Tootsie Roll Industries, Inc. Annual Report 2013 Merrill Corp - Tootsie Roll 10-K Bannerless pdf ED | 106516 | 06-Mar-14 12:02 | 14-7572-1.ba | Sequence: 1 CHKSUM Content: 485 Layout: 64987 Graphics: 56396 CLEAN Ellen R. Gordon, President and Chief Operating Officer and Melvin J. Gordon, Chairman and Chief Executive Officer. Corporate Principles Financial Highlights We believe that the differences among companies are attributable to the caliber of their people, and therefore we strive to attract and retain December 31, superior people for each job. 2013 2012 (in thousands except per share data) We believe that an open family atmosphere at work combined with professional management fosters cooperation and enables each individual to maximize his or her contribution to the Company and Net Product Sales . $539,627 $545,985 realize the corresponding rewards. Net Earnings . 60,849 52,004 We do not jeopardize long-term growth for immediate, short-term results. Working Capital . 179,990 136,476 We maintain a conservative financial posture in the deployment and Net Property, Plant and management of our assets. Equipment . 196,916 201,290 We run a trim operation and continually strive to eliminate waste, Shareholders’ Equity . 680,305 649,815 minimize cost and implement performance improvements. Average Shares Outstanding* . 59,634 60,484 We invest in the latest and most productive equipment to deliver the Per Share Items* best quality product to our customers at the lowest cost. Net Earnings . $1.02 $0.86 We seek to outsource functions where appropriate and to vertically Cash Dividends Paid . 0.24 0.90 integrate operations where it is financially advantageous to do so. We view our well known brands as prized assets to be aggressively *Adjusted for stock dividends. advertised and promoted to each new generation of consumers. We conduct business with the highest ethical standards and integrity which are codified in the Company’s “Code of Business Conduct and Ethics.” 1 JOB: 14-7572-1 CYCLE#;BL#: 1; 0 TRIM: 11" x 8.5" COMPOSITE COLORS: Black, ~HTML color, ~HTML color 2, ~note-color 2, ~note-color 3 GRAPHICS: Tootsie_roll_candy_lrg_logo.eps, ellen_r_gordan_fpo_4c_photo.eps, melvin_j_gordan_fpo_4c_phto.eps V1.5 Merrill Corp - Tootsie Roll 10-K Bannerless pdf ED | 106516 | 06-Mar-14 12:02 | 14-7572-1.bc | Sequence: 1 CHKSUM Content: 64501 Layout: 2053 Graphics: 7966 CLEAN To Our Shareholders Net product sales in 2013 were Other highlights of 2013 include: 2013. These items generate high Our leadership in the lollipop $540 million compared to $546 million volumes through a variety of trade category was bolstered by two • Cash dividends were paid for the in 2012. We had another strong classes either as straight goods or seasonal offerings in the Charms seventy-first consecutive year. Halloween selling season and many in combo packs, display ready line. New Candy Corn Pops of of our core brands delivered good • Our forty-ninth consecutive 3% cases and floor displays. orange, yellow and white deliver sales results. stock dividend was distributed. Candy is sold in almost every retail great flavor along with the nostalgic trade channel, and we face intense feeling of fall candy corn. Net earnings in 2013 were • 752,100 shares of the Company’s common stock were purchased in competition in our industry. $61 million compared to $52 million Retailers are highly selective as to in 2012, and earnings per share the open market for an aggregate price of $23 million. the products they carry, and were $1.02 as compared to $0.86 in consumers can choose from a the prior year. These actions were accomplished broad array of appealing products. using internally generated funds. The market is also fluid, as pack Our margins began to move toward We ended 2013 with $200 million of sizes, product presentations and more normal historical levels as cash and investments, net of assortments evolve to meet certain commodity costs began to interest bearing debt and changing preferences in the trade moderate somewhat during the investments that hedge deferred and among consumers. Our iconic year. Still, many commodities we compensation. brands evolve in response to these use remain costly by historical shifting market conditions yet This financial strength enables the standards, and we are continually remain pure and satisfying to the Candy Corn Pops challenged to keep our operations Company to continue to reinvest in sweet tooth of the many long term lean in order to deliver maximum operating assets and in our brands, consumers who enjoy them. develop new products or line Pumpkin Pops, another fall favorite value to our consumers and our from Charms, got an extreme make- shareholders. extensions, distribute dividends, Line extensions and other new repurchase