Tootsie Roll Industries, Inc. Annual Report 2011 Merrill Corp - Tootsie Roll 10-K Tier 2 ED [AUX] | 105123 | 29-Feb-12 11:39 | 11-31190-1.ba | Sequence: 1 CHKSUM Content: 58733 Layout: 48046 Graphics: 17590 CLEAN Corporate Profile Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of confectionery products for 115 years. Our products are primarily sold under the familiar brand names: Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child’s Play, Charms, Blow Pop, Blue Razz, Cella’s chocolate covered cherries, Tootsie Dots, Tootsie Crows, Junior Mints, Junior Caramels, Charleston Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff cotton candy, Dubble Bubble, Razzles, Cry Baby, Nik-L-Nip and EI Bubble. Melvin J. Gordon, Chairman and Chief Executive Officer and Ellen R. Gordon, President and Chief Operating Officer. Corporate Principles We believe that the differences among companies are attributable to We run a trim operation and continually strive to eliminate waste, the caliber of their people, and therefore we strive to attract and minimize cost and implement performance improvements. retain superior people for each job. We invest in the latest and most productive equipment to deliver the We believe that an open family atmosphere at work combined with best quality product to our customers at the lowest cost. professional management fosters cooperation and enables each individual to maximize his or her contribution to the Company and We seek to outsource functions where appropriate and to vertically realize the corresponding rewards. integrate operations where it is financially advantageous to do so. We view our well known brands as prized assets to be aggressively We do not jeopardize long-term growth for immediate, short-term advertised and promoted to each new generation of consumers. results. We conduct business with the highest ethical standards and integrity We maintain a conservative financial posture in the deployment and which are codified in the Company’s “Code of Business Conduct and management of our assets. Ethics.” 1 JOB: 11-31190-1 CYCLE#;BL#: 8; 0 TRIM: 11" x 8.5" COMPOSITE COLORS: Black, Cyan, Magenta, Yellow, ~HTML color, ~HTML color 2, ~note-color 2, ~note-color 3 GRAPHICS: Gordon_new_fpo_4c_photo.eps, Tootsie_roll_candy_logo.eps V1.5 Merrill Corp - Tootsie Roll 10-K Tier 2 ED [AUX] | 105123 | 29-Feb-12 11:39 | 11-31190-1.bc | Sequence: 1 CHKSUM Content: 4558 Layout: 51574 Graphics: No Graphics CLEAN To Our Shareholders Net product sales in 2011 were a by adjusting prices in response to Highlights in 2011 include: the high percentage of sell-throughs record $528 million, surpassing the rising costs, we are mindful of the and attractive margins of our items previous record of $517 million set competitive value positioning of our • $16 million was invested in are appealing to the trade. This was in 2010. The Company had another products in the market place. We capital expenditures for property, evident once again in 2011. We strong Halloween selling season also remain true to the principles plant and equipment. used carefully targeted promotional and sales gains were achieved enumerated on the facing page, • Cash dividends were paid for the initiatives to help move our across many of our core brands. which have guided the Company for sixty-ninth consecutive year. products into distribution and to Sales benefited from successful many years. subsequently move them off the promotional programs, new • Our forty-seventh consecutive retail shelf. Our diverse portfolio of We focus in particular on the distribution and selected price annual 3% stock dividend was highly recognizable brands remains principles of taking a long-term increases. distributed. popular across all channels of perspective, reinvesting in our trade. Net earnings in 2011 were $44 million operations and our brands and • 708,235 shares of our common compared to $53 million in 2010. maintaining a conservative financial stock were repurchased in the Our broad range of offerings The decline in net earnings is posture. We believe that these open market for an aggregate includes something for virtually primarily due to significantly higher principles have served the price of $18 million. every major consumer raw material and packaging costs Company and its shareholders well demographic, which we continue to in 2011. While we endeavor to over the years and we remain • The above actions were taken refine and evolve to meet changing maintain the Company’s profitability committed to them. entirely with internally generated consumer preferences and the funds, and the Company remains demands of the trade in today’s essentially debt free. fluctuating market place. We remain vigilant in keeping our products Financial Highlights As of December 31, 2011, the contemporary even as they retain Company had $186 million in cash their iconic character. December 31, and investments. These financial 2011 2010 resources enable us to continue Halloween is a major selling season (in thousands except per share data) distributing cash dividends to our in our primary market, the United shareholders, repurchasing our States, for a number of product stock on the open market and categories including candy. It is a Net Product Sales . $528,369 $517,149 reinvesting in operating assets and magical time of fun, family Net Earnings . 