 in 2023,2024, aan decreaseincrease of $2,337$4,828 or 1.5%.3.2%. Selling, marketing and administrative expenses include $15,521$15,653 and $14,675$15,521 in certain deferred compensation expenses in 20242025 and 2023,2024, respectively. These deferred compensation expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Adjusting for the aforementioned, selling, marketing and administrative expenses decreasedincreased from $140,337 in 2023 to $137,154 in 2024,2024 ato decrease$141,850 in 2025, an increase of $3,183$4,696 or 2.3%.3.4%. As a percent of net product sales, these adjusted expenses increased from 18.4% of net product sales in 2023 to 19.2% of net product sales in 2024,2024 to 19.6% of net product sales in 2025, a 0.80.4 unfavorable percentage point change. The increase in these expenses,expenses in 2025, as a percentage of net product salessales, was attributableprincipally driven by increases in advertising and marketing expenses, and higher expenses relating to lowerinternational sales volume in 2024 compared to 2023, primarily due to the impact of employee compensation, that is largely fixed in nature.operations.

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 in each of the periods presented that changed Management’s estimated current and future liabilities for prior period obligations resulting in a $5,665 reduction in accrued liabilities and an increase in net product sales of $2,700 and $5,665 in twelve2025 monthsand 2024.2024, respectively.

Selling, marketing and administrative expenses include freight, delivery and warehousing expenses. These expenses decreased from $65,465 in 2023 to $57,581 in 2024,2024 to $56,780 in 2025, a decrease of $7,884$801 or 12.0%.1.4%. As a percent of net product sales, these adjusted expenses decreased from 8.6% in 2023 to 8.0% in 2024,2024 to 7.8% in 2025, a 0.60.2 favorable percentage point change, which generally reflects the benefits of lowersales freightprice surcharges and a more favorable freight market.increases.

The Company has foreign operating businesses in Mexico, Canada and Spain, and exports products to many foreign markets. The Company’s Spanish subsidiary (97% owned by the Company) incurred an operating loss of $611$2,244 in 20242025 compared to its $828$611 loss in 2023.2024. Company management expects the competitive and business challenges in Spain to continue.continue, but is undertaking an in-depth evaluation of the business to ascertain the best course of action for this business. Nonetheless, Management believes that operating losses at its Spanish subsidiary are expected towill continue beyondin 20252026 and that these future losses, as well as some capital expenditures, will likely require additional cash financing.

The Company believes that the carrying values of its goodwill and trademarks have indefinite lives as they are expected to generate cash flows indefinitely. In accordance with current accounting guidance, these indefinite-lived intangible assets are assessed at least annually for impairment as of December 31 or whenever events or circumstances indicate that the carrying values may not be recoverable from future cash flows. No impairments were recorded in 2024,2025, 20232024 or 2022.2023. Current accounting guidance provides entities an option of performing a qualitative assessment (a "step-zero" test) before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors, that it is more-likely-than-not that the intangibles (goodwill and certain trademarks) are not impaired, the entity would not need to proceed to the two step impairment testing process (quantitative analysis) as prescribed in the guidance. During fourth quarter 20242025 (and fourth quarters 20232024 and 20222023), the Company performed a “step zero” test of its goodwill and certain trademarks, and concluded that there was no impairment based on this guidance. ForAlthough the “step-zero” analysis performed for the fair value assessment of certain trademarks whereconcluded that there was no impairment, the Company proceeded to “step-zerostep-one” analysis was not considered appropriate, impairment testing wasand performed additional analysis in fourth quarter 2024 (and fourth quarters 20232025 and 2022)2024 usingfor significant indefinite-lived intangible assets that have been impaired in the past. Using discounted cash flows and estimated royalty ratesrates, andthe Company concluded that the trademarks were not impaired. For these trademarks, holding all other assumptions constant, as of December 31, 2024,2025, a 100 basis point increase in the discount rate would reduce the fair value of these trademarks by approximately 12%11% and a 100 basis point decrease in the royalty rate would increasereduce the fair value of these trademarks by approximately 16%.9%. Individually, a 100 basis point increase in the discount rate or a 100 basis point decrease in the royalty rate would not result in a potential impairment as of December 31, 2024.2025.

Earnings from operations were $100,505$100,939 in 20242025 compared to $101,828$100,505 in 2023,2024, aan decreaseincrease of $1,323.$434. Earnings from operations include $16,324$16,351 and $15,489$16,324 in certain deferred compensation expense in 20242025 and 2023,2024, respectively, which are discussed above. Adjusting for these deferred compensation expenses, adjusted earnings from operations decreasedincreased from $117,317 in 2023 to $116,829 in 2024,2024 ato decrease$117,290 in 2025, an increase of $488$461 or 0.4%. The above discussed decreaseincrease in net product salessales, wasas well as cost and expense reduction programs and actions, were the principal driverdrivers of lowerhigher adjusted operating earnings in 20242025 compared to 2023.2024.

