-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hLoTu1Rt0g6AZeufMpJCmxogHrE0YbGE/wp8X/YVIyeqlCzXGKS1q5nTkjqwbome lGA6VyHLRpGhK8yTh9Xcug== 0000912057-94-001129.txt : 19940331 0000912057-94-001129.hdr.sgml : 19940331 ACCESSION NUMBER: 0000912057-94-001129 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOOTSIE ROLL INDUSTRIES INC CENTRAL INDEX KEY: 0000098677 STANDARD INDUSTRIAL CLASSIFICATION: 2060 IRS NUMBER: 221318955 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-01361 FILM NUMBER: 94518839 BUSINESS ADDRESS: STREET 1: 7401 S CICERO AVE CITY: CHICAGO STATE: IL ZIP: 60629 BUSINESS PHONE: 3128383400 FORMER COMPANY: FORMER CONFORMED NAME: SWEETS CO OF AMERICA INC DATE OF NAME CHANGE: 19660921 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 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 other jurisdiction (IRS Employer Identification No.) of Incorporation or organization) 7401 South Cicero Avenue, Chicago, Illinois 60629 (Address of principle executive offices)(ZIP Code) Registrant's Telephone Number: (312) 838-3400 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------------ ---------------------------- Common Stock - Par Value New York Stock Exchange $.69-4/9 Per Share Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock - Par Value $.69-4/9 Per Share ------------------------------------------------------------ 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 during 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 requirements for the past 90 days. Yes X No -------- -------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ------ As of March 11, 1994, 7,078,671 shares of Common Stock par value $.69-4/9 per share were outstanding and the aggregate market value of the Common Stock (based upon the closing price of the stock on the New York Stock Exchange on such date) held by non-affiliates was approximately $295,638,000. As of March 11, 1994, 3,451,695 shares of Class B Common Stock, par value $.69-4/9 per share were outstanding. Class B Common Stock is not traded on any exchange, is restricted as to transfer or other disposition, but is convertible into Common Stock on a share-for-share basis. Upon such conversion, the resulting shares of Common Stock are freely transferable and publicly traded. Assuming all 3,451,695 shares of outstanding Class B Common Stock were converted into Common Stock, the aggregate market value of Common Stock held by non-affiliates on March 11, 1994 (based upon the closing price of the stock on the New York Stock Exchange on such date) would have been approximately $328,485,000. Determination of stock ownership by non-affiliates was made solely for the purpose of this requirement, and the Registrant is not bound by these determinations for any other purpose. DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of the Company's Annual Report to Shareholders for the year ended December 31, 1993 (the "1993 Report") are incorporated by reference in Parts I and II of this report. 2. Portions of the Company's Definitive Proxy Statement which will be distributed on or before April 30, 1994 in connection with the Company's 1994 Annual Meeting of Shareholders (the "1994 Proxy Statement") is incorporated by reference in Part III of this report. Cover Page 2 of 2 pages PART I ITEM 1. BUSINESS. Tootsie Roll Industries, Inc. and its consolidated subsidiaries (the "Company") are engaged in the manufacture and sale of candy. This is the only industry segment in which the Company operates and is its only line of business. A majority of the Company's products are sold under the registered trademarks "Tootsie," "Tootsie Roll," or "Tootsie Pop." The principal product of the Company is the familiar "Tootsie Roll," a chocolate-flavored candy of a chewy consistency, which is sold in several sizes and which is also used as a center for other products in the line including "Tootsie Pops," a spherical fruit or chocolate-flavored shell of hard candy with a center of "Tootsie Roll" candy on a paper safety stick, and "Tootsie Pop Drops," a smaller sized version of the "Tootsie Pop" without the stick. The Company and its predecessors have manufactured the "Tootsie Roll" product to substantially the same formula and sold it under the same name for over 90 years. The Company's products also include "Tootsie Roll Flavor Rolls" and "Tootsie Frooties," multiflavored candies of chewy consistency. The Company also manufactures and sells molded candy drop products under the registered trademark "Mason" and "Tootsie," including "Mason Dots," and "Mason Crows." The Company's wholly owned subsidiary, Cella's Confections Inc., produces a chocolate covered cherry under the registered trademark "Cella's." In 1988, the Company acquired the Charms Company. This candy manufacturer produces lollipops, including bubble gum-filled lollipops, and hard candy. The majority of the Company's products are sold under the registered trademarks "Charms," "Blow-Pop," "Blue Razz," and "Zip-A-Dee-Doo-Da-Pops." On October 15, 1993, the Company acquired Cambridge Brands, Inc. which was the former Chocolate/Caramel Division of Warner Lambert. Cambridge Brands, Inc. produces various confectionery products under the registered trademarks "Junior Mint," "Charleston Chew," "Sugar Babies," "Sugar Daddy," and "Pom Poms." The Company's products are marketed in a variety of packages designed to be suitable for display and sale in different types of retail outlets and vending machines and fund-raising religious and charitable organizations. They are distributed through approximately 100 candy and grocery brokers and by the Company itself to approximately 15,000 customers throughout the 1 United States. These customers include wholesale distributors of candy and groceries, supermarkets, variety stores, chain grocers, drug chains, discount chains, cooperative grocery associations, warehouse and membership club stores, vending machine operators, and fund-raising religious and charitable organizations. The Company's principal markets are in the United States, Canada and Mexico. The Company's Mexican plant supplies a very small percentage of the products marketed in the United States and Canada. The Company has advertised nationally for many years. Although nearly all advertising media have been used at one time or another, at present most of the Company's advertising expenditures are for the airing of network and syndicated TV and cable and spot television on major markets throughout the country. The domestic candy business is highly competitive. The Company competes primarily with other manufacturers of bar candy and candy of the type sold in variety, grocery and convenience stores. Although accurate statistics are not available, the Company believes it is among the ten largest domestic manufacturers in this field. In the markets in which the Company competes, the main forms of competition comprise brand recognition as well as a fair price for our products at various retail price points. Sale of candy products may be influenced to some extent by discussions of and effect on dental health and weight. The Company did not have a material backlog of firm orders at the end of the calendar years 1993 or 1992. All raw materials used by the Company are readily obtainable from a number of suppliers at competitive prices. The average cost of most major raw materials remained relatively stable in 1993 compared to 1992. It is not possible to project future changes in the price of raw materials. The Company has engaged in hedging transactions in sugar and corn and may do so in the future if and when advisable. From time to time the Company changes the size of certain of its products, which are usually sold at standard retail prices, to reflect significant changes in raw material costs. The Company does not hold any material patents, licenses, franchises or concessions. The Company's major trademarks are registered in the United States and in many other countries. Continued trademark protection is of material importance to the Company's business as a whole. The Company does not expend significant amounts on research or development activities. Compliance with Federal, State and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect on the capital expenditures, earnings or competitive position of the Company nor does the Company anticipate any such material effects from presently enacted or adopted regulations. 2 The Company employs approximately 1,700 persons. The Company has found that its sales normally maintain a consistent level throughout the year except for a substantial upsurge in the third quarter which reflects sales in anticipation of Halloween. In anticipation of this high sales period, the Company generally begins its Halloween inventory build up in the second quarter of each year. The Company historically offers extended credit terms for sales made under Halloween sales programs. Each year, after Halloween receivables have been paid, the Company invests funds in various temporary cash investments. For a summary of sales, net earnings and assets of the Company by geographic area and additional information regarding the foreign subsidiaries of the Company, see Note 11 of the Notes to Consolidated Financial Statements on Page 15 of the Company's Annual Report to Shareholders for the year ended December 31, 1993 (the "1993 Report") and on Page 4 of the 1993 Report under the section entitled "International." Note 11 and the aforesaid section are incorporated herein by reference. Portions of the 1993 Report are filed as an exhibit to this report. ITEM 2. PROPERTIES. The Company owns its principal plant and offices which are located in Chicago, Illinois in a building consisting of approximately 2,200,000 square feet. The Company utilizes approximately 1,800,000 square feet for offices, manufacturing and warehousing facilities and leases, or has available to lease to third parties, approximately 400,000 square feet. In addition to owning the principal plant and warehousing facilities mentioned above, the Company leases manufacturing and warehousing facilities at a second location in Chicago which comprises 80,600 square feet. The lease is renewable by the Company every five years through June, 2011. The Company also periodically leases additional warehousing space at this second location as needed on a month to month basis. Cella's Confections, Inc., a subsidiary, owns a facility in New York City, containing approximately 43,000 square feet. This facility consists of manufacturing, warehousing and office space on three floors containing approximately 33,200 square feet with a below surface level of approximately 9,800 square feet. Charms Company, a subsidiary, owns a facility in Covington, Tennessee, containing approximately 267,000 square feet of manufacturing, warehousing and office space. Cambridge Brands, Inc., a subsidiary, owns a facility in Cambridge, Massachusetts, containing approximately 145,000 square feet. The facility consists of manufacturing, warehousing and office space on five floors. The Company also owns property and a plant with manufacturing, warehousing and office space in Mexico City, Mexico, consisting of approximately 57,000 square feet plus parking lot and yard area comprising approximately 25,000 square feet. 3 The Company owns the production machinery and equipment located in the plants in Chicago, New York, Covington (Tennessee), Cambridge (Massachusetts) and Mexico City, except for approximately $7 million of equipment in Covington, Tennessee under an operating lease. The Company considers that all of its facilities are well maintained, in good operating condition and adequately insured. ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings known to the Company to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the Company's shareholders through the solicitation of proxies or otherwise during the fourth quarter of 1993. ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT. See the information on Executive Officers set forth in the table in Part III, Item 10, Page 6 of this report, which is incorporated herein by reference. 4 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Shares are traded on the New York Stock Exchange.The Company's Class B Common Shares are subject to restrictions on transfer and no market exists for such shares. The Class B Common Shares are convertible at the option of the holder into Common Shares on a share for share basis. As of March 11, 1994, there were approximately 9,500 holders of record of Common and Class B Common Shares. For information on the market price of, and dividends paid with respect to, the Company's Common Shares, see the section entitled "1993-1992 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Prices and Dividends" which appears on Page 16 of the 1993 Report. This section is incorporated herein by reference and filed as an exhibit to this report. ITEM 6. SELECTED FINANCIAL DATA. See the section entitled "Five Year Summary of Earnings and Financial Highlights" which appears on Page 17 of the 1993 Report. This section is incorporated herein by reference and filed as an exhibit to this report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. See the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 5-7 of the 1993 Report. This section is incorporated herein by reference and filed as an exhibit of this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements, together with the report thereon of Price Waterhouse dated February 17, 1994, appearing on Pages 8-15 of the 1993 Report and the Quarterly Financial Data on Page 16 of the 1993 Report are incorporated by reference in this report. With the exception of the aforementioned information and the information incorporated in Items 1, 5, 6 and 7, the 1993 Report is not to be deemed filed as part of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 5 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. See the information with respect to the Directors of the Company which is set forth in the section entitled "Election of Directors" of the Company's Definitive Proxy Statement to be used in connection with the Company's 1994 Annual Meeting of Shareholders (the "1994 Proxy Statement"). Except for the last paragraph of this section relating to the compensation of Directors, this section is incorporated herein by reference. The 1994 Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 1994. The following table sets forth the information with respect to the executive officers of the Company:
Name Position (1) Age - ---- -------- --- Melvin J. Gordon* Chairman of the Board and Chief Executive Officer (2) 74 Ellen R. Gordon* President and Chief Operating Officer (2) 62 G. Howard Ember Jr. Vice President/Finance 41 John W. Newlin Jr. Vice President/Manufacturing 57 Thomas E. Corr Vice President/Marketing and Sales 45 James M. Hunt Vice President/Distribution 51 *A member of the Board of Directors of the Company. 1) Mr. and Mrs. Gordon and Messrs. Newlin and Corr have served in the positions set forth in the table as their principal occupations for more than the past five years. Mr. Ember has served in his position for the past three years, and in the seven years prior to that, has served the Company in the position of Treasurer and Assistant Vice President of Finance. Mr. Hunt has served in his position for the past year and in the fifteen years prior to that, has served the Company in the positions of Director of Distribution and Assistant Vice President of Distribution. Mr. and Mrs. Gordon have also served as President and Vice President, respectively, of HDI Investment Corp., a family investment company. 2) Melvin J. Gordon and Ellen R. Gordon are husband and wife.