Company stock and to products generated incremental over in 2013 with vivid new consider business acquisition sales and added to the excitement graphics. Despite the hauntingly We strive to implement measures opportunities as they arise. We are of our product portfolio. Cry Baby sinister jack-o-lantern on the bag, that improve every aspect of our constantly active in each of these Chews were a super-sour, super- this treat makes an eye-catching operations without jeopardizing the aspects of our business. chewy, addition to our theater box and tasty addition to any Halloween long-term strength of the Company. line. In five delicious fruit flavors candy bowl. Our many well-known confectionery Sales and Marketing and dusted with a supercharged brands tend to be value-oriented. Halloween was once again our sour powder, this item is true to the As such, one of our key goals is to mouth-puckering sour experience be the low-cost producer in each largest selling period. Sales were supported by promotions tailored to Cry Baby consumers have come to product category in which we expect. compete. our most significant trade class which includes mass merchandisers, drug chains, To achieve this goal, we actively warehouse clubs, grocery and pursue investments in the latest dollar stores. Packaged goods technology, and in 2013 capital have remained highly successful in expenditures were $16 million. This these channels, including large included new state of the art mixed assortments of our most equipment installations at a number popular items. of our plants, as well as investments Pumpkin Pops in information technology, which We also have several market plays an ever-increasing role in the leading entries in the “theater box” For the Christmas season, Naughty Company. category which sold well again in Cry Baby Chews (sour apple) or Nice (sweet cherry) 2 JOB: 14-7572-1 CYCLE#;BL#: 1; 0 TRIM: 11" x 8.5" COMPOSITE COLORS: Black, ~note-color 2, ~note-color 3 GRAPHICS: candy_corn_pops_k_pht.eps, cry_baby_k_pht.eps, pumpkin_pops_k_pht.eps V1.5 Merrill Corp - Tootsie Roll 10-K Bannerless pdf ED | 106516 | 06-Mar-14 12:02 | 14-7572-1.bc | Sequence: 2 CHKSUM Content: 12549 Layout: 24274 Graphics: 37499 CLEAN Pops became a fitting treat no Advertising and Public Relations projects to add capacity, increase International matter which of Santa’s lists you efficiency or improve quality. During 2013, we further expanded were on! Emerging technology in production We manufacture and sell products our digital marketing and social and control systems used in Mexico under the Tutsi media initiatives on Facebook, throughout our process in blending, trademark. We also sell Tootsie Twitter, You Tube and Pinterest. Our cooking, forming, wrapping, products, along with most of our primary demographic in these packaging and material handling, other domestic brands, in the cited by Jeremy Siegel in his popular We initiativesalso undertook is candy a comprehensive buying mothers We believe that our well known Informationas well as new Technology information and Canadian market and in many book ‘‘The Future for Investors’’ as studyages to examine25 to 44. our We supply leveraged chain in Internal Controls products,countries includingin Europe, the Asia, additions and of technologies, continually present Dubble Bubble and other Concord citedhaving by delivered Jeremy Siegelthe fourth in his highest popular We2005. severalalso The undertook focus brands was aalong comprehensiveon with our WeSouth believe and thatCentral our wellAmerica. known Informationopportunities Technology for attractive, and cost brands, offers a compelling and return to our shareholders among all studyreengineeringfamous to examine Mr. Owl the ournetwork character supply and chain through in a products, including the additions of book ‘‘The Future for Investors’’ as Internalsaving capitalControls projects. broad assortment of items that can havingsurviving delivered S & P 500 the firmsfourth from highest the 2005.patternsvariety The of focus ofdistribution, website was on game As a result of Our principal information technology DubbleWe continue Bubble to and see other opportunities Concord to this study, certain changes were be extended to additional foreign returnoriginal to index our shareholders first published among in 1957, all reengineeringexperiences, the bannernetwork adsand and prize efforts during 2005 were in support brands,market ouroffers products a compelling to and and the highest among food implemented in 2005 and other markets. surviving S & P 500 firms from the patternscontests. of distribution, As a result of OurofIn the principalplanning Concord information and integration designing technology and these the broadconfectionery assortment consumers of items that