Other income, net was $26,366$36,297 in 20242025 compared to $18,066$26,366 in 2023,2024, an increase of $8,300.$9,931. Other income, net principally reflects $16,324$16,351 and $15,489$16,324 of aggregate net gains and investment income on trading securities in 20242025 and 2023,2024, respectively. These trading securities provide an economic hedge of the Company’s deferred compensation liabilities; and the related net gains and investment income were offset by a like amount of expense in aggregate product cost of goods sold and selling, marketing, and administrative expenses in the respective years as discussed above. Other income, net includes investment income from available for sale securities of $9,598$20,186 and $5,211$9,598 in 20242025 and 2023,2024, respectively, which reflects both higher interest rates and related investment returns on the Company’s available for sale investments in marketable securities, as well as an increase in the average balances in 2025 compared to 2024 on such securities. 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 $3,231 for 2025 which resulted from reclassifying unrealized gains from Accumulated Other Comprehensive Income/Loss. Other income, net also includes foreign exchange gains (losses) of $511($1,711) and $(2,803)$511 in 20242025 and 2023,2024, respectively.

OnIn December 3, 2024, the Board of Directors (the “Board”) of the Company revoked its prior action datedin December 28, 2018 that permitted management to take appropriate action to preserve the full income tax deductibility of certain amounts under its nonqualified deferred compensation plans in light of changes to Section 162(m) of Internal Revenue Code made by the Tax Cuts and Jobs Act of 2017 (“TCJA”). The Board revoked its authorization after determining that it was no longer feasible, after considering the purpose of these plans, to secure tax deductions on all accrued deferred compensation by further deferring payment amounts, in large part, due to interpretations of TCJA later adopted by the IRS and the subsequent growth of plan account balances due to sustained equity market appreciation. Given this Board action and the resulting expectation that certain additional amounts of deferred compensation will not be tax deductible in future years, the Company concluded that it will be required under generally accepted accounting principles in the United States of America toshould write off the related deferred tax assets.assets based on accounting guidance. The adjustment to the deferred tax assets resulted in a non-cash tax charge of $11,010 in fourth quarter 2024. The Company does not anticipate that this write off will result in future cash expenditures other than the Company’s inability to deduct certain deferred compensation payments against future taxable income.

Net earnings attributable to Tootsie Roll Industries, Inc. were $86,827$100,052 in twelve months 20242025 compared to $91,912$86,827 in 2023,2024, and net earnings per share were $1.22$1.37 and $1.28$1.18 in 20242025 and 2023,2024, respectively, aan decreaseincrease of $0.06$0.19 per share or 4.7%.16.1%. Fourth quarter 20242025 and 20232024 net earnings attributable to Tootsie Roll Industries, Inc. were $22,509$28,791 and $29,403,$22,509, respectively, and net earnings per share were $0.32$0.40 and $0.41,$0.31, respectively, aan decreaseincrease of $0.09 per share or 22.0%.29.0%. Adjusting for the above-discussed write-off of deferred tax assets relating to deferred compensation, net earnings in fourth quarter 20242025 would have been $33,519$29,116 compared to $29,403$33,519 in fourth quarter 2023,2024, ana increasedecrease of $4,116$4,403 or 14%,13%, and net earnings in twelve months 20242025 would have been $97,837$103,148 compared to $91,912$97,837 in 2023,2024, an increase of $5,925$5,311 or 6%.5%. The decline in the aforementioned adjusted net earnings in fourth quarter 2025 reflects the favorable effects of the prior year’s LIFO liquidation as discussed above, higher ingredient costs, primarily cocoa and chocolate, unfavorable sales mix, higher advertising expense, and adverse results of foreign operations in fourth quarter 2025. Earnings per share in both fourth quarter and twelve months 20242025 benefited by the reduction in average shares outstanding resulting from purchases of the Company’s common stock in the open market by the Company. Average shares outstanding decreased from 71,903 in 2023 to 71,32073,438 in 2024 to 72,905 in 2025 which reflects share repurchases of $13,534$6,482 during 2024.2025.

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. TheBeginning Plan’sin status2015, the Plan was changedreclassified to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015,2015. A designation of “critical and thisdeclining status” hasimplies continued.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 20242024, prior to receipt of Special Financial Assistance, have continued to classify the Plan in the “critical and declining status” category. As discussed below, in July 2024 the Plan received Special Financial Assistance of $3.4 billion. As required by federal law, the Plan is certified to be in critical status for plan year 2025 and will be until the plan year ending in 2051 as a result of the Special Financial Assistance received.