6 ITEM 11. EXECUTIVE COMPENSATION. See the information set forth in the section entitled "Executive Compensation and Other Information" of the Company's 1994 Proxy Statement. Except for the "Report on Executive Compensation" and "Performance Graph," this section of the 1994 Proxy Statement is incorporated herein by reference. See the last paragraph of the section entitled "Election of Directors" of the 1994 Proxy Statement, which paragraph is incorporated herein by reference. The 1994 Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 1994. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. For information with respect to the beneficial ownership of the Company's Common and Class B Common shares by the beneficial owners of more than 5% of said shares and by the management of the Company, see the sections entitled "Ownership of Common Stock and Class B Common Stock by Certain Beneficial Owners" and "Ownership of Common Stock and Class B Common Stock by Management" of the 1994 Proxy Statement. These sections of the 1994 Proxy Statement are incorporated herein by reference. The 1994 Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 1994. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Daniel G. Ross, a director of the Company, is a member of the law firm of Becker, Ross, Stone, DeStefano & Klein, which has served as general counsel to the Company for many years. 7 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements. The following financial statements and schedules are filed as part of this report: (1) Financial Statements (filed herewith as part of Exhibit 13): Report of Independent Accountants Consolidated Statements of Earnings and Retained Earnings for the three years ended December 31, 1993 Consolidated Statements of Cash Flows for the three years ended December 31, 1993 Consolidated Statements of Financial Position at December 31, 1993 and 1992 Notes to Consolidated Financial Statements (2) Financial Statement Schedules: Report of Independent Accountants on Financial Statement Schedules For the year ended December 31, 1993- I - Marketable Securities - Other Investments For the three years ended December 31, 1993- V- Property, Plant and Equipment VI- Accumulated Depreciation and Amortization of Property, Plant and Equipment VIII- Valuation and Qualifying Accounts IX- Short-Term Borrowings X- Supplementary Income Statement Information All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (3) Exhibits required by Item 601 of Regulation S-K: See Index to Exhibits which appears following Financial Schedule X. (b) Reports on Form 8-K 8 The Company filed a Report on Form 8-K dated October 15, 1993 and a Report on Form 8-K/A (Amendment No. 1) dated October 15, 1993, which described the acquisiton by the Company of the chocolate/caramel division of Warner-Lambert Company. The Report on Form 8-K/A filed the financial statements of the acquired company and unaudited pro forma financial statements of the Company. No other reports on Form 8-K were filed during the quarter ended December 31, 1993. 9 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Tootsie Roll Industries, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TOOTSIE ROLL INDUSTRIES, INC. By S/ MELVIN J. GORDON ------------------------------- Melvin J. Gordon, Chairman of the Board of Directors and Chief Executive Officer Date: March 28, 1994 ----------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. S/MELVIN J. GORDON - ------------------ Chairman of the Board Melvin J. Gordon of Directors and Chief Executive Office (principal executive officer) March 28, 1994 S/ELLEN R. GORDON - ----------------- Director, President, Ellen R. Gordon and Chief Operating Officer March 28, 1994 S/DANIEL G. ROSS - ----------------- Director March 28, 1994 Daniel G. Ross - ------------------- Charles W. Seibert Director March 28, 1994 S/WILLIAM TOURETZ - ----------------- Director & Secretary William Touretz March 28, 1994 - -------------------- Lana Jane Lewis-Brent Director March 28, 1994 G.HOWARD EMBER JR. - -------------------- Vice President, Finance G. Howard Ember Jr. (principal financial officer and principal accounting officer) March 28, 1994 10 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Directors and Shareholders of Tootsie Roll Industries, Inc. Our audit of the consolidated financial statements referred to in our report dated February 17, 1994 appearing on Page 15 of the 1993 Annual Report to Shareholders of Tootsie Roll Industries, Inc., (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 14(a) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated Financial Statements Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PRICE WATERHOUSE PRICE WATERHOUSE Chicago, Illinois February 17, 1994 FINANCIAL SCHEDULES TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS AT DECEMBER 31, 1993
COL. A COL. B COL. C COL. D COL. E ------ ------ ------ ------ ------ Amount at which Number each portfolio of of shares equity security or units- Market issues and each principal value of other security Name of issuer and amount each issue issue carried in title of each of bonds Cost of at balance the balance issue and notes each issue sheet date sheet - ------------------ --------- ---------- ---------- ------------- Unit Investment Trusts of Preferred Stocks - ------------------------- Merrill Lynch CIF Stock PUT Fund #1 34,337 $ 8,279,886 $ 9,750,232 $ 8,279,886 CIF Stock PUT Fund #2 6,331 1,996,546 2,004,267 1,996,546 CIF Stock PUT Fund #3 2,559 843,721 810,128 843,721 CIF Stock PUT Fund #6 1,001 129,429 132,982 129,429 ---------- ---------- --------- 11,249,582 12,697,609 11,249,582 ---------- ---------- --------- Tax - Free Commercial Paper - --------------------------- Muniyield Quality IIB 2,000,000 1,994,972 2,000,000 1,994,972 Nuveen Income #2th 100 5,000,000 5,000,000 5,000,000 Nuveen Advtg Ser W 20 1,000,000 1,000,000 1,000,000 Nuveen NY Select Qlty Ser 9 450,522 450,000 450,522 Intercapital Qlty Ser TH 50 2,504,985 2,500,000 2,504,985 Intercapital Ser B 40 2,000,000 2,000,000 2,000,000 Blackrock Insured Ser 17 35 1,750,000 1,750,000 1,750,000 Blackrock Insured Ser T28 60 3,000,000 3,000,000 3,000,000 Utah HFA S/F Mtg Sen-A- 100,000 100,000 100,145 100,000 Van Kempen Merritt Mun Tru 40 2,002,111 2,002,111 2,002,111 ---------- ---------- ---------- 19,802,590 19,802,256 19,802,590 ---------- ---------- ----------
-1- SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS AT DECEMBER 31, 1993
COL. A COL. B COL. C COL. D COL. E Amount at which Number each portfolio of of shares equity security or units- Market issues and each principal value of other security Name of issuer and amount each issue issue carried in title of each of bonds Cost of at balance the balance issue and notes each issue sheet date sheet - ------------------ --------- ---------- ---------- --------------- Municipal Bonds - --------------- Jacksonville FL Elec 200,000 200,000 201,280 200,000 Jacksonville FL Elec 300,000 316,573 321,300 316,573 Jacksonville FL Ex 1,000,000 1,064,940 1,074,900 1,064,940 Marion County FL Sch 500,000 500,000 501,450 500,000 Intermountain Power 280,000 281,535 284,004 281,535 Detroit MI Water 500,000 500,711 503,950 500,711 Detroit MI Distr St 400,000 400,542 401,640 400,542 Honolulu Hawaii City 260,000 264,466 267,410 264,466 Arizona St Power Authority 200,000 201,818 203,600 201,818 California Housing 200,000 201,353 202,560 201,353 Nassau County 315,000 315,270 318,276 315,270 Brunswick OH 200,000 204,004 204,600 204,004 Fort Myers FL 250,000 252,708 253,875 252,708 Riverside County CA 500,000 515,129 516,150 515,129 New Jersey State 370,000 371,457 376,105 371,457 Maryland State County 1,080,000 1,080,000 1,091,772 1,080,000 Warren County NJ 290,000 290,000 291,537 290,000 Cambria County 665,000 665,000 669,256 665,000 Harris County Tx 350,000 359,287 361,550 359,287 MA Municipal Whsl Elec 200,000 200,092 201,040 200,092 MA St Rfdg Ser C 2,000,000 2,000,909 2,006,200 2,000,909 MA State Health & Ed 500,000 520,469 531,500 520,469 Suffolk County NY 500,000 513,740 514,900 513,740 Municipal Custodial 378 364,909 365,110 364,909 NJ State Highway Auth 1,000,000 1,049,337 1,063,370 1,049,337 Westmoreland Cnty PA 1,120,000 1,160,858 1,177,187 1,160,858 Kansas City KS 500,000 519,432 523,160 519,432 ---------- ---------- ---------- 14,314,539 14,427,682 14,314,539 ---------- ---------- ----------
-2- SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS AT DECEMBER 31, 1993
COL. A COL. B COL. C COL. D COL. E Amount at which Number each portfolio of of shares equity security or units- Market issues and each principal value of other security Name of issuer and amount each issue issue carried in title of each of bonds Cost of at balance the balance issue and notes each issue sheet date sheet - ------------------ --------- ---------- ---------- ---------------- Unit Investment Trusts of Municipal Bonds MIT-PUT Ser 05 10,430 4,312,443 4,962,906 4,312,443 MIT-PUT Ser 01 3,411 721,984 637,277 721,984 MIT-PUT Ser 10 2,077,989 1,553,204 1,537,712 1,553,204 MIT-PUT Ser 13 3,094 411,935 378,550 411,935 MIT-PUT Ser 04 725 50,127 38,359 50,127 US Leasing Intl Tax Ex 2,000,000 89,538 78,400 89,538 ---------- ---------- ---------- 7,139,231 7,633,204 7,139,231 ---------- ---------- ---------- Other Private Export Funding Corp. Secured Note - Ser Y 1,711,137 1,711,137 1,711,137 ---------- ---------- ---------- $54,217,079 ----------