43,938 53,063 in our brands, including new togetherness, gatherings and products. We are also prepared to parties, evoking feelings of Working Capital . 153,846 176,662 consider and respond to excitement and nostalgia. Our sales Net Property, Plant and appropriate business acquisition in the third quarter are centered on Equipment . 212,162 215,492 opportunities as they may arise. this popular holiday and are nearly double those of any other quarter Shareholders’ Equity . 665,935 667,408 Sales and Marketing during the year. Average Shares Outstanding* . 57,892 58,685 Consumers have many tempting In 2011, we posted strong Per Share Items* choices in the candy aisle and Halloween sales in the grocery, retailers are highly selective as to mass merchandiser, warehouse Net Earnings . $0.76 $0.90 the products they stock. We have club, dollar store and drug store Cash Dividends Paid . .32 .32 found that consumers respond well classes of trade. Our line of to the many high quality/high value packaged goods, including straight *Adjusted for stock dividends. brands in our portfolio. Additionally, goods as well as large bags of 2 JOB: 11-31190-1 CYCLE#;BL#: 8; 0 TRIM: 11" x 8.5" COMPOSITE COLORS: Black, ~note-color 2, ~note-color 3 GRAPHICS: none V1.5 Merrill Corp - Tootsie Roll 10-K Tier 2 ED [AUX] | 105123 | 29-Feb-12 11:39 | 11-31190-1.bc | Sequence: 2 CHKSUM Content: 47174 Layout: 13607 Graphics: 24997 CLEAN Child’s Play and other mixed Raspberry Cremes. These delicious of luscious caramel on a real The Dubble Bubble Nostalgic Big assortments, are offered in a morsels feature a luscious, creamy wooden stick packaged in the Bar was a new addition to the number of merchandising raspberry center encased in a thin familiar yellow and red Sugar Dubble Bubble line in 2011. The presentations and are especially shell of pure dark chocolate. A Daddy wrapper and shape. The wrapper features nostalgic popular during this season. Other perfect snacking indulgence for Giant Sugar Daddy makes a fun gift graphics and is made of foil for traditional merchandising people on the go! or an all-day good treat. lasting freshness. The Big Bar is a presentations such as shippers, foot-long rope of bubble blowing pallet packs and display ready fun. cases contributed to Halloween sales. Outside of Halloween, we continued Dubble Bubble Big Bar our position of leadership in the theater box category. This category Our popular line of novelty fun is no longer limited to the “big banks grew with the addition of two screen” venue and has developed new items in 2011. The Dubble Giant Sugar Daddy into a major format for everyday Raspberry Cremes Bubble bank was launched in a candy purchases. Two new patriotic red, white and blue motif We also extended our market The Andes line was expanded with offerings in this important category and the Tootsie Roll bank took on a leadership position in the lollipop a delicious new seasonal offering. were added to our line in 2011. nostalgic tone with old-fashioned category with the introduction of Andes Mint Truffles are beautifully graphics at a price point that makes Tear Jerkers Mini Pops. This packaged in a festive Christmas- Blow Pop Minis, bite-sized candy it an old-fashioned value. All of our exciting new addition to our themed red box highlighted with tablets, each with a real Blow Pop banks feature a slotted lid so when bagged line packs a super sour gold ornaments and featuring a bubble gum center, were extended the candy is gone you can begin to punch into each pop! The decorative green foil tree topper. into the theater box format. Popular save for the next one. Fun you can assortment includes six tangy The individually wrapped treats and portable, this “Blow Pop with feature a delicious truffle mint bank on! no stick!” includes four of the most flavors in a laydown bag with eye catching graphics and great center that melts in your mouth. popular Blow Pop flavors in each Perfect for holiday gift giving! box, enveloped in a protective consumer appeal. Pucker up! sealed pouch for added freshness. Blow Pop Minis continue to be a sales growth driver. Dubble Bubble Patriotic and Tootsie Roll Nostalgic Banks Tear Jerker