Based on these updated notices, the Plan’s funded percentage (plan investment assets as a percentage of plan liabilities), as defined, were 45.2%, 47.0%, 49.3%, and 48.5%49.3% as of January 1, 2024, 2023, 2022, and 2021,2022, 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, 2023,2024, the funded percentage would be 43.6%41.7% (not 47.0%45.2%). Note that these funded percentages do not include the Special Financial Assistance. As of the January 1, 2023 valuation date (most recent valuationmeasurement available),provided in the Annual Funding Notice, only 14%14.9% of Plan participants were current active employees, 55%54.8% were retired or separated from service and receiving benefits, and 31%30.3% were retired or separated from service and entitled to future benefits. The number of current active employee Plan participants as of Januarythe 1,most 2023recent fellmeasurement 1%increased 2% from the previous year and 6%remained consistent 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%,54%, whereas participants who were retired or separated from service and receiving benefits increased 3%1% and participants who were retired or separated from service and entitled to future benefits increased 6%.2%.

The Company has been advised that its withdrawal liability would have been $97,500,$102,800, $102,200$97,500 and $96,000$102,200 if it had withdrawn from the Plan during 2024,2025, 20232024 and 20222023 respectively (most recent information provided by the Plan). The most recent decreaseincrease in the withdrawal liability as advised by the Plan was primarily drivendue by an increase into the PBGC interest rates used to value a portion of thefull present value of vested benefits (being valued at the PlanPBGC usesinterest rates, as required for plans that receive Special Financial Assistance, rather than a blended interest rate assumption). used in previous years. As discussed below, 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 bewas 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. The net impact of the interest rate assumption change was a decrease in the effective interest rate, which resulted in a higher vested Plan benefit 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.

Based on the Company’s most recent actuarial estimates using the information provided by the Plan with respect to its 20242025 withdrawal liability (based on most recent information provided to the Company) and certain provisions in ERISA and laws relating to withdrawal liability payments, management believes that the Company’s liability had the Company withdrawn in 20242025 would likely be limited to twenty annual payments of $2,664$2,706 which have a present value in the range of $31,262$32,904 to $37,654$35,413 depending on the interest rate used to discount these payments. While the Company’s actuarial consultant diddoes not believeanticipate that the Plan will sufferincur 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 same actuarial estimates, had a mass withdrawal occurred in 2024,2025, the present value of such perpetuities is in the range of $43,650$47,812 to $69,266$56,833 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.

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.

The Company’s pension expense for this Plan for twelve months 20242025 and 20232024 was $3,332$3,290 and $3,516,$3,332, respectively. The aforementioned expense includes surcharges of $1,174$1,160 and $1,239$1,174 for twelve months 20242025 and 2023,2024, respectively, as required under the amended plan of rehabilitation. The decrease in the twelve months 2024 expense compared to twelve months 2023 reflects the effects of lower sales volumes in twelve months 2024, and corresponding reductions in lower production and labor hours worked.

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 and believes 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. TheAccording to the Company’s actuary believes thatactuary, it still remains unclear if the Plan can remain solvent through the targeted date of 20512051, 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 previously discussed and that those payments will not be affected by Special Financial Assistance regulation.

The Company manages and controls a VEBA trust, to fund the estimated future costs of certain union employee health, welfare and other benefits. Contributions of $20,000 and $5,000 were made to this trust in 2023 and 2022, respectively; no contribution was made to the trust during 2024.2024 and 2025. The Company uses these funds to pay the actual cost of such benefits over each union contract period. At December 31, 20242025 and 2023,2024, the VEBA trust held $13,926$8,953 and $19,126$13,926 respectively, of aggregate cash and cash equivalents, which the Company expects to use to pay certain union employee benefits through part or all of 2027. This asset value is included in prepaid expenses and long-term other assets in the Company’s Consolidated Statement of Financial Position and is categorized as Level 1 within the fair value hierarchy.

Cash flows from investing activities reflect capital expenditures of $34,263, $17,997, $26,796, and $23,356$26,796 in 2024,2025, 20232024 and 2022,2023, respectively. The Company is currently pursuingundergoing a plant expansion,expansion at one of its manufacturing facilities in the USA, including additional and replacement of certain processing and packaging lines, to better meet its higher level of forecasted demand for certain products on a timelier and more cost effectivecost-effective basis. The Company expects that this will take place over the next seven years, however, most of the actual expendituresexpenditures, which related to the building construction, are expected to occur in 20252026. andDuring 2026.2025, we incurred $10,700 of capital expenditures relating to this expansion. Company management believes that the total cost of this expansion, including new machinery, equipmentmachinery and equipment, some of which is normal and recurring replacements over the next seven years, food processing infrastructure, and raw materials warehousing will approximate $100,000.$75,000 to $85,000. All capital expenditures have been and are expected to be funded from the Company’s cash flow from operations and internal sources including investments in available for sale securities.

Other than the bank loans and the related restricted cash of the Company’s Spanish subsidiary which are discussed in Note 1 of the Company’s Notes to Consolidated Financial Statements, the Company had no bank borrowings or repayments in 2022,2023, 2023,2024, or 2024, and had no outstanding bank borrowings as of December 31, 2023 or 2022.2025. Nonetheless, the Company would consider bank borrowing or other financing in the event that a business acquisition is completed.