-3- TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Balance at Retirements Balance at beginning Additions and end of Classification of year at cost Reclassifications year - --------------- ---------- --------- ----------------- ---------- 1993: Land $ 230,667 $ 4,000,000 (3) $ $ 4,230,667 Buildings 4,861,047 15,654,891 (4) 4,831,261 (6) 25,347,199 Machinery and equipment 75,090,978 32,837,252 (5) (242,869) 107,685,361 Leasehold improvements 4,840,902 (4,831,261)(6) 9,641 ----------- ---------- ---------- ----------- $85,023,594 $52,492,143 $ (242,869) $137,272,868 ----------- ---------- ---------- ----------- 1992: Land $ 230,667 $ $ $ 230,667 Buildings 4,861,047 4,861,047 Machinery and equipment 64,472,325 10,956,217 (2) (337,564) 75,090,978 (2) Leasehold improvements 4,840,902 4,840,902 ----------- ---------- ---------- ----------- $74,404,941 $10,956,217 $ (337,564) $ 85,023,594 ----------- ---------- ---------- ----------- 1991: Land $ 230,667 $ $ $ 230,667 Buildings 4,087,964 773,083 (1) 4,861,047 Machinery and equipment 58,815,077 5,840,866 (1) (183,618) 64,472,325 Leasehold improvements 4,840,902 4,840,902 ----------- ---------- ---------- ----------- $67,974,610 $ 6,613,949 $ (183,618) $ 74,404,941 ----------- ---------- ---------- ----------- (1) Additions include $741,000 for buildings and $1,888,000 for machinery and equipment related to the step-up adjustment to assets acquired in connection with the 1988 acquisition of Charms Company recorded in the adoption of SFAS 109. (2) Balance reduced by $1,554,468 leased equipment transferred to prepaid expenses. (3) Additions include $2,500,000 from Cambridge Brands which was acquired in October, 1993 and $1,500,000 from Tootsie Roll building purchased in August, 1993. (4) Additions include $5,000,000 from Cambridge Brands which was acquired in October, 1993 and $4,619,278 from Tootsie Roll building purchased in August, 1993. (5) Additions include $17,000,000 from Cambridge Brands which was acquired in October, 1993 and $13,880,722 from Tootsie Roll building purchased in August, 1993. (6) Reclassification resulting from Tootsie Roll building purchase in August, 1993.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Additions Balance at charged to Retirements Balance at beginning costs and and end of Classification of year expenses Reclassifications year - -------------- ---------- ---------- ----------------- ---------- 1993: Buildings $ 775,536 $ 378,509 $ 3,440,388 (2) $ 4,594,433 Machinery and equipment 40,674,816 5,507,115 (208,800) 45,973,131 Leasehold improvements 3,316,037 130,466 (3,440,388)(2) 6,115 ---------- ---------- ------------ ----------- $44,766,389 $ 6,016,090 $ (208,800) $ 50,573,679 ---------- ---------- ------------ ----------- 1992: Buildings $ 611,312 $ 164,224 $ $ 775,536 Machinery and equipment 36,589,841 4,394,383 (309,408) 40,674,816 Leasehold improvements 3,185,087 130,950 3,316,037 ---------- ---------- ------------ ----------- $40,386,240 $ 4,689,557 $ (309,408) $ 44,766,389 ---------- ---------- ------------ ----------- 1991: Buildings $ 426,549 $ 184,763 (1) $ $ 611,312 Machinery and equipment 32,394,954 4,377,614 (1) (182,727) 36,589,841 Leasehold improvements 3,054,247 130,840 3,185,087 ---------- ---------- ------------ ----------- $35,875,750 $ 4,693,217 $ (182,727) $ 40,386,240 ---------- ---------- ------------ ----------- (1) Additions included $47,343 for buildings and $430,000 for machinery and equipment related to the step-up adjustment to assets acquired in connection with the 1988 acquisition of Charms Company recorded in the adoption of SFAS 109. (2) Reclassification resulting from Tootsie Roll building purchase in August, 1993.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS DECEMBER 31, 1993, 1992 AND 1991
Additions Balance at charged to Balance at beginning costs and end of Classification of year expenses Deductions year -------------- ---------- ---------- ---------- ---------- 1993: Reserve for bad debts $ 1,110,000 $ 894,790 $ 169,790 (1) $ 1,835,000 Reserve for cash discounts 109,000 4,962,551 4,831,551 (2) 240,000 ---------- ---------- ---------- ---------- $ 1,219,000 $ 5,857,341 $ 5,001,341 $ 2,075,000 ---------- ---------- ---------- ---------- 1992: Reserve for bad debts $ 981,000 $ 939,448 $ 810,448 (1) $ 1,110,000 Reserve for cash discounts 118,000 4,557,058 4,566,058 (2) 109,000 ---------- ---------- ---------- ---------- $ 1,099,000 $ 5,496,506 $ 5,376,506 $ 1,219,000 ---------- ---------- ---------- ---------- 1991: Reserve for bad debts $ 576,000 $ 739,211 $ 334,211 (1) $ 981,000 Reserve for cash discounts 172,000 3,497,649 3,551,649 (2) 118,000 ---------- ---------- ---------- ---------- $ 748,000 $ 4,236,860 $ 3,885,860 $ 1,099,000 ---------- ---------- ---------- ---------- (1) Accounts receivable written off net of recoveries. (2) Allowances to customers.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE IX - SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
Maximum Average Category of Weighted amount amount aggregate Balance average outstanding outstanding short-term at end of interest during the during the borrowings period rate* year year ---------- --------- -------- ------------ ----------- 1993: Notes payable to banks $22,600,673 3.2% $67,600,673 $12,490,782 1992: Notes payable to banks $ 252,569 7.7% $ 2,000,000 $ 306,192 1991: Notes payable to banks $ -- 5.8% $ 1,493,294 $ 998,019 * Total interest expense as a percentage of average notes payable, calculated using sum of month-end balances divided by 12.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Charged to Item costs and expenses ---- ------------------ 1993: Repairs and maintenance $ 4,914,712 Depreciation and amortization 8,814,188 Advertising 4,902,292 1992: Repairs and maintenance $ 5,174,373 Depreciation and amortization 6,070,891 Advertising 4,876,510 1991: Repairs and maintenance $ 4,048,986 Depreciation and amortization 5,202,442 Advertising 4,069,583
INDEX TO EXHIBITS 2.1 Asset Sale Agreement dated September 29, 1993 between Warner-Lambert Company and the Company, including a list of omitted exhibits and schedules. Incorporated by reference to Exhibit 2 to the Company's Report on Form 8-K dated October 15, 1993; Commission File No. 1-1361. The Company hereby agrees to provide the Commission, upon request, copies of any omitted exhibits or schedules required by Item 601(b)(2) of Regulation S-K. 3.1 Articles of Incorporation. Incorporated by reference to Exhibit 2.1 to Company's Registration Statement on Form 8-A dated February 29, 1988. 3.1.1 Articles of Amendment of the Articles of Incorporation dated May 2, 1988. Incorporated by reference to Exhibit 3.1.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1988; Commission File No. 1-1361. 3.1.2 Articles of Amendment of the Articles of Incorporation dated May 7, 1990. Incorporated by reference to Exhibit 3.1.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1990; Commission File No. 1-1361. 3.2 By-Laws. Incorporated by reference to Exhibit 2.2 to Company's Registration Statement of Form 8-A dated February 29, 1988. 3.3 Specimen Class B Common Stock Certificate. Incorporated by reference to Exhibit 1.1 to Company's Registration Statement on Form 8-A dated February 29, 1988. 10.5* Consultation Agreement between the Company and William Touretz dated December 21, 1979. Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended December 31, 1992; Commission File No. 1-1361. INDEX TO EXHIBITS (CONTINUED) 10.5.1* Modification Agreement between the Company and William Touretz dated as of December 5, 1984. Incorporated by reference to Exhibit 10.5.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1984; Commission File No. 1-1361. 10.5.2* Modification Agreement between the Company and William Touretz dated as of December 13, 1985. Incorporated by reference to Exhibit 10.5.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1985; Commission File No. 1-1361. 10.5.3* Modification Agreement between the Company and William Touretz dated as of December 17, 1986. Incorporated by reference to Exhibit 10.5.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1986; Commission File No. 1-1361. 10.8.1* Excess Benefit Plan. Incorporated by reference to Exhibit 10.8.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1990; Commission File No. 1-1361. 10.8.2* Career Achievement Plan of the Company. 10.17* Family Security Agreement between the Company and G. Howard Ember dated March 5, 1992. Incorporated by reference to Exhibit 10.17 of the Company's Annual Report on Form 10-K for the year ended December 31, 1991; Commission File No. 1-1361. INDEX TO EXHIBITS (CONTINUED) 10.12* Split Dollar Agreements (Special Trust and Daughters Revocable Trust) between the Company and trustee of Trust dated July 10, 1993. 10.18* Family Security Agreement between the Company and John W. Newlin dated October 30, 1986. Incorporated by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the year ended December 31, 1986; Commission File No. 1-1361. 10.19* Family Security Agreement between the Company and Thomas E. Corr dated November 18, 1986. Incorporated by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the year ended December 31, 1986; Commission File No. 1-1361. 10.20* Family Security Agreement between the Company and James M. Hunt dated August 26, 1993. 13 The following items incorporated by reference herein from the Company's 1993 Annual Report to Shareholders for the year ended December 31, 1993 (the "1993 Report"), are filed as Exhibits to this report: (i) Information under the section entitled "International" set forth on Page 4 of the 1993 Report; (ii) Information under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth on Pages 5-7 of the 1993 Report; (iii) Consolidated Statements of Earnings and Retained Earnings for the three years ended December 31, 1993 set forth on Page 8 of the 1993 Report; INDEX TO EXHIBITS (CONTINUED) (iv) Consolidated Statements of Financial Position at December 31, 1993 and 1992 set forth on Pages 9-10 of the 1993 Report; (v) Consolidated Statements of Cash Flow for the three years ended December 31, 1993 set forth on Page 11 of the 1993 Report; (vi) Notes to Consolidated Financial Statements set forth on Pages 12-15 of the 1993 Report; (vii) Report of Independent Accountants set forth on Page 15 of the 1993 Report; (viii) Quarterly Financial Data set forth on Page 16 of the 1993 Report; (ix) Information under the section entitled "1993-1992 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Prices and Dividends" set forth on Page 16 of the 1993 Report; and (x) Information under the section entitled "Five Year Summary of Earnings and Financial Highlights" set forth on Page 17 of the 1993 Report. 21 List of Subsidiaries of the Company. - ------------------ * Executive compensation plan or arrangement. EX-13 2 EXHIBIT 13 EXHIBIT 13 INTERNATIONAL Strong sales growth was realized in our Mexican subsidiary primarily due to another successful Christmas season. Profits also increased substantially, although they declined as a percentage of sales due to margin pressure. New sales and marketing programs are being implemented in order to retain and grow our sales base in this emerging market. Canadian sales increased as did export sales outside of North America. Our sales division in the Far East developed new packaging and product formulations to appeal to local taste preferences. These new items, along with certain of our existing products, have been introduced in various test markets in the Pacific Rim. We are encouraged by the acceptance of our products in these markets to date. 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS (in thousands except per share, percentage and ratio figures)
