10-Q 1 sep2002filing.txt TOOTSIE ROLL INDUSTRIES, INC. 10-Q ENDING 09/28/02 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ----to---- COMMISSION FILE NUMBER 1-1361 Tootsie Roll Industries, Inc. (Exact Name of Registrant as Specified in its Charter) VIRGINIA 22-1318955 (State of Incorporation) (I.R.S. Employer Identification No.) 7401 South Cicero Avenue, Chicago, Illinois 60629 (Address of Primcipal Executive Offices) (Zip Code) 773-838-3400 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 dur- ing the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing require- ments for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (September 28, 2002) Class Outstanding (In Thousands) Common Stock, $.69 4/9 par value 34,821 Class B Common Stock, $.69 4/9 par value 16,765 TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES SEPTEMBER 28, 2002 I N D E X Page No Part I - Financial Information Item 1. Financial Statements: Consolidated Statements of Financial Position.......................2 Consolidated Statements of Earnings, Comprehensive Earnings and Retained Earnings......................................3 Consolidated Statements of Cash Flows................................4 Notes to Consolidated Financial Statements........................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............6 Item 4. Controls and Procedures.......................................6C Part II - Other Information Item 5. Other Information.............................................7 Item 6. Exhibits and Reports on Form 8-K Signatures.............................................................7 Certifications.........................................................7A-C PART I - FINANCIAL INFORMATION TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands of dollars) (UNAUDITED) ASSETS Sept. 28, Sept. 29, Dec. 31, CURRENT ASSETS 2002 2001 2001 Cash & Cash Equivalents $ 62,801 $ 76,597 $106,532 Investments 53,582 50,845 68,629 Trade Accounts Receivable, Less Allowances of $3,094, $3,181 & $2,037 80,717 80,036 20,403 Other Receivables 3,528 4,003 3,329 Inventories, at Cost (Last-in,First-out): Finished Goods & Work in Process 30,091 29,153 24,770 Raw Material & Supplies 17,589 15,917 16,392 Prepaid Expenses 5,336 8,833 4,269 Deferred Income Taxes 1,772 1,351 1,772 Total Current Assets 255,416 266,735 246,096 PROPERTY, PLANT & EQUIPMENT, (at cost) Land 8,308 8,358 8,354 Buildings 43,556 37,214 43,613 Machinery & Equipment 195,768 193,953 189,528 247,632 239,525 241,495 Less-Accumulated Depreciation 117,813 106,840 108,920 129,819 132,685 132,575 OTHER ASSETS Goodwill, Net 38,151 38,520 38,151 Trademarks, Net 79,348 79,924 79,348 Investments 103,608 72,056 71,131 Cash Surrender Value of Life Insurance and Other Assets 58,265 50,994 51,375 279,372 241,494 240,005 Total Assets $664,607 $640,914 $618,676 (The accompanying notes are an integral part of these statements)
(in thousands of dollars) (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY Sept. 28, Sept. 29, Dec. 31, CURRENT LIABILITIES 2002 2001 2001 Accounts Payable $ 13,096 $ 13,493 $ 9,223 Dividends Payable 3,612 3,536 3,536 Accrued Liabilities 41,371 40,199 34,295 Income Taxes Payable 21,194 36,682 10,792 Total Current Liabilities 79,273 93,910 57,846 NON-CURRENT LIABILITIES Industrial Development Bonds 7,500 7,500 7,500 Post Retirement Benefits 7,966 7,344 7,450 Deferred Compensation and Other Liabilities 19,927 18,718 20,627 Deferred Income Taxes 16,665 12,226 16,792 Total Non-Current Liabilities 52,058 45,788 52,369 SHAREHOLDERS' EQUITY Common Stock, $.69-4/9 par value- 120,000 shares authorized 34,821, 34,039 & 34,139 respectively, issued 24,182 23,638 23,708 Class B Common Stock, $.69-4/9 par value- 40,000 shares authorized 16,765, 16,469 & 16,319 respectively, issued 11,642 11,437 11,332 Capital in Excess of Par Value 373,157 325,879 323,981 Retained Earnings 137,596 152,483 161,345 Accumulated Other Comprehensive Earnings (11,309) (10,229) (9,913) Treasury Stock (at cost)- 55,55, & 55 shares, respectively (1,992) (1,992) (1,992) Total Shareholders' Equity 533,276 501,216 508,461 Total Liabilities and Shareholders' Equity $664,607 $640,914 $618,676