Advertising and marketing costs are recorded in the period to which such costs relate. Media advertising is recorded as an expense in the period in which the media is run (e.g. a commercial is aired in the chosen media) based on accounting guidance. The Company does not defer the recognition of any amounts on its consolidated balance sheet with respect to such costs. The expected cost of future payments to customers for incentives and other trade promotional programs is recorded at the time sale as a reduction of Net productProduct sales.Sales. The liabilities associated with these programs are reviewed quarterly and adjusted if the expected utilization rate differs from management’s original estimates. Although the Company recorded a $5,665 favorable change in this estimate in 2024, as discussed above, such adjustments have not historically been material to the Company’s operating results.

Deferred income taxes are recognized for future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. The Company records valuation allowances, or may actually adjust or write-off deferred tax assets, in situations where the realization of deferred tax assets, including those relating to net operating tax losses,assets is not more-likely-than-not; and the Company adjusts and releases such valuation allowances when realization becomes more-likely-than-not as defined by accounting guidance. The Company periodically reviews assumptions and estimates of the Company’s probable tax obligations and effects on its liability for uncertain tax positions, using informed judgment which may include the use of third-party consultants, advisors and legal counsel, as well as historical experience.

Investments are classified as either available for sale or trading. Investments classified as available for sale primarily comprise high quality corporate bonds which are generally not sold prior to maturity, whichwith ismaturities typically three to five years. The Company uses a “ladder” approach to its maturities so that approximately 20% to 35% of the portfolio matures each year with the objective of achieving higher yields with minimumlimited interest rate risk. The Company also invests in variable rate demand notes (generally long term bonds where interest rates are reset weekly, and provide a weekly “put” which allows the holder to also sell each week with no loss in principal). Available for sale investments are reviewed for impairment at each reporting period by comparing the carrying value or amortized cost to the fair market value. In the event that the Company determines that a security’s fair value is permanently impaired, the Company will record the amount of the impairment attributable to credit factors in earnings as credit loss expense or, as applicable, a reversal of that expense, with the amount attributable to non-credit factors in other comprehensive income, net of applicable taxes. The Company’s investment policy, which guides investment decisions, is focused on high quality investments which mitigates the risk of impairment. Investments classified as trading securities primarily comprise mutual funds which are used as an economic hedge against our deferred compensation liabilities. Trading securities are carried at fair value with gains or losses included in otherOther income,Income, net.Net. The Company does not invest in Level 3 securities, as defined, but may utilize third-party professional valuation firms as necessary to assist in the determination of the value of investments that utilize Level 3 inputs (as defined by guidance) should any of its investments ever be downgraded to Level 3.

The Company utilizes commodity futures contracts, as well as annual supply agreements, to hedge (primarily sugar) and plan for anticipated purchases of certain ingredients, including sugar,ingredients in order to mitigate commodity cost fluctuation. The Company also may purchase forward foreign exchange contracts to hedge its costs of manufacturing certain products in Canada for sale and distribution in the United States (U.S.A.),USA, and periodically does so for purchases of equipment or raw materials from foreign suppliers. Such commodity futures and currency forward contracts are cash flow hedges and are effective as hedges as defined by accounting guidance. The unrealized gains and losses on such contracts are deferred as a component of accumulated other comprehensive loss (or gain) and are recognized as a component of product cost of goods sold when the related inventory is sold.

The majority of the Company’s investments which are classified as available for sale have generally not been sold prior to their maturity, which is typically three to five years. Approximately 20% to 35% of this investment portfolio matures each year. This “ladder” approach to investing limits the Company’s exposure to interest rate fluctuations. The Company also invests in variable rate demand notes which have interest rates that are reset weekly and can be “put back” and sold each week through a remarketing agent, generally a large financial broker, which also substantially eliminates the Company’s exposure to interest rate fluctuations on the principal invested. The accompanying chart summarizes the maturities of the Company’s investments in debt securities at December 31, 2024.2025.

As stated above, the Company’s investments classified as available for sale primarily include marketable securities which mature in three to five years and variable rate demand notes (VRDNs).years. The VRDNs have weekly “puts” which are collateralized by bank letters of credit or other assets, and interest rates are reset weekly. Except for VRDNs, the Company’s marketable securities are generally not sold prior to maturity and such maturities generally approximate three to five years.maturity. The Company utilizes a professional money managersmanager and maintains investment policy guidelines which emphasize high quality and liquidity in order to minimize the potential loss exposures that could result in the event of higher interest rates, a default or other adverse event. The Company continues to monitor these investments and markets, as well as its investment policies, however, the financial markets could experience unanticipated or unprecedented events and future outcomes may be less predictable than in the past.

Developments in economic and fiscal policy, most notably those related to tariff’stariffs 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 quarterhalf 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. Notwithstanding,In addition, we procure certain ingredients, including cocoa, chocolate and edible oils, as well as some packaging and other operating equipment and supplies, from sources outside of the United States andwhich doare notsubject qualifyto as exempt from tariffs under USMCA.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.refunds as these potential refunds will be recognized as received.