NET SALES Per Share 89... $17.02 90... $18.45 91... $19.73 92... $23.30 93... $24.64
NET EARNINGS Per Share 89... $1.92 90... $2.14 91... $2.42 92... $3.04 93... $3.36
FINANCIAL REVIEW This financial review discusses the company's financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with the Consolidated Financial Statements and related footnotes beginning on pages 8 and 12, respectively. FINANCIAL CONDITION Our financial condition remained strong in 1993, bolstered by another year of record profits. Net earnings rose from $32,032 in 1992 to $35,442 in 1993. Shareholders' equity increased by 16.9% from $181,704 in 1992 to $212,343 in 1993, due principally to the addition of these earnings, less cash dividends of $3,769. Cash dividends have been paid by the company for fifty-one consecutive years. Shareholders also received a 3% stock dividend in 1993, the twenty-ninth consecutive year one has been distributed. Capital expenditures were a record $27,992, primarily reflecting the purchase of our Chicago facility which had previously been leased, completion of the Covington plant expansion commenced in 1992, and several other projects. In October we acquired the Junior Mints, Charleston Chew, Sugar Daddy and Sugar Babies brands, along with the facility in which they are produced. This acquisition was the largest in the history of the company. These significant investments were financed by a combination of cash and debt which is reflected in the following ratios: current ratio declined from 5.9:1 to 2.2:1; quick ratio declined from 4.5:1 to 1.5:1; current liabilities to net worth increased from 12.4% to 24.0% and debt to equity increased from 4.3% to 23.6%. Despite the increased leverage incurred in 1993, the company retains a conservative financial position and sufficient capital for other corporate purposes. RESULTS OF OPERATIONS 1993 vs. 1992 Net sales increased in 1993 to $259,593, a record level for the seventeenth consecutive year and 6% over 1992 sales of $245,424. Sales remained at the highest level in the third quarter, due to successful Halloween and Back to School promotions. Other factors contributing to sales growth during the year were the continued success of our traditional product lines, favorable results with seasonal lines and the line extensions, as well as growth in our Mexican and Canadian subsidiaries. Comparing the quarterly sales in 1993 to those of 1992, increases were seen in each of the first three quarters, while the fourth quarter declined by 3%. Excluding the brands acquired in October the decrease would have been 10%. This decrease is largely due to general softness in the candy industry, the timing of some large customer Halloween shipments between the third and fourth quarters relative to the prior year and the effects of consolidation in the warehouse club class of trade. Cost of goods sold, as a percentage of sales, was consistent with 1992 at 51.6% versus 51.8%. Raw material prices remained stable throughout the year and productivity improvements continued to 5
SHAREHOLDERS' EQUITY Per Share 89... $10.40 90... $12.33 91... $14.50 92... $17.25 93... $20.16
NET EARNINGS As a % of Sales 89... 11.3 90... 11.6 91... 12.3 92... 13.1 93... 13.7
mitigate modest changes in the cost of other factors of production. Gross margin grew by 6% to $125,615 because of increased sales and as a percentage of sales it remained constant at 48.4% versus 48.2% in 1992. Operating expenses, comprised of marketing, selling, physical distribution, general and administrative expenses and goodwill amortization, declined slightly as a percentage of sales to 27.8% from 28.7% in the prior year. This favorable result demonstrates the effect of management's "hands-on" involvement in the operation of the business and the implementation of effective expense control programs to keep costs in check. The effective tax rate was comparable to the 1992 rate at 38.6% versus 38.3% and other income, consisting primarily of interest and dividend income, remained essentially even with the prior year as the decrease in our short term investment portfolio, to partially finance the acquisition, did not occur until later in the year. Consolidated earnings rose 10.6% to $35,442, a record high for the twelfth consecutive year. 1992 vs. 1991 1992 represented the sixteenth year of record sales achievement. Sales of $245,424 were up 18.1% over 1991 sales of $207,875. Double digit gains were realized in each quarter. The third quarter back to school and pre-Halloween sales periods, historically our largest, again surpassed levels attained in previous years. However, the largest sales increase on both a percentage and absolute basis was seen in the fourth quarter, as tight inventory management at the retail level caused seasonal orders to be carried over into October and due to the fact that our Mexican subsidiary experienced a strong Christmas season. Sales increases stemmed from merchandising efforts directed toward the fastest growing classes of trade, continued strength in our Child's Play assortment and successful line extensions such as Blue Razz Berry Blow Pops and seasonal packs. Cost of goods sold, as a percentage of sales, was in line with the prior year at 51.8% versus 51.6% in 1991. Both direct and indirect costs were comparable to the prior year as a percent of sales. Continued weakness in the cosmetic economy and the absence of significant increases in the cost of any major raw materials or packaging components contributed to this stability. Correspondingly, gross margin, as a percentage of sales, remained essentially even at 48.2% in 1992 compared with 48.4% in 1991. Operating expenses, as a percentage of sales, remained comparable with the prior year and 28.7% of sales. Tight control of operating expenses is an ongoing program within the company. The effective tax rate of 38.3% declined slightly from the 1991 level of 32.9% due to lower foreign taxes offset by foreign tax credits and increased tax free investment income. Other income rose by $1,050 due to increased interest and dividend income. In 1991, the company adopted two new Statements of Financial Accounting Standards (SFAS) issued by the Financial Accounting Standards Board. SFAS No. 109, "Accounting for Income Taxes" principally requires companies to adopt the liability 6 method of computing deferred taxes, thereby recomputing existing tax liabilities at current rates. This change had a favorable impact of $869. Also in 1991, the Company adopted SFAS No. 106, "Employers" Accounting for Postretirement Benefits other than Pensions whereby the accrual method is utilized to record the anticipated expenses of each retiree's benefits ratably over his/her working career. This method accelerates the recognition of expense versus the ""pay as you go'' method which deferred such recognition until the expenses were actually paid. This change had an unfavorable impact of $1,907, net of future tax benefits. Consolidated net earnings after the cumulative effect of these accounting changes rose 25.6% to a new company record of $32,032 or $3.04 per share in 1992 from the previous record of $25,495 or $2.42 per share for 1991. Prior to the cumulative effect of accounting changes the increase was 20.7%. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities decreased $2,108 to $33,363 in 1993 from $35,471 in 1992 and $36,826 in 1991. Higher profits and depreciation and amortization and accrued liabilities in 1993 were offset by increased accounts receivable, inventories and prepaids. Cash flows from investing activities in 1993 reflect the acquisition of Cambridge Brands along with net investment sales which were used toward its financing. Increased capital expenditures were principally due to the purchase of our Chicago plant and the Charms expansion. Cash flows from financing activities include $92,000 of interest bearing debt incurred during 1993, $50,000 of which was paid off prior to year end. The net inflow of funds was utilized in the purchase of Cambridge Brands and our Chicago plant and enabled us to maintain a solid financial position with cash and marketable securities of $56,203. Cash dividends were declared and paid in 1993 for the fifty-first consecutive year. Dividends were increased by 28% to $.36 per share during 1993. Our successful operating results and financial conservatism are expressed in the following financial statements.