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS (NOTE 1) (in thousands except per share amounts) (UNAUDITED) 13 Weeks Ended Sept 28, 2002 & Sept 29, 2001 NET SALES (Notes 2 & 5) $146,298 $148,456 Cost of Goods Sold 84,338 82,477 Gross Margin 61,960 65,979 Selling, Marketing & Administrative Expense (Note 5) 22,599 24,685 Amortization of Intangible Assets -- 945 Earnings from Operations 39,361 40,349 Other Income, Net 845 1,143 Earnings before Income Taxes 40,206 41,492 Provision for Income Taxes 13,590 14,482 Net Earnings 26,616 27,010 Other Comprehensive Income, before tax: Foreign Currency Translation Adjustments (377) (854) Unrealized Gains on Securities: Unrealized holding gains (losses) arising during period $(423) $(529) Less: Amounts realized in earnings 6 (417) 17 (512) Unrealized Gains on Derivatives: Unrealized holding gains (losses) arising during period (192) (27) Less: Amounts realized in earnings 405 213 (25) (52) Other comprehensive income (loss), before tax (581) (1,418) Income tax benefit related to items of other Comprehensive Income 76 209 Other Comprehensive Earnings, Net of Tax (505) (1,209) Comprehensive Earnings $ 26,111 $ 25,801 Retained Earnings at Beginning of Period $114,588 $129,004 Net Earnings 26,616 27,010 Cash Dividends (3,608) (3,531) Stock Dividends - 3% -- -- Retained Earnings at End of Period $137,596 $152,483 Net Earnings per Share (Note 3) $ .52 $ .52 Dividends per Share * $ .07 $ .07 Average Number of Shares Outstanding (Note 3) 51,557 51,951 *Does not include 3% Stock Dividend to Shareholders of Record on 3/05/02 and 3/06/01 (The accompanying notes are an integral part of the statements)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS (NOTE 1) (in thousands except per share amounts) (UNAUDITED) 39 Weeks Ended Sept 28, 2002 & Sept 29, 2001 NET SALES (Notes 2 & 5) $302,420 $304,301 Cost of Goods Sold 168,874 165,505 Gross Margin 133,546 138,796 Selling, Marketing & Administrative Expense (Note 5) 58,144 59,609 Amortization of Intangible Assets -- 2,834 Earnings from Operations 75,402 76,353 Other Income, Net 3,106 5,518 Earnings before Income Taxes 78,508 81,871 Provision for Income Taxes 26,804 28,574 Net Earnings 51,704 53,297 Other Comprehensive Income, before tax: Foreign Currency Translation Adjustments (1,186) 297 Unrealized Gains on Securities: Unrealized holding gains (losses) arising during period $(811) $(629) Less: Amounts realized in earnings 56 (755) 29 (600) Unrealized Gains on Derivatives: Unrealized holding gains (losses) arising during period (596) (135) Less: Amounts realized in earnings 1,018 422 204 69 Other comprehensive income (loss), before tax (1,519) (234) Income tax benefit related to items of other Comprehensive Income 123 196 Other Comprehensive Earnings, Net of Tax (1,396) (38) Comprehensive Earnings $ 50,308 $ 53,259 Retained Earnings at Beginning of Period $161,345 $180,123 Net Earnings 51,704 53,297 Cash Dividends (10,729) (10,493) Stock Dividends - 3% (64,724) (70,444) Retained Earnings at End of Period $137,596 $152,483 Net Earnings per Share (Note 3) $1.00 $1.03 Dividends per Share * $ .21 $ .21 Average Number of Shares Outstanding (Note 3) 51,649 51,951 *Does not include 3% Stock Dividend to Shareholders of Record on 3/05/02 and 3/06/01 (The accompanying notes are an integral part of the statements)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands dollars) (UNAUDITED) 39 Weeks Ended Sept. 28, 2002 & Sept. 29, 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $51,704 $53,297 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 8,893 11,670 (Increase) decrease in assets: Accounts receivable (60,578) (56,394) Other receivables 69 (2,730) Inventories (6,837) (3,090) Prepaid expenses and other assets (8,433) (13,234) Increase (decrease) in liabilities: Accounts payable and accrued liabilities 11,083 10,031 Income taxes payable and deferred 10,213 26,123 Postretirement health care and life insurance benefits 516 388 Deferred compensation and other liabilities (700) (704) Other (27) 13 Net cash provided by operating activities 5,903 25,370 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (6,787) (10,269) Purchase of held to maturity securities (191,739) (140,392) Maturity of held to maturity securities 175,824 140,665 Purchase of available for sale securities (26,629) (50,870) Sale of available for sale securities 25,114 61,850 Net cash provided by (used in) investing activities (24,217) 984 CASH FLOWS FROM FINANCING ACTIVITIES: Shares repurchased and retired (14,412) -- Dividends paid in cash (11,005) (10,639) Net cash used in financing activities (25,417) (10,639) Increase (decrease) in cash & cash