Net product sales were $149,488$151,943 in firstsecond quarter 2026 compared to $146,521$153,190 in second quarter 2025, a decrease of $1,247 or 0.8%. First half 2026 net product sales were $301,431 compared to $299,711 in first quarterhalf 2025, an increase of $2,967$1,720 or 2.0%.0.6%. Domestic (U.S.) net product sales in firstsecond quarter 2026decreased by 2.5% but increased 3.4%by 0.3% in first half 2026 compared to the corresponding period in the prior year; and foreign net product sales, including exports to foreign markets,markets decreasedand 13.0%the effects of foreign translations, increased 25.1% and 3.4%, respectively, compared to the corresponding periodperiods in the prior year. For the second quarter and first quarterhalf 2026, domestic sales represented 92.7%92.2% and 92.4%, respectively, of total consolidated net product sales. SuccessfulSecond marketingquarter and first half 2026 sales programs,were adversely impacted by the timing of sales, including tradeseasonal promotionssales, between second and other marketing support, contributed to higher domestic sales in firstthird quarter 2026 when compared to the prior yearyears’ comparativecorresponding period.quarterly periods. We are focused on the long term and have continued to support our brands with increased trade promotions, as well as advertising in the second quarter and first half 2026. Because trade promotions are accounted for as a reduction in reported net sales, these higher levels of trade promotions had some adverse effects on our reported net sales for second quarter and first half 2026.

Product cost of goods sold was $99,722$100,965 in firstsecond quarter 2026 compared to $95,500$98,127 in second quarter 2025, and $200,687 in first quarterhalf 2026 compared to $193,627 in first half 2025. Product cost of goods sold includes $(245)$718 and $(155)$467 of certain deferred compensation (credits)expenses in second quarter 2026 and 2025, respectively, and $473 and $312 of certain deferred compensation expenses in first quarterhalf 2026 and 2025, respectively. These deferred compensation (credits) 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 (credits),expenses, product cost of goods sold increased from $95,655$97,660 in firstsecond quarter 2025 to $99,967$100,247 in firstsecond quarter 2026, an increase of $4,312$2,587 or 4.5%.2.6%; and from $193,315 in first half 2025 to $200,214 in first half 2026, an increase of $6,899 or 3.6%. As a percentage of net product sales, adjusted product cost of goods sold was 66.9%66.0% and 65.3%63.8% in firstsecond quarter 2026 and 2025, respectively, an unfavorableincrease of 2.2 percentage points; and 66.4% and 64.5% in first half 2026 and 2025, respectively, an increase of 1.61.9 percentage points. FirstIn addition to the sales impact of timing between second and third quarter as discussed above, second quarter and first half 2026 product cost of goods sold and gross profit margins were adversely affected by significantly higher unitcocoa costs forand chocolate andunit cocoa.costs, when compared to the corresponding periods in 2025. Cocoa commodities markets have retreated from their extraordinarily high price levels in 2025 but still remain above historical levels. As these lower costs begin to be reflected in our supply chain costs, we should realize lower cocoa and chocolate costs in latesecond half 2026 and into 2027. TheDuring Companysecond hasquarter beenand advisedfirst byhalf certain2026, packagingelevated suppliersenergy thatcosts theyalso will be increasing prices duecontributed to higher energy costs whichfor haveresin-based increasedpackaging thematerials, costas ofwell resins used inas certain packagingother materials.materials Theand Company is not able to determine the effects of these actions yet.supplies.

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,Under the above-discussedLIFO method, the most current costs are charged to cost of goods sold thereby accelerating the realization of higher cocoa and chocolate costs willduring havesuch anperiods increasinglyof adverserising effect on our gross profit margins as this year progresses.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 to the final consumers of our products.

Selling, marketing and administrative expenses were $28,081$54,247 in firstsecond quarter 2026 compared to $29,390$44,362 in second quarter 2025; and $82,328 in first quarterhalf 2026 compared to $73,752 in first half 2025. Selling, marketing and administrative expenses include $(5,190)$15,233 and $(3,459)$10,403 of certain deferred compensation (credits)expenses in second quarter 2026 and 2025, respectively, and $10,043 and 6,944 of certain deferred compensation expenses in first quarterhalf 2026 and 2025, respectively. As discussed above, these (credits) expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Excluding the adjustment for deferred compensation (credits) expenses, selling, marketing and administrative expenses increased from $32,849$33,959 in firstsecond quarter 2025 to $33,271$39,014 in firstsecond quarter 2026, an increase of $422$5,055 or 1.3%.14.9%; and from $66,808 in first half 2025 to $72,285 in first half 2026, an increase of $5,477 or 8.2%. As a percentage of net product sales, adjusted selling, marketing and administrative expenses decreasedincreased from 22.4%22.2% in firstsecond quarter 2025 to 25.7% in second quarter 2026, an unfavorable change of 3.5 percentage points; and from 22.3% in first quarterhalf 2025 to 24.0% in first half 2026, aan favorableunfavorable decreasechange of 0.11.7 percentage points.