NET SALES Millions of dollars 89... $179 90... $194 91... $206 92... $245 93... $250
NET EARNINGS Millions of dollars 89... $20.2 90... $22.6 91... $25.5 92... $32.0 93... $35.4
GROSS MARGIN Millions of dollars 89... $85 90... $91 91... $101 92... $118 93... $126
SHAREHOLDERS' EQUITY Millions of dollars 89 $110 90 $130 91 $153 92 $182 93 $212
7
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (in thousands except per share data) For the year ended December 31, ------------------------------------------ 1993 1992 1991 --------- --------- --------- Net sales . . . . . . . . . . . . . . . . . . . . . . . . $259,593 $245,424 $207,875 Cost of goods sold. . . . . . . . . . . . . . . . . . . . 133,978 127,123 107,280 --------- --------- --------- Gross margin. . . . . . . . . . . . . . . . . . . . . . 125,615 118,301 100,595 --------- --------- --------- Operating expenses: Marketing, selling and advertising. . . . . . . . . . . 40,096 38,958 32,392 Distribution and warehousing . . . . . . . . . . . . . 17,655 16,959 14,867 General and administrative. . . . . . . . . . . . . . . 12,837 13,186 10,837 Amortization of the excess of cost over acquired net tangible assets . . . . . . . . . . 1,510 1,265 1,264 --------- --------- --------- 72,098 70,368 59,360 --------- --------- --------- Earnings from operations. . . . . . . . . . . . . . . . . 53,517 47,933 41,235 Other income, net (Note 8). . . . . . . . . . . . . . . . 4,193 3,989 2,939 --------- --------- --------- Earnings before income taxes. . . . . . . . . . . . . . . 57,710 51,922 44,174 Provision for income taxes (Notes 1 and 4). . . . . . . . 22,268 19,890 17,641 --------- --------- --------- Earnings before cumulative effect of accounting changes. . . . . . . . . . . . . . . . . . 35,442 32,032 26,533 Cumulative effects of accounting changes - income (expense): Income taxes (Note 1). . . . . . . . . . . . . . . - - 869 Postretirement health care and life insurance benefits, less income tax effect (Notes 1 and 7). . . . . . . . . . . . - - (1,907) --------- --------- --------- Net earnings. . . . . . . . . . . . . . . . . . . . . . . 35,442 32,032 25,495 Retained earnings at beginning of year. . . . . . . . . . 90,285 83,507 74,173 --------- --------- --------- 125,727 115,539 99,668 --------- --------- --------- Deduct (Note 5): Cash dividends ($.36, $.28 and $.24 per share). . . . . 3,769 2,947 2,492 Stock dividends . . . . . . . . . . . . . . . . . . . . 25,311 22,307 13,669 --------- --------- --------- 29,080 25,254 16,161 --------- --------- --------- Retained earnings at end of year. . . . . . . . . . . . . $ 96,647 $ 90,285 $ 83,507 --------- --------- --------- --------- --------- --------- Earnings per common share: Earnings before cumulative effect of accounting changes. . . . . . . . . . . . . . . . $3.36 $3.04 $2.52 Cumulative effect of accounting changes. . . . . . - - (.10) --------- --------- --------- Net earnings per common share . . . . . . . . . . . . . . $3.36 $3.04 $2.42 --------- --------- --------- --------- --------- --------- Average common and class B common shares outstanding (Note 5) . . . . . . . . . . . . . . . . . . 10,534 10,534 10,534 --------- --------- --------- --------- --------- --------- * Based on average shares outstanding adjusted for stock dividends.
(The accompanying notes are an integral part of these statements.) 8
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands) December 31, ASSETS 1993 1992 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents (Notes 1 and 10). . . . . . . . . . . . . . $ 1,986 $ 995 Investments (Notes 1 and 10). . . . . . . . . . . . . . . . . . . . . 54,217 87,947 Accounts receivable, less allowances of $2,075 and $1,219 . . . . . . 20,656 12,889 Inventories (Note 1): Finished goods and work in process. . . . . . . . . . . . . . . . . 17,186 14,823 Raw materials and supplies. . . . . . . . . . . . . . . . . . . . . 12,108 10,022 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,667 4,544 Deferred income taxes (Notes 1 and 4) . . . . . . . . . . . . . . . . 2,094 1,992 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . . . 111,914 133,212 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT, at cost (Note 1): Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,231 231 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,347 4,861 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . 107,685 75,091 Leasehold improvements. . . . . . . . . . . . . . . . . . . . . . . . 10 4,841 ---------- ---------- 137,273 85,024 Less - Accumulated depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 50,574 44,767 ---------- ---------- 86,699 40,257 ---------- ---------- OTHER ASSETS: Excess of cost over acquired net tangible assets, net of accumulated amortization of $7,260 and $5,750 (Notes 1 and 2) . . . . . . . . . 101,375 45,195 Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,952 5,806 ---------- ---------- 105,327 51,001 ---------- ---------- $303,940 $224,470 ---------- ---------- ---------- ---------- (The accompanying notes are an integral part of these statements.)
9
(in thousands except per share data) LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 1993 1992 ---------- ---------- CURRENT LIABILITIES: Notes payable to banks (Notes 2, 6 and 10) . . . . . . . . . . . . . $ 22,601 $ 253 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 6,259 4,674 Dividends payable. . . . . . . . . . . . . . . . . . . . . . . . . . 1,026 791 Accrued liabilities (Note 3) . . . . . . . . . . . . . . . . . . . . 17,919 13,661 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 3,057 3,119 ---------- ---------- Total current liabilities 50,862 22,498 ---------- ---------- NONCURRENT LIABILITIES: Deferred income taxes (Notes 1 and 4). . . . . . . . . . . . . . . . 6,364 5,986 Postretirement health care and life insurance benefits (Notes 1 and 7) . . . . . . . . . . . . . . . . . . . . . . 4,498 3,976 Industrial Development Bonds (Notes 6 and 10). . . . . . . . . . . . 7,500 7,500 Term notes payable (Note 6 and 10) . . . . . . . . . . . . . . . . . 20,000 - Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . 2,373 2,806 ---------- ---------- Total noncurrent liabilities 40,735 20,268 ---------- ---------- SHAREHOLDERS' EQUITY (Notes 1 and 5): Common stock, $.69-4/9 par value - 25,000 shares authorized - 7,069 and 6,834, respectively, issued . . . . . . . . . . . . . . 4,909 4,746 Class B common stock, $.69-4/9 par value - 10,000 shares authorized - 3,465 and 3,395, respectively, issued . . . . . . . . . . . . . . 2,406 2,357 Capital in excess of par value . . . . . . . . . . . . . . . . . . . 111,108 86,162 Retained earnings, per accompanying statement. . . . . . . . . . . . 96,647 90,285 Foreign currency translation adjustment account (Note 1) . . . . . . (2,727) (1,846) ---------- ---------- 212,343 181,704 ---------- ---------- COMMITMENTS (Note 9). . . . . . . . . . . . . . . . . . . . . . . . . . - - ---------- ---------- $303,940 $224,470 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these statements. 10
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the year ended December 31, 1993 1992 1991 -------- -------- -------- Cash flows from operating activities: Net earnings. . . . . . . . . . . . . . . . . . . . . . $35,442 $32,032 $25,495 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . 8,814 6,071 5,202 Translation loss . . . . . . . . . . . . . . . . - 124 171 Changes in operating assets and liabilities: Accounts receivable. . . . . . . . . . . . . . (7,941) 113 3,152 Inventories. . . . . . . . . . . . . . . . . . (2,727) (3,443) 1,457 Prepaid expenses and other assets. . . . . . . (2,827) (724) 125 Accounts payable and accrued liabilities . . . 3,179 2,964 (1,664) Income taxes payable and deferred. . . . . . . 214 (3,536) (1,697) Postretirement health care and life insurance benefits . . . . . . . . . . . . . . 522 450 3,526 Other long-term liabilities . . . . . . . . . . (432) 1,420 59 Other . . . . . . . . . . . . . . . . . . . . . (881) - - --------- --------- --------- Net cash provided by operating activities . . . . . . . 33,363 35,471 35,826 --------- --------- --------- Cash flows from investing activities: Acquisition of Cambridge Brands . . . . . . . . . . . . (81,317) - - Capital expenditures. . . . . . . . . . . . . . . . . . (27,992) (10,956) (3,984) Investment purchases. . . . . . . . . . . . . . . . . . (22,854) (86,357) (68,399) Investment sales. . . . . . . . . . . . . . . . . . . . 61,096 52,752 41,017 --------- --------- --------- Net cash used in investing activities . . . . . . . . . (71,067) (44,562) (31,366) --------- --------- --------- Cash flows from financing activities: Issuances of industrial development bonds and notes payable . . . . . . . . . . . . . . . . . . 92,000 7,500 - Repayments of notes payable . . . . . . . . . . . . . . (50,000) - - Dividends paid in cash. . . . . . . . . . . . . . . . . (3,687) (2,965) (2,489) Other, net. . . . . . . . . . . . . . . . . . . . . . . 382 152 (797) --------- --------- --------- Net cash provided by (used in) financing activities . . 38,695 4,687 (3,286 --------- --------- --------- Increase (decrease) in cash and cash equivalents. . . . . 991 (4,403) 1,174 Cash and cash equivalents at beginning of year. . . . . . 995 5,398 4,224 --------- --------- --------- Cash and cash equivalents at end of year. . . . . . . . . $ 1,986 $ 995 $ 5,398 --------- --------- --------- --------- --------- --------- Supplemental cash flow information: Income taxes paid . . . . . . . . . . . . . . . . . . . $22,111 $23,733 $16,887 --------- --------- --------- --------- --------- --------- Interest paid . . . . . . . . . . . . . . . . . . . . . $ 653 $ 116 $ 88 --------- --------- --------- --------- --------- ---------