equivalents (43,731) 15,715 Cash and cash equivalents-beginning of year 106,532 60,882 Cash and cash equivalents-end of quarter $62,801 $76,597 Supplemental cash flow information: Income taxes paid $16,497 $ 2,558 Interest paid $ 236 $ 319 (The accompanying notes are an integral part of the statements)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 28, 2002 (in thousands except per share amounts) (UNAUDITED) Note 1 - Foregoing data has been prepared from the unaudited financial records of the Company and in the opinion of Management, all adjustments necessary for a fair statement of the results for the interim period have been reflected. All adjustments were of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company's 2001 Annual Report on Form 10-K. Note 2 - The Company's unshipped orders amounted to $32,900 and $35,500 at September 28, 2002 and September 28, 2001, respectively. Note 3 - Average shares outstanding for the period ended September 28, 2002 reflects stock repurchases of 70 shares for $2,590 for the three month period and 370 shares for $14,412 and a 3% stock dividend distributed on April 17, 2002 for the nine month period. Average shares outstanding for the period ended September 29, 2001 reflects a 3% stock dividend distributed on April 18, 2001. Note 4 - Results of operations for the period ended September 28, 2002 are not necessarily indicative of results to be expected for the year to end December 31, 2002 because of the seasonal nature of the Company's operations. Histor- ically, the Third Quarter has been the Company's largest sales quarter due to Halloween sales. NOTE 5 - Effective January 1, 2002, the Company adopted EITF 00-14, "Accounting for Certain Sales Incentives" and EITF 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products." These state- ments required that the Company reclassify its cooperative advertising and certain sales incentives from selling, marketing and and administrative expense to a reduction of net sales. This reclassification has been made for all periods presented. The effect of these adoptions reduced both net sales and operating expenses by $9,736 and $10,325 in the Third Quarter of 2002 and 2001, respectively, and $23,048 and $23,983 in the First Nine Months of 2002 and 2001, respectively. The adoption of such requirements did not effect the comparative quarterly earnings. NOTE 6 - The Company adopted SFAS 142, "Goodwill and Other Intangible Assets," on January 1, 2002. As a result of its adoption, the Company has reclassified approximately $79.3 million from intangible assets to trademarks. The remaining amounts relate to goodwill. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. Thus, the Company has ceased amorti- zation expense on all trademarks and goodwill as of January 1, 2002, resulting in increased reported net income after tax by approximately $712 for the quarter and by $2,138 for the nine months ended September 28, 2002, respectively. The amortiza- tion expense and net income (including any tax effects) of the Company for the 13 weeks and 39 weeks ended September 28, 2002 and September 29, 2001, respectively, are as follows: 13 Weeks Ended Sept 28, 2002 & Sept 29,2001 Reported net income $26,616 $27,010 Add back: goodwill amortization 0 369 Add back: trademark amortization 0 576 Less: Tax effect 0 233 Adjusted net income $26,616 $27,722 Reported basic earnings per share $ .52 $ .52 Goodwill amortization - .00 Trademark amortization - .01 Adjusted basic earnings per share $ .52 $ .53 39 Weeks Ended Sept 28, 2002 & Sept 29,2001 Reported net income $51,704 $53,297 Add back: goodwill amortization 0 1,105 Add back: trademark amortization 0 1,729 Less: Tax effect 0 696 Adjusted net income $51,704 $55,435 Reported basic earnings per share $ 1.00 $ 1.03 Goodwill amortization - .01 Trademark amortization - .03 Adjusted basic earnings per share $ 1.00 $ 1.07 The Company has identified its reporting units related to good- will and completed step one of the goodwill impairment test during the first quarter which required that management compare the fair value of the reporting unit with its carrying value. The reporting units were not considered to be impaired. The Company also completed its impairment test of the indefinite lived trademarks which required management to compare the fair value of the trademarks to the carrying value. The trademarks were not considered to be impaired. The impairment tests performed require that the Company deter- mine the fair market value of its trademarks and the fair market value of its reporting units for comparison to the carrying value of such net assets to assess whether an impairment exists. The methodologies used to estimate fair market value involve the use of estimates and assumptions, including projected revenues, earnings and cash flows. Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion of the Company's operating results and analysis of factors which have affected the accompanying Statement of Earnings. NET SALES: Third Quarter, 2002 Third Quarter vs. 2002 2001 Third Quarter, 2002 $146,298 $148,456 - 1.5% Nine Months, 2002 Nine Months vs. 2002 2001 Nine Months, 2001 $302,420 $304,301 - 0.6% Third quarter 2002 net sales of $146,298 were down 1.5% from third quarter 2001 net sales of $148,456. Nine months 2002 net sales of $302,420 were down 0.6% from nine months 2001 net sales of $304,301. Effective January 1, 2002, the Company adopted the reporting requirements of the Emerging Issues Task Force of the Financial Accounting Standards Board (FASB) which require that certain con- sumer and trade promotion expenses, including off invoice allowances and market- ing performance fund payments, be recorded as a reduction of net sales and not as a component of Selling, Marketing and Administrative expense. The effect of the above was to reduce net sales and operating expenses by $9,736 and $10,325 in the third quarter of 2002 and 2001, respectively, and by $23,048 and $23,983 in the first nine months of 2002 and 2001, respectively. The adoption of such requirements did not affect the Company's comparative quarterly and nine months earnings or financial position. Although some of the Company's core brands showed sales increases, lower Mexican Sales, slower retail sales traffic and retail bankruptcies, as well as overall competitive activity, adversely affected sales for the quarter and nine month periods. In addition, third quarter sales were adversely affected by more cautious retail ordering reflecting the overall economic climate and the lower prior year candy industry sell-through rates of Halloween sales caused by the events of September 11, 2001. Third quarter 2002 net sales of $146,298 were up 89.7% from second quarter 2002 net sales of $77,131. Historically, the third quarter includes pre-Halloween sales and is the Company's largest quarterly sales period of the year. COST OF SALES: Cost of Sales as a Third Quarter Percentage of Net Sales 2002 2001 3rd Qtr. 2002 3rd Qtr. 2001 $84,338 $82,477 57.6% 55.6% Cost of Sales as a Nine Months Percentage of Net Sales 2002 2001 Nine Months 2002 Nine Months 2001 $168,874 $165,505 55.8% 54.4% Cost of sales as a percentage of net sales increased from 55.6% in the third quarter 2001 to 57.6% in the third quarter 2002. Nine months cost of sales as a percentage of net sales also increased from 54.4% to 55.8% in 2002. These higher costs were principally the result of higher ingredient costs, including sugar, corn syrup and cocoa. The effects of product mix and higher plant over- head costs also contributed to these higher costs. NET EARNINGS: Third Quarter, 2002 Third Quarter vs. 2002 2001 Third Quarter, 2001 $26,616 $27,010 -1.5% Nine Months, 2002 Nine Months vs 2002 2001 Nine Months, 2001 $51,704 $27,010 -3.0% Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangibles," which changed the financial accounting and reporting for acquired goodwill and intangibles. SFAS 142 specifies that goodwill and indef- inite-lived intangibles will not be amortized but rather will be tested for im- pairment. The Company has completed its impairment tests under the provisions of SFAS No. 142 for its indefinite-lived trademarks and goodwill and has con- cluded that neither is impaired. The adoption of SFAS No. 142 had the effect of eliminating amortization expense of $945 and $2,834 relating to the Company's acquired goodwill and indefinite-lived trademarks during the Third Quarter of 2002 and Nine Months of 2002, respectively. Third quarter earnings from operations were $39,361 and $40,349 in 2002 and 2001, respectively; and nine months earnings from operations were $75,402 and $76,353 in 2002 and 2001, respectively. However, after adjusting the prior year's operating earnings for the effects of SFAS 142, third quarter 2002 and 2001 operating earnings were $39,361 and $41,294, respectively, a decrease of $1,933 or 4.7%; and nine months operating earnings were $75,402 and $79,187 in 2002 and 2001, respectively, a decrease of $3,785 or 4.8%. The decrease in ad- justed operating earnings for the quarter and nine months principally results from higher ingredient costs, lower earnings from export and international oper- ations, principally Mexico, and the effects of sales volumes and product mix as discussed above. However, cost containment programs, which reduced Selling, Marketing and Administrative expense for the quarter and nine month periods, mitigated some of these higher costs and expenses. The consolidated effective income tax rate for the comparative nine month period favorably decreased from 34.9% in the nine months of 2001 to 34.1% in the nine months of 2002. The effective tax rate for the comparative quarterly periods de- creased from 34.9% in 2001 to 33.8% in 2002. This improvement generally reflects the effects of eliminating a portion of acquired goodwill that was not tax de- ductible as well as some reduction in state income taxes. Third quarter net earnings were $26,616, compared to $27,010 in the third quarter 2001. Third quarter 2002 earnings per share were $.52 and were equal to third Quarter 2001 earnings per share. Nine month 2002 net earnings were $51,704 compared to the prior year's nine month 2001 net earnings of $53,297. Nine months 2002 earnings per share were $1.00 compared to nine months 2001 earnings per share of $1.03, a decrease of $.03 or 2.9%. As discussed above, the adoption of SFAS 142 had the effect of increasing re- ported earnings by approximately $712 or $.01 per share in the third quarter, and by $2,138 or $.04 per share in the nine months 2002. Nine months 2002 com- parative earnings were adversely affected by a $962 capital gain, net of tax, in the second quarter of 2001, which added approximately $.02 per share to the prior year second quarter and nine months reported earnings per share. Exclud- ing the effects of this investment gain and adjusting for the effects of SFAS No. 142 in 2001, net earnings per share in the third quarter of 2002 and 2001 were $.52 and $.53, respectively, a decrease of 1.9%; and net earnings per share in the nine month 2002 and 2001 were $1.00 and $1.05, respectively, a de- crease of 4.8%. The aforementioned comparative third quarter and nine month earning per share were adversely affected by lower sales and higher ingredient costs as discussed above, as well as lower investment income resulting from lower interest rates. LIQUIDITY AND CAPITAL RESOURCES: The Company's current ratio (current assets divided by current liabilities) is 3.2 to 1 as of the end of the third quarter 2002 as compared to 2.8 to 1 as of the third quarter 2001 and 4.3 to 1 as of the fourth quarter 2001. Net working capital was $176,143 as of the end of the third quarter 2002 as compared to $172,825 as of the third quarter 2001 and $188,250 as of the end of the fourth quarter 2001. Net cash provided by operating activities was $5,903 for the nine months ended September 28, 2002 compared to $25,370 for the nine months ended September 29, 2001. The change primarily reflects the timing of quarterly estimated income tax payments, the use of tax overpayments from the prior years, and payment of an Internal Revenue Service settlement; in addition, higher increases in accounts receivable and inventories for the comparative nine month periods also contributed to lower cash provided by operating activities. Capital expenditures for 2002 are anticipated to be generally in line with historical spending and are to be funded from the Company's cash flow from operations and internal sources. The Company purchased and retired $14,412 of its shares during the nine months ended September 28, 2002, whereas no shares were repurchased and retired in the prior year comparative period. Debt securities that matured during the quarters ended September 28, 2002 and September 29, 2001 were replaced with debt securities of similar maturities. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK: The Company is exposed to various market risks, including fluctuations in major ingredients including sugar, corn, edible oils, and cocoa, and packaging costs. The Company also invests in securities with maturities of up to three years, the majority of which are held to maturity, which limits the Company's exposure to interest rate fluctuations. There has been no material change in the Company's market risks that would significantly affect the disclosures made in the Form 10-K for the year ended December 31, 2001. FORWARD-LOOKING STATEMENTS This discussion, the information contained in the preceding notes to the finan- cial statements and the information contained in "Quantitative and Qualitative Disclosures Of Market Risk," contain certain forward-looking statements that are based largely on the Company's current expectations. Forward-looking state- ments are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in the forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond the Company's control, include changes in demand and consu- mer preferences, including seasonal events such as Halloween; ingredient costs; the effect of acquisitions on the Company's results of operations and financial condition; the Company's reliance on third-party vendors for various goods and services; changes in the confectionary environment including action taken by major retailers and customer accounts; and the overall competitive environment. The words "believe," "expect," "anticipate," "estimate," "intend" and similar expressions generally identify forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are as of the date of this filing. Item 4. CONTROLS AND PROCEDURES Under the supervision and with the participation of management, the chief execu- tive officer and chief financial officer of the Company have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures within 90 days of the filing date of this quarterly report and, based on their evaluation, the chief executive officer and chief financial officer have concluded that these controls and procedures are effective. There were no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures are also designed to ensure that information is accumulated and communicated to manage- ment, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. PART II - OTHER INFORMATION TOOTSIE ROLL INDUSTRIES, INC AND SUBSIDIARIES Item 5. OTHER INFORMATION None. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 99 -Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) No reports on Form 8-K were filed for the quarter ended September 28, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Regis- trant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TOOTSIE ROLL INDUSTRIES, INC. Date: _November 08, 2002 BY: _/S/ Melvin J. Gordon Melvin J. Gordon Chairman of the Board BY: _/S/ G. Howard Ember, Jr. G. Howard Ember Vice President - Finance Section 302 Certification 1. I, Melvin J. Gordon, Chairman and Chief Executive Officer of Tootsie Roll Industries, Inc., certify that I have reviewed this Form 10-Q of Tootsie Roll Industries, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial inform- ation included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for estab- lishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and pro- cedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subse- quent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 08, 2002 /S/ MELVIN J GORDON Melvin J Gordon Chairman and Chief Executive officer Section 302 Certification 1. I, G. Howard Ember, Vice President/Finance and Chief Financial Officer of Tootsie Roll Industries, Inc., certify that I have reviewed this Form 10-Q of Tootsie Roll Industries, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial inform- ation included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for estab- lishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and pro- cedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subse- quent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 08, 2002 /S/ G. Howard Ember, Jr. G. Howard Ember, Jr. Vice President/Finance and Chief Financial Officer Exhibit 99 Certificate Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code Each of the undersigned officers of Tootsie Roll Industries, Inc. certifies that (i) the Quarterly Report on Form 10-Q of Tootsie Roll Industries, Inc. for the quarterly period ended September 28, 2002 (the Form 10-Q) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Tootsie Roll Industries, Inc. and its subsidiaries. Dated: November 08, 2002 /S/ MELVIN J GORDON MELVIN J GORDON Chairman and Chief Executive officer Dated: November 08, 2002 /S/ G. HOWARD EMBER, JR. G. Howard Ember, Jr. V.P./Finance and Chief Financial Officer