Selling, marketing and administrative expenses include $13,535$15,424 and $13,916$13,047 for customer freight, delivery and warehousing expenses in firstsecond quarter 2026 and 2025, respectively, aan decreaseincrease of $381$2,377 or 2.7%.18.2%; and $28,960 and $26,963 in first half 2026 and 2025, respectively, an increase of $1,997 or 7.4%. These expenses were 9.1%10.2% and 9.5%8.5% of net product sales in second quarter 2026 and 2025, respectively; and 9.6% and 9.0% of net product sales in first quarterhalf 2026 and 2025, respectively. Customer freight and delivery unit costs, includingwhich reflect the cost per pound shipped, were more favorableincreased in firstsecond quarter 20262026, and first half 2026, compared to the corresponding periodperiods in 2025. However,Increases in fuel costs, principally freight fuel surcharges, were driven by elevated energy costsmarkets. haveIn recentlyaddition, increased,higher marketing and weadvertising expectexpenses, as well as increased professional fees, in second quarter and first half 2026, contributed to incurthese higher freightselling, marketing and deliveryadministrative unit costs in the future due to higher diesel costs and resulting fuel surcharges from our freight carriers.expenses.

Earnings (losses) from operations were $23,213$(1,617) in firstsecond quarter 2026 compared to $23,060$12,121 in second quarter 2025; and were $21,596 in first quarterhalf 2026 compared to $35,181 in first half 2025. Earnings from operations include $(5,435)$15,951 and $(3,614)$10,870 of certain deferred compensation (credits)expenses in second quarter 2026 and 2025, respectively; and include $10,516 and $7,256 of certain deferred compensation expenses in first quarterhalf 2026 and 2025, respectively, which is discussed above. Adjusting for these deferred compensation (credits)expenses, expenses,adjusted earnings from operations were $17,778$14,334 and $19,446$22,991 in firstsecond quarter 2026 and 2025, respectively, a decrease of $1,668$8,657 or 8.6%.37.7%; and $32,112 and $42,437 in first half 2026 and 2025, respectively, a decrease of $10,325 or 24.3%. As a percentage of net product sales, these adjusted operating earnings were 11.9%9.4% and 13.3%15.0% in firstsecond quarter 2026 and 2025, respectively, an unfavorable decrease5.6 percentage point change; and 10.7% and 14.2% in first half 2026 and 2025, respectively, an unfavorable 3.5 percentage point change. As discussed above, higher trade promotions and the timing of 1.4sales percentagebetween points. Higher input costs, primarily chocolatesecond and cocoa,third quarter 2026, as well as unfavorablethe internationalhigher operations’ results adversely affected first quarter 2026 gross profit marginscosts and expenses noted above, contributed to the decrease in adjusted operating earnings.earnings in second quarter and first half 2026 when compared to the corresponding periods in the prior year. Declines in international operating income, including exports to foreign countries also contributed to the decline in adjusted operating earnings in second quarter and first half 2026.

Other (loss) income, net was $316$19,854 in firstsecond quarter 2026 compared to $(51)$14,072 in second quarter 2025; and $20,170 in first quarterhalf 2026 compared to $14,021 in first half 2025. Other (loss) income, net for first quarter 2026 and 2025 includes net (losses) gains and investment income of $(5,435)$15,952 and $(3,614),$10,870 for second quarter 2026 and 2025, respectively, and $10,516 and $7,256 in first half 2026 and 2025, 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 quarterhalf 2026 and 2025 primarily 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.

Other (loss) income, net for first quarter 2026 and 2025 includes investment income from available for sale securities and cash equivalents of $6,028$4,468 and $3,416$3,485 for second quarter 2026 and 2025, respectively; and $10,495 and $6,946 in first half 2026 and 2025, respectively. The aforementioned increaseincreases in 2026 investment income principallyreflects reflectsthe higher average investment balances held in second quarter and first quarterhalf 2026 compared to the corresponding period in the prior year. OtherIn (loss)addition, other income, net also includes an insurance recovery of $0.8 in first quarter 2025 and pre-tax losses(loss) on foreign exchange of $(40619) and $(544843) in firstsecond quarter 2026 and 2025, respectively; and $(658) and $(1,387) in first half 2026 and 2025, respectively.

The Company’s effective income tax rates were 25.1%26.9% and 21.6%33.1% in firstsecond quarter 2026 and 2025, respectively, and therefore25.9% and 27.7% in first half 2026 and 2025, respectively. The changes in the higher effective tax in first quarter 2026 adversely affected first quarter 2026 results when compared to first quarter 2025. The higher tax raterates in firstthe quartercomparative 2026periods principally reflectsreflect the adverse effecteffects of changes in certain deferred compensation that will not be deductible for income taxes when paid in future periods. The Company is currently under audit for its federal income tax returns for 2022 to 2024 calendar years. The audit is in the early stages and the Company in not able to predict the outcome of this audit.