(The accompanying notes are an integral part of these statements.) 11 TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands except per share data) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES: BASIS OF CONSOLIDATION: The consolidated financial statements include the accounts of Tootsie Roll Industries, Inc. and its wholly-owned subsidiaries (the company), all of which are engaged in the manufacture and sale of candy products. All significant intercompany transactions have been eliminated. CASH AND CASH EQUIVALENTS: The company considers temporary cash investments with a maturity of three months or less to be cash equivalents. INVESTMENTS: Investments are carried at cost which approximates market and consist of various marketable securities that have maturities of less than one year. INVENTORIES: Inventories are stated at cost, not in excess of market. The cost of domestic inventories ($26,500 and $21,546 at December 31, 1993 and 1992, respectively) has been determined by the last-in, first-out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $4,316 and $4,301 at December 31, 1993 and 1992, respectively. The cost of foreign inventories ($2,794 and $3,299 at December 31, 1993 and 1992, respectively) has been determined by the first-in, first-out (FIFO) method. The company executes futures contracts to hedge price risk related to certain future purchases of product ingredients. Changes in market value of such futures contracts are included in the measurement of the cost of these ingredients. PROPERTY, PLANT AND EQUIPMENT: Depreciation is computed for financial reporting purposes by use of both the straight-line and accelerated methods, whereas for income tax purposes the company uses accelerated methods on all properties. Amortization is computed for financial reporting and income tax purposes by use of the straight-line method. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS: Effective January 1, 1991, the company changed its method of accounting for postretirement health care and life insurance benefits to the accrual method, as a result of adopting Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits other than Pensions." The cumulative effect of this accounting change was to decrease net earnings by $1,907 (net of income taxes of $1,144) or $.18 per share as of January 1, 1991. The effect of this change on 1991 operations is a decrease in net earnings before the cumulative effect of accounting changes of approximately $250 or $.02 per share. INCOME TAXES: Effective January 1, 1991, the company changed its method of accounting for income taxes, as a result of adopting SFAS No. 109, "Accounting for Income Taxes." This statement requires, among other things, a change from the deferral to the liability method of computing deferred income taxes. The cumulative effect of this change on 1991 net earnings, excluding the cumulative effect upon adoption, was not material. The company elected not to restate prior years. EXCESS OF COST OVER ACQUIRED NET TANGIBLE ASSETS: The excess of cost over the acquired net tangible assets of operating companies is amortized on a straight-line basis over a 40 year period. FOREIGN CURRENCY TRANSLATION: During 1992 and 1991 management classified Mexico as a hyper-inflationary economy, as defined by SFAS No. 52, "Foreign Currency Translation". Under this classification, the dollar is used as the functional currency, and translation gains and losses are included in the determination of earnings. Translation losses of $124 and $171 related to the company's Mexican operations were charged to expense in 1992 and 1991, respectively. Effective January 1, 1993 management determined that the Mexican economy is no longer hyper-inflationary. Accordingly, the local currency is used as the functional currency and the net effect of translating the Mexican operation's financial statements is reported in a separate component of shareholders' equity. RECLASSIFICATIONS: Certain prior year balances and amounts have been reclassified in order to conform to the current year presentation. Such reclassifications had no effect on net income or retained earnings as previously reported. NOTE 2 - ACQUISITION: On October 15, 1993, the company purchased certain tangible and intangible assets of a candy manufacturer (Cambridge Brands) for approximately $81,300. Funds for the acquisition were provided from $9,300 of the company's own funds and $72,000 in bank borrowings (Note 6). The acquisition has been accounted for as a purchase and the net assets and the results of operations and cash flows of Cambridge Brands have been included in the company's consolidated financial statements from October 15, 1993. The following unaudited pro forma information shows the results of the company's operations as though the purchase of Cambridge Brands had been consummated as of the beginning of each year:
1993 1992 -------- -------- Net sales $306,584 $303,576 Net earnings 36,592 32,763 Net earnings per common share 3.47 3.11
The pro forma results of operations are not necessarily indicative of the actual results of operations that would have occurred had the purchase actually been made at the beginning of periods presented or of future operations. NOTE 3 - ACCRUED LIABILITIES: Accrued liabilities are comprised of the following:
December 31, ------------------------ 1993 1992 -------- -------- Compensation and employee benefits . $ 5,989 $ 5,134 Commissions. . . . . . . . . . . . . 856 850 Advertising and promotions . . . . . 4,413 2,353 Workmen's compensation . . . . . . . 973 1,067 Other . . . . . . . . . . . . . . . 5,688 4,257 -------- -------- $17,919 $13,661 -------- -------- -------- --------
NOTE 4 - INCOME TAXES: The domestic and foreign components of pretax income are as follows:
1993 1992 1991 ------- ------- ------- Domestic . . . . . . . . . . . . . . . $56,159 $48,450 $40,423 Foreign . . . . . . . . . . . . . . . 1,551 3,472 3,751 ------- ------- ------- $57,710 $51,922 $44,174 ------- ------- ------- ------- ------- -------
12 The provision for income taxes is comprised of the following:
1993 1992 1991 ------- ------- ------- Current: Federal. . . . . . . . . . . . . . . $19,052 $17,820 $14,230 Foreign . . . . . . . . . . . . . . 534 1,073 1,343 State. . . . . . . . . . . . . . . . 2,406 2,469 2,312 ------- ------- ------- 21,992 21,362 17,885 ------- ------- ------- Deferred: Federal . . . . . . . . . . . . . . 514 (1,318) (586) Foreign . . . . . . . . . . . . . . (281) (25) 411 State . . . . . . . . . . . . . . . 43 (129) (69) ------- ------- ------- 276 (1,472) (244) ------- ------- ------- $22,268 $19,890 $17,641 ------- ------- ------- ------- ------- -------
Deferred income taxes are comprised of the following:
December 31, ------------------ 1993 1992 ------- ------- Workers' compensation. . . . . . . . . $ 331 $ 364 Reserve for returns. . . . . . . . . . 445 295 Reserve for uncollectible accounts. . . . . . . . . . . . . . . 230 257 Other accrued expenses . . . . . . . . 1,705 1,099 VEBA funding . . . . . . . . . . . . . (526) (433) Other, net . . . . . . . . . . . . . . (91) 410 ------- ------- Net current deferred income tax asset . . . . . . . . . . . . . . $2,094 $1,992 ------- ------- ------- -------
December 31, ------------------ 1993 1992 ------- ------- Depreciation . . . . . . . . . . . . . $6,878 $7,298 Post employment benefits . . . . . . . (1,536) (1,353) Deductible goodwill. . . . . . . . . . 1,342 - Deferred compensation. . . . . . . . . (473) (699) DISC commissions . . . . . . . . . . . 724 768 Other, net . . . . . . . . . . . . . . (571) (28) ------- ------- Net long-term deferred income tax liability . . . . . . . . . . . . $6,364 $5,986 ------- ------- ------- -------
The effective income tax rate differs from the statutory rate as follows:
1993 1992 1991 ------- ------- ------- U.S. statutory rate. . . . . . . . . . 35.0% 34.0% 34.0% State income taxes, net . . . . . . . 2.8 3.0 3.4 Amortization of excess of cost over acquired net tangible assets . . . . . . . . . . . 0.7 0.8 1.0 Other, net . . . . . . . . . . . . . . 0.1 0.5 1.5 ------- ------- ------- Effective income tax rate. . . . . . . 38.6% 38.3% 39.9% ------- ------- ------- ------- ------- -------
The company has not provided for U.S. federal or foreign withholding taxes on $6,015 of foreign subsidiaries' undistributed earnings as of December 31, 1993 because such earnings are considered to be permanently reinvested. When excess cash has accumulated in the company's foreign subsidiaries and it is advantageous for tax or foreign exchange reasons, subsidiary earnings may be remitted, and income taxes are provided on such amounts. It is not practicable to determine the amount of income taxes that would be payable upon remittance of the undistributed earnings. NOTE 5 - SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:
Common Stock Class B Common Stock Capital in ------------------ --------------------- excess of Shares Amount Shares Amount par value --------- -------- -------- -------- --------- (000's) (000's) Balance at January 1, 1991 . . . . 6,287 $4,366 3,358 $2,332 $ 50,820 Issuance of 3% stock dividend. . . 189 132 98 68 13,380 Conversion of Class B common shares to common shares . . . . . 78 54 (78) (54) - -------- -------- -------- -------- -------- Balance at December 31, 1991 . . . 6,554 4,552 3,378 2,346 64,200 Issuance of 3% stock dividend. . . 197 136 100 69 21,962 Conversion of Class B common shares to common shares . . . . . 83 58 (83) (58) - -------- -------- -------- -------- -------- Balance at December 31, 1992 6,834 4,746 3,395 2,357 86,162 Issuance of 3% stock dividend. . . 204 142 101 70 24,946 Conversion of Class B common shares to common shares . . . . . 31 21 (31) (21) - -------- -------- -------- -------- -------- Balance at December 31, 1993 . . . 7,069 $4,909 3,465 $2,406 $111,108 -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
The Class B Common Stock has essentially the same rights as Common Stock, except that each share of Class B Common Stock has ten votes per share (compared to one vote per share of Common Stock), is not traded on any exchange, is restricted as to transfer and is convertible on a share-for- share basis, at any time and at no cost to the holders, into shares of Common Stock which are traded on the New York Stock Exchange. Average shares outstanding and all per share amounts included in the financial statements and notes thereto have been adjusted retroactively to reflect the three percent stock dividend distributed in 1993. NOTE 6 - NOTES PAYABLE AND INDUSTRIAL DEVELOPMENT BONDS: In October 1993, the company executed notes payable with three banks in the aggregate amount of $72,000 to provide funds for the acquisition of Cambridge Brands (Note 2). As of December 31, 1993 $22,000 was outstanding at fixed (3.64%) and variable interest rates based upon the London Interbank Offered Rates (LIBOR) plus 13 basis points with a composite interest rate of 3.62%. The outstanding principal balance is due in 1994. Additionally, the company entered into two 3-year term notes aggregating $20,000 the proceeds of which were used to purchase the company's Chicago manufacturing facility and headquarters. These term notes bear interest payable monthly at 3.55% and mature entirely in 1996. At December 31, 1993, the company had outstanding a three year interest rate swap agreement with a notional amount of $20,000. Under the agreement, the company exchanged a fixed rate of 4.24% for a variable rate adjusted monthly based upon LIBOR (3.33% at December 31, 1993). The company anticipates the counterparty to the swap agreement (a large financial institution) will fully perform on its obligations. During 1992, the company entered into an industrial development bond agreement with the City of Covington, Tennessee. The bond proceeds of $7.5 million are being used to finance the