Net earnings attributable to Tootsie Roll Industries, Inc. were $17,661$13,347 (after $35$21 net loss attributed to non-controlling interests) in firstsecond quarter 2026 compared to $18,058$17,544 (after $17$14 net loss attributed to non-controlling interests) in firstsecond quarter 2025, and earnings per share were $0.24$0.18 and $0.24$0.23 in firstsecond quarter 2026 and 2025, respectively.respectively, a decrease of $0.05 per share, or 21.7%. First half 2026 net earnings attributable to Tootsie Roll Industries, Inc. were $31,008 (after $56 net loss attributed to non-controlling interests) compared to first half 2025 net earnings of $35,602 (after $31 net loss attributed to non-controlling interests), and net earnings per share were $0.41 and $0.47 in first half 2026 and first half 2025, respectively, a decrease of $0.06 per share or 12.8%. Average shares outstanding decreased from 75,13875,060 at firstsecond quarter 2025 to 75,06075,035 at firstsecond quarter 20262026, adjustedand forfrom the75,105 3%in stockfirst dividendhalf distributed2025 onto April75,046 3,in first half 2026.

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 firstsecond quarter 2026.or first half 2025. Although Management has not identified any triggingtriggering 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, 2025, could change this assessment in the future.

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. Beginning 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, prior to receipt of Special Financial Assistance, have continued to classify the Plan in the “critical and declining status” category. In July 2024 the Plan received Special Financial Assistance of $3.4 billion. As required by federal law, the Plan is certified to be in “critical status” for plan year 20252026 and will belikely remain in this status until the plan year ending in 2051 as a result of the Special Financial Assistance received.

Based on these updated notices, the Plan’s funded percentage (plan investment assets as a percentage of plan liabilities as reported), as defined, were 41.0%, 45.2%, 47.0%, and 49.3%47.0% as of January 1, 2025, 2024, 2023, and 2022,2023, respectively (these valuation dates are as of the beginning of each Plan year and reflect the most recent information available). These funded percentages are based on actuarial values, as defined, and do not reflect the Special Financial Assistance or the actual market value of Plan investments as of these dates. If the market value of investments had been used as of January 1, 2024,2025, including the Special Financial Assistance, the funded percentage would be 41.7%81.2% (not 45.2%41.0%). Note that these funded percentages do not include the Special Financial Assistance.

The Company has been advised that its withdrawal liability would have been $102,800, $97,500 and $102,200 if it had withdrawn from the Plan during 2025, 2024 and 2023, respectively (most recent information provided by the Plan). The most recent increase in the withdrawal liability as advised by the Plan was primarily due to the full present value of vested benefits being valued at the PBGC interest rates, as required for plans that receive Special Financial Assistance, rather than a blended interest rate assumption used in previous years. As discussed below, the Plan was granted $3.4 billion in Special Financial Assistance in July 2024. After receiving the Special Financial Assistance, the Plan was 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. The net impact of the interest rate assumption change was a decrease in the effective interest rate, which resulted in a higher vested Plan benefit 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 Company’s pension expense for this Plan for first quarterhalf 2026 and 2025 was $749$1,777 and $698,$1,744, respectively. ThisThe aforementioned expense includes surcharges of $264$626 and $246$615 for first quarterhalf 2026 and 2025, respectively, as required under the amended plan of rehabilitation. The Company’s twelve months pension expense for this Plan for 2025 and 2024 was $3,290 and $3,332,$3,332 respectively, which includes surcharges of $1,160 and $1,174, respectively.

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. According to the Company’s actuary, it 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 likely continue to be limited to the twenty annual payments previously discussed and that those payments will not be affected by Special Financial Assistance regulation.

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 and the related higher tariffs on these purchases added to our costs in 2025.2025 and early 2026. During fourth quarter 2025, tariffs on cocoa were rescinded and therefore we should realizerealized some additional tariff cost reductions on these purchases in 2026.2026 as these lower costs begin to be reflected in our supply chain. In February 2026, the Supreme Court of the United States issued a ruling that stated the International Emergency Economic Powers Act (IEEPA) does not authorize the imposition of tariffs that were imposed by the President in 2025. Management estimates that the Company could recoup up to $1.3 million in tariffs previously paid directly by the Company if and when the appropriate authorities fully execute a process to do so.Company. The Company intends to record any refund benefits when such funds are received.

Net cash flows providedused byin operating activities were $11,494$(10,879) and $3,602$(4,935) in first quarterhalf 2026 and 2025, respectively, aan favorableunfavorable increasedecrease of $7,892.$5,944, primarily driven by the Company’s seasonal Halloween business whereby inventories are historically built in second quarter for planned Halloween sales primarily in third quarter. The increasedecrease in cash flows from operating activities principally reflects lower net income and changes in working capitalcapital, primarily relating to the timing of income tax payments and prepaid expenses duringin the comparative periods. The change in income taxes payable reflects the timing of income taxes paid in the first quarter of 2025 compared to the second quarter of 2026.

Cash flows provided by (used in) investing activities reflectwere $19,906$(37,596) and $13,110$5,670 in first half 2026 and 2025, respectively, a decrease of $43,266, which principally reflects an increase in purchases of available for sale securitiessecurities, and a corresponding decrease in cash and cash equivalents during firstthe quartercomparative 2026 and 2025, respectively, and $14,150 and $11,727 of sales and maturities of available for sale securities during first quarter 2026 and 2025, respectively.periods. First quarterhalf 2026 and 2025 investing activities also include capital expenditures of $8,204$20,614 and $2,852,$10,363, respectively. The Company is currently undergoing a plant expansion at one of its manufacturing facilities in the USA, including additional and replacement of certain processing and packaging lines, to better meet its higherthe level of forecasted demand for certain products on a timelier and more cost-effective basis. The Company expects that this will take place over the next seven years, however, most of the actual expenditures, which related to the building construction, are expected to occur in 2026 and early 2027. DuringWe the first quarter of 2026, wehave incurred $3,300$18,200 of capital expenditures relating to this expansion.expansion to date. Company management believes that the total cost of this expansion, including new machinery and equipment, some of which is normal and recurring replacements over the next seven years, for food processing infrastructure,infrastructure and raw materials warehousing will approximate $75,000 to $85,000. All capital expenditures have been and are expected to be funded from the Company’s cash flow from operations and internal sources including investments in available for sale securities.

The Company’s condensed consolidated financial statements include short term bank borrowings of $951$8,333 and $975$1,018 at MarchJune 31,30, 2026 and 2025, respectively, of which $7,500 of the June 30, 2026 balance relates to the Company’s industrial development bond that matures and is payable in June of 2027. The remaining $833 of bank borrowings at June 30, 2026 and all of whichthe bank borrowings as of June 30, 2025 relate to itsthe Company’s Spanish subsidiary. The Company had no other outstanding bank borrowings at MarchJune 31,30, 2026 and 2025.

Financing activities include Company common stock purchases and retirements of $0$3,822 and $6,483 in first quarterhalf 2026 and 2025, respectively. Cash dividends of $13,138$13,326 and $12,781$12,928 were paid in first quarterhalf 2026 and 2025, respectively.

The Company’s current ratio (current assets divided by current liabilities) was 3.62.9 to 1 at MarchJune 31,30, 2026 compared to 3.3 to 1 at December 31, 2025 and 4.24.0 to 1 at MarchJune 31,30, 2025. Net working capital was $232,649$219,163 at MarchJune 31,30, 2026 compared to $223,016 and $250,938$273,269 at December 31, 2025 and MarchJune 31,30, 2025, respectively. Included in net working capital is cash and cash equivalents and short-term investments totaling $169,731$141,124 at MarchJune 31,30, 2026 compared to $176,633 and $176,607$170,531 at December 31, 2025 and MarchJune 31,30, 2025, respectively. In addition, long term investments, principally debt securities comprising corporate bonds, were $426,113$431,784 at MarchJune 31,30, 2026, as compared to $437,114 and $330,949$333,626 at December 31, 2025 and MarchJune 31,30, 2025, respectively. Aggregate cash and cash equivalents and short and long-term investments were $595,844,$572,908, $613,747, and $507,556,$504,157, at MarchJune 31,30, 2026, December 31, 2025 and MarchJune 31,30, 2025, respectively, including $114,546,$130,723, $121,541, and $100,892$112,009 at MarchJune 31,30, 2026, December 31, 2025 and MarchJune 31,30, 2025, 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 bondsbonds, that matured during first quarterhalf 2026 and 2025, 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 $(1,8002,500) and $3,300$4,600 at MarchJune 31,30, 2026 and 2025, 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 gains or losses on individual investments (see also Item 3 below, QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK).

The Company periodically contributes to a Voluntary Employee Benefit Association (VEBA) trust, managed and controlled by the Company, to fund the estimated future costs of certain union employee health, welfare and other benefits. The Company funded $20,000 to the VEBA trust in 2023. No contribution was made during first quarter.half 2026 or 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 $7,411,$7,484, $8,953 and $14,090$12,509 of aggregate cash and cash equivalents at MarchJune 31,30, 2026, December 31, 2025 and MarchJune 31,30, 2025, 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.

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 effects of U.S. tariffs as well as retaliatory tariffs and other import fees and surcharges by other countries, the overall competitive environment in the Company’s industry, the ability to recover increases in input costs and tariffs through price increases and restoring margins, the overall competitive environment in the Company’s industry,increases, successful distribution and sell-through during Halloween and other seasons, the effects of future changes to natural colors, including related higher costs and availability of cocoa and chocolate at reasonable prices given that these markets are significantly elevated and volatile,supply, and changes in assumptions, judgments and risk factors are discussed in our Annual Report on Form 10-K for the year ended December 31, 2025.