expansion of the Company's existing facilities. Interest is payable at various times during the year based upon the interest calculation option (fixed, variable or floating) selected by the company. As of December 31, 1993 and 1992, interest was calculated under the floating option 13 (3.4% and 2.9%, respectively) which requires monthly payments of interest. Principal on the bonds is due in its entirety in the year 2027. At December 31, 1993 and 1992, unexpended bond proceeds of $1,061 and $5,573 were restricted for use on the capital expenditure projects discussed above. These funds, which are included as other assets in the accompanying consolidated balance sheet, are invested in short-term securities until expended. In connection with the issuance of the bonds, the company entered into a letter of credit agreement with a bank for the amount of principal outstanding plus 48 days accrued interest. The letter of credit, which expires in March 1996, carries an annual fee of 32 1/2 basis points on the outstanding principal amount of the bonds. NOTE 7 - EMPLOYEE BENEFIT PLANS: PENSION PLANS: The company sponsors defined contribution pension plans covering certain nonunion employees with over one year of credited service. The company's policy is to fund pension costs accrued based on compensation levels. Total pension expense for 1993, 1992 and 1991 approximated $1,202, $1,075 and $867, respectively. The company also maintains certain profit sharing and savings- investment plans. Company contributions in 1993, 1992 and 1991 to these plans were $321, $291, and $263, respectively. The company also contributes to multi-employer defined benefit pension plans for its union employees. Such contributions aggregated $407, $474 and $510 in 1993, 1992 and 1991, respectively. The relative position of each employer associated with the multi-employer plans with respect to the actuarial present value of benefits and net plan assets is not determinable by the company. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFIT PLANS: The company provides certain postretirement health care and life insurance benefits for corporate office and management employees. As discussed in Note 1, the company adopted the accrual method of accounting for these benefits effective January 1, 1991. Employees become eligible for these benefits if they meet minimum age and service requirements and if they agree to contribute a portion of the cost. The company has the right to modify and terminate these benefits and increase future participant contributions. The Company does not fund postretirement health care and life insurance benefits in advance of payments for benefit claims. The accrual for the accumulated postretirement benefit obligation at December 31, 1993 and 1992 consists of the following:
December 31, ---------------- 1993 1992 ------ ------ Retirees. . . . . . . . . . . . . . $1,285 $1,354 Active employees. . . . . . . . . . 3,213 2,622 ------ ------ $4,498 $3,976 ------ ------
Net periodic postretirement benefit cost for 1993, 1992 and 1991 included the following components:
1993 1992 1991 ------ ------ ------ Service cost - benefits attributed to service during the period. . . . $241 $246 $220 Interest cost on the accumulated postretirement benefit obligation . 259 288 255 ------ ------ ------ Net periodic postretirement benefit cost. . . . . . . . . . . . . . . $500 $534 $475 ------ ------ ------ ------ ------ ------
For measurement purposes, a 14.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1994; the rate was assumed to decrease gradually to 6.5% for 2002 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by 1 percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1993 by approximately $233 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by approximately $121. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.0% and 8.5% at December 31, 1993 and 1992, respectively. NOTE 8 - OTHER INCOME, NET: Other income (expense) is comprised of the following:
1993 1992 1991 ------ ------ ------ Interest income. . . . . . . . . . . $1,975 $2,376 $1,380 Interest expense . . . . . . . . . . (642) (440) (196) Dividend income. . . . . . . . . . . 1,992 1,624 1,510 Foreign exchange losses. . . . . . . (4) (155) (178) Royalty income . . . . . . . . . . . 634 289 299 Miscellaneous, net . . . . . . . . . 238 295 124 ------ ------ ------ $4,193 $3,989 $2,939 ------ ------ ------ ------ ------ ------
NOTE 9 - COMMITMENTS: Future minimum rental commitments under non-cancelable operating leases are as follows:
Amount ------- 1994. . . . . . . . . . $2,213 1995. . . . . . . . . . 1,996 1996. . . . . . . . . . 153
During 1993, the Company entered into operating leases for certain manufacturing equipment. These leases expire in 1998 but provide the Company with the option to terminate the lease in 1996 and to purchase the equipment at its fair market value. Rental expense aggregated $1,015, $1,243, and $1,172 in 1993, 1992 and 1991, respectively. NOTE 10 - DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND CASH EQUIVALENTS The carrying amount approximates fair value because of the short maturity of those instruments. INVESTMENTS The fair values of investments are estimated based on quoted market prices. NOTES PAYABLE AND INDUSTRIAL DEVELOPMENT BONDS The fair values of the company's notes payable and industrial development bonds are estimated based on the quoted market prices for the same or similar issues. FAIR VALUE The estimated fair values of the company's financial instruments are as follows:
1993 1992 -------------- ---------------- Carrying Fair Carrying Fair Amount Value Amount Value ------- ----- -------- ----- Cash and cash equivalents. . . $ 1,986 $ 1,986 $ 995 $ 995 Investments. . . . . . . . . . 54,217 56,327 87,947 89,347 Notes payable and industrial development bonds. . . . . . . . . . . . 50,101 50,101 7,500 7,500
14
NOTE 11 - GEOGRAPHIC AREA AND SALES INFORMATION: Summary of sales, net earnings and assets by geographic area 1993 1992 1991 ----------------------------- ----------------------------- -------------------------- Mexico Mexico Mexico United and Consoli- United and Consoli- United and Consoli- States Canada dated States Canada dated States Canada dated -------- -------- -------- -------- -------- -------- -------- -------- -------- Sales to unaffiliated customers. . . . . . . . . . . . . $234,460 $25,133 $259,593 $225,001 $20,423 $245,424 $188,625 $19,250 $207,875 -------- -------- -------- -------- -------- -------- Sales between geographic areas . . . 2,186 3,219 806 1,649 795 1,546 -------- -------- -------- -------- -------- -------- $236,646 $28,352 $225,807 $22,072 $189,420 $20,796 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Net earnings . . . . . . . . . . . . $ 34,144 $ 1,298 $ 35,442 $ 29,478 $ 2,554 $ 32,032 $ 23,722 $ 1,773 $ 25,495 Total assets . . . . . . . . . . . . 288,506 15,434 303,940 211,099 13,371 224,470 171,349 13,078 184,427 Net assets . . . . . . . . . . . . . 199,862 12,481 212,343 171,838 9,866 181,704 145,473 7,286 152,759
Total assets are those assets associated with or used directly in the respective geographic area, excluding intercompany advances and investments. MAJOR CUSTOMER Revenues from a major customer aggregated approximately 13.6% and 12.5% of total net sales during the year ended December 31, 1993 and 1992. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Tootsie Roll Industries, Inc. In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of earnings and retained earnings and of cash flows present fairly, in all material respects, the financial position of Tootsie Roll Industries, Inc. and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1, the Company changed its method of accounting for income taxes and postretirement health care and life insurance benefits in 1991. Price Waterhouse Chicago, Illinois February 17, 1994 15 QUARTERLY FINANCIAL DATA Tootsie Roll Industries, Inc. and Subsidiaries
(Thousands of dollars except per share data) 1993 First Second Third Fourth Total - ------------------------------------------------------------------------------------------------------------------------------------ Net sales. . . . . . . . . . . . . . . . . . . . . . $50,017 $53,923 $93,239 $62,414 $259,593 Gross margin . . . . . . . . . . . . . . . . . . . . 25,281 27,232 45,318 27,784 125,615 Net earnings . . . . . . . . . . . . . . . . . . . . 6,696 7,345 14,380 7,021 35,442 Net earnings per share . . . . . . . . . . . . . . . .64 .69 1.37 .66 3.36 1992 - ----------------------------------------------------------------------------------------------------------------------------------- Net sales. . . . . . . . . . . . . . . . . . . . . . $42,798 $51,494 $86,856 $64,276 $245,424 Gross margin . . . . . . . . . . . . . . . . . . . . 21,691 26,104 41,979 28,527 118,301 Net earnings . . . . . . . . . . . . . . . . . . . . 5,563 6,733 13,076 6,660 32,032 Net earnings per share . . . . . . . . . . . . . . . .53 .64 1.24 .63 3.04 1991 - ------------------------------------------------------------------------------------------------------------------------------------ Net sales. . . . . . . . . . . . . . . . . . . . . . $38,405 $43,786 $77,289 $48,395 $207,875 Gross margin . . . . . . . . . . . . . . . . . . . . 19,934 22,346 37,207 21,088 100,585 Earnings before cumulative effect of accounting changes . . . . . . . . . . . 4,823 5,265 11,335 5,093 26,533 Cumulative effect of accounting changes. . . . . . . (1,038) -- -- -- (1,038) Net earnings . . . . . . . . . . . . . . . . . . . . 3,785 5,285 11,335 5,090 25,495 Net earnings per share Before cumulative effect of accounting changes . . .46 .50 1.08 .48 2.52 Cumulative effect of accounting changes. . . . . . (.10) -- -- -- (.10) Net earnings . . . . . . . . . . . . . . . . . . . .36 .50 1.08 .48 2.42 Net earnings per share is based upon average outstanding shares as adjusted for 3% stock dividends issued during the second quarter of each year.
1993-1992 QUARTERLY SUMMARY OF TOOTSIE ROLL INDUSTRIES INC. STOCK
STOCK PRICES* - ------------------------------------------------------------------------------------- 1st Qtr. . . . . . . . . 83-3/8 74 81-1/8 70-1/2 2nd Qtr. . . . . . . . . 82-1/2 71-1/8 76-3/4 60 3rd Qtr. . . . . . . . . 74-1/4 85 82-1/8 61 4th Qtr. . . . . . . . . 79-1/4 69-1/4 83-1/2 78 *NYSE Closing Quotations.
Estimated Number of shareholders at 12/31/93..... 9,500
DIVIDENDS* - -------------------------------------------------------------------------------------- 1st Qtr. . . . . . . . . $.0728 $.0613 2nd Qtr. . . . . . . . . $.0950 $.0728 3rd Qtr. . . . . . . . . $.0950 $.0728 4th Qtr. . . . . . . . . $.0950 $.0728 NOTE: In addition to the above Cash Dividends, a 3% Stock Dividend was issued on 4/22/93 and 4/24/92. *Cash Dividends are restated to reflect 3% Stock Dividends.
16
FIVE YEAR SUMMARY OF EARNINGS AND FINANCIAL HIGHLIGHTS Tootsie Roll Industries, Inc. and Subsidiaries (See Management's Comments starting on page 5) 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- Sales and Earnings Data Net Sales . . . . . . . . . . . . . . . . . . . $259,593 $245,424 $207,875 $194,299 $179,294 Gross Margin. . . . . . . . . . . . . . . . . . 125,615 118,301 100,595 91,094 85,295 Interest Expense. . . . . . . . . . . . . . . . 642 440 196 527 1,184 Provision for Income Taxes. . . . . . . . . . . 22,268 19,890 17,641 14,563 12,994 Earnings before cumulative effect of accounting changes. . . . . . . . . 35,442 32,032 26,533 22,556 20,212 Cumulative effect of accounting changes (1) . . - - (1,038) - - Net Earnings. . . . . . . . . . . . . . . . . . 35,442 32,032 25,495 22,556 20,212 % of Sales. . . . . . . . . . . . . . . . . . . 13.7% 13.1% 12.3% 11.6% 11.3% % of Shareholders' Equity . . . . . . . . . . . 16.7% 17.6% 16.7% 17.4% 18.4% Per Common Share Data (2) Net Sales . . . . . . . . . . . . . . . . . . . $24.64 $23.30 $19.73 $18.45 $17.02 Earnings before cumulative effect of accounting changes . . . . . . . . . 3.36 3.04 2.52 2.14 1.92 Cumulative effect of accounting changes (1) . . -- -- (.10) -- -- Net Earnings. . . . . . . . . . . . . . . . . . 3.36 3.04 2.42 2.14 1.92 Shareholders' Equity. . . . . . . . . . . . . . 20.16 17.25 14.50 12.13 10.40 Cash Dividends. . . . . . . . . . . . . . . . . .36 .28 .24 .21 .20 Stock Dividends . . . . . . . . . . . . . . . . 3% 3% 3% 3% 3% Additional Financial Data Working Capital. . . . . . . . . . . . . . . . . $61,052 $110,714 $80,569 $55,318 $33,486 Current Ratio. . . . . . . . . . . . . . . . . . 2.2 5.9 4.8 3.5 2.6 Net Cash Provided by Operating Activities (3). . . . . . . . . . . . 33,363 36,471 36,826 26,685 16,189 Property, Plant and Equipment Additions . . . . . . . . . . . . . . 27,992 10,956 3,985 5,155 3,114 Net Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . 86,699 40,257 34,019 32,099 30,907 Total Assets . . . . . . . . . . . . . . . . . . 303,940 224,470 184,427 159,702 136,342 Shareholders' Equity . . . . . . . . . . . . . . 212,343 181,704 152,759 129,645 109,562 Average Shares Outstanding (2) . . . . . . . . . 10,534 10,534 10,534 10,534 10,534 (1) Reflects adoption of new accounting standards for income taxes and postretirement health care and life insurance benefits (see Notes 1 and 7 to financial statements). (2) Adjusted for stock dividends. (3) 1989 has been restated in accordance with SFAS No. 35 "Statement of Cash Flows."
17 SUBSIDIARIES Arrendadora Gorvac S.A. de C.V C.G.C. Corporation Cambridge Brands, Inc. Cambridge Mfg., Inc. Cambridge Services, Inc. Cella's Confections, Inc. Charms Company Charms Marketing Company Henry Eisen Advertising Agency, Inc. J.T. Company, Inc. Tootsie Roll of Canada, Ltd. The Tootsie Roll Company, Inc. Tootsie Roll Management, Inc. Tootsie Ross Mfg., Inc. Tootsie Rolls--Latin America, Inc. Tootsie Roll Worldwide Ltd. The Sweets Mix Company, Inc. TRI de Latino America TRI International Co. TRI-Mass., Inc. TRI Sales Co. Tutsi S.A. de C.V. World Trade & Marketing Ltd. 18 EX-10.20 3 EXHIBIT 10.20 FAMILY SECURITY AGREEMENT THIS AGREEMENT made and entered into on this 26 day of August, 1993 by and between TOOTSIE ROLL INDUSTRIES, INC. (hereinafter called "Company"), and James M. Hunt (hereinafter called "Employee"). W I T N E S S E T H : WHEREAS, the Employee has rendered valuable services to the Company for 15 years; WHEREAS, the Company desires to have the benefit of the Employee's continued loyalty, service and counsel and also to assist the Employee in providing for the contingency of his death; WHEREAS, the Company wishes to offer an inducement to the Employee to continue his relationship with the Company; and WHEREAS, the Company is willing to pay a death benefit to a designated beneficiary of the Employee as provided herein. NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, it is mutually agreed by the parties as follows: I. BENEFITS 1.01 If the Employee dies while in the employ of the Company, the Company shall pay to the Employee's designated beneficiary a total death benefit of $600,000 payable within (90) 1 days after the death of the Employee. 1.02 Notwithstanding anything in this Agreement to the contrary, nothing herein shall require the Company to purchase any insurance to secure its obligation under this Agreement. If the Company should purchase such insurance, it shall not be required to exercise any option, election or right under such insurance contract; or if the Company wishes to exercise any option, election or right under such insurance, it shall not be required to so exercise any such option, election or right in any particular manner. Employee hereby agrees and confirms that the Company has an insurance interest in the Employee and he agrees to execute such documents and to take such action as may be reasonably required to enable the Company to purchase and maintain life insurance policies on the life of the Employee. II. BENEFICIARY 2.01 Beneficiary shall mean a beneficiary or beneficiaries designated by the Employee in writing duly signed by the Employee and delivered to the Company. No other manner of designating a beneficiary shall be recognized by Company. The Employee reserves the right to change such beneficiary designations from time to time. If more than one designated beneficiary survives the Employee, payment shall be made as provided in the last dated beneficiary designation received by the Company. Unless clearly stated to the contrary in the beneficiary designation, the primary beneficiary shall receive 100% of the benefits. Nothing 2 herein shall prevent Employee from designating secondary beneficiaries. Should no beneficiary be designated, or should all designated beneficiaries predecease the Employee, the benefits payable hereunder shall be paid to the Employee's estate. III. SERVICES SUBJECT TO MUTUAL AGREEMENT 3.01 Employee will continue to furnish services to the Company on the basis of an independent understanding or a contractual agreement. Any changes in the Employee's compensation shall not be deemed a violation or waiver of any of the provisions of this Agreement. Nothing contained in this Agreement shall be deemed to constitute a contract for services between the Employee and the Company, and nothing contained herein shall be deemed to give the Employee any right to continue furnishing services to the Company, or the Company the right to so demand such services. IV. PROHIBITION AGAINST FUNDING 4.01 Should the Company elect to acquire an insurance contract as described in Article II hereof in connection with the liabilities assumed by it hereunder, it is expressly understood and agreed that the Employee shall not have any right with respect to, or claim against, such contract. Such contract shall be and remain a general, unpledged, unrestricted asset of Company subject to the claims of it creditors. Such contract shall not be held under any trust for the benefit of the Employee. In the event such purchase is made by the Company, the Employee shall have no right of 3 ownership or any other right or benefit with respect to such contract. The beneficiary or beneficiaries under this Agreement shall be required to look solely to the provisions of this Agreement and the Company itself for enforcement of any and all benefits under this Agreement. Company shall be the owner and beneficiary of any insurance contract acquired by it in connection with this Agreement. V. MISCELLANEOUS 5.01 This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, legal representatives, successors and assigns. 5.02 There shall be no change or modification of this Agreement unless reduced to writing and signed by the parties hereto. 5.03 This is the entire understanding of the parties regarding the subject matter of this Agreement and all other understandings regarding such subject matter, oral or written, prior or contemporaneous, are merged herein. VI. CHOICE OF LAW 6.01 This Agreement shall be construed under the laws of the State of Illinois governing contracts wholly executed and performed therein. IN WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be duly executed, effective as of the day and 4 year first above written. ATTEST: TOOTSIE ROLL INDUSTRIES, INC. By: M. Buddemeier By: Ellen R. Gordon Title: Director-Human Resources Title: President EMPLOYEE James M. Hunt 5 EX-10.8 4 CAREER ACHIEVEMENT PLAN TOOTSIE ROLL INDUSTRIES, INC. CAREER ACHIEVEMENT PLAN 1. PURPOSE. The purpose of the Career Achievement Plan (the "Plan") of Tootsie Roll Industries, Inc. (the "Company") is to promote the financial interests and growth of the Company by increasing motivation on the part of its senior officers and key employees by creating an incentive for them to remain in the long term employ of the Company and to work to the best of their abilities for the achievement of the Company's strategic growth objectives. 2. PARTICIPATION. Participation in the Plan will be limited to those senior officers and other key employees of the Company as the Board of Directors (the "Board") in its sole discretion shall designate from time to time to be eligible to receive Career Achievement Awards hereunder. 3. CAREER ACHIEVEMENT AWARDS. As of the date determined by the Board for any calendar year during the term of the Plan, the Board may, but shall not be required to, grant an award to any or all of the participants of the Plan. Each such award (a "Career Achievement Award") shall be for a fixed dollar amount, and shall be calculated based on such formulas or other criteria as may be established by the Board in its sole discretion, PROVIDED, HOWEVER, that the Board shall be prohibited from adopting formulas or other criteria which would cause Career Achievement Awards to be subject to Section 16 of the Securities Exchange Act of 1934 or the rules promulgated thereunder. Each Career Achievement Award shall be communicated in a written notice to the affected participant as soon as practicable -1- after the amount has been determined by the Board. Such written notice shall state the amount of the award, and shall set forth the non-competition provisions of Section 7 hereof and any other terms or conditions that may be established by the Board consistent with the provisions of this Plan. Except as otherwise provided in Section 5 hereof, once an award has been communicated to a participant pursuant to this Section 3, such award may not be canceled, reduced or diminished in any manner without the written consent of the participant. 4. CAREER ACHIEVEMENT ACCOUNT. (a) ESTABLISHMENT OF ACCOUNTS. There shall be established on the books of the Company a Career Achievement Account in the name of each participant in the Plan. Career Achievement Awards made under the Plan shall be credited to a participant's Career Achievement Account as of the January 1st specified in the written notice of the award delivered to the participant. (b) CAREER ACHIEVEMENT ACCOUNT EARNINGS. (1) PRIOR TO TERMINATION OF EMPLOYMENT. Each participant's Career Achievement Account shall consist of the aggregate amount of all Career Achievement Awards and any "interest" previously credited to the participant's account with respect to such Career Achievement Awards under this Section 4(b)(1). Such account balance shall be credited with "interest" as of the last day of each calendar quarter in which the participant remains an employee of the Company at a rate equal to one-fourth of the published yield of Moody's Seasoned Bond Index as of the last day of such quarter. Notwithstanding the preceding sentence, if the date -2- of termination of a participant's employment is other than the last day of a calendar quarter, no "interest" shall be credited to the participant's account under this Section 4(b)(1) for the calendar quarter in which such termination occurs. (2) AFTER TERMINATION OF EMPLOYMENT. From and after the date on which a participant's employment with the Company terminates until payment is made hereunder, the "vested" portion of the participant's Career Achievement Account (as determined under Section 5(a)) shall be credited with "interest" as of the last day of each calendar quarter beginning with the calendar quarter in which such termination occurs and ending with the calendar quarter in which the participant's Career Achievement Account is distributed. For purposes of this Section 4(b)(2), the rate of "interest" shall equal one- fourth of the annual yield on five-year United States Treasury Notes as of the last day of each relevant calendar quarter. If the participant's Career Achievement Account is distributed on a date other than the last day of a calendar quarter, the rate of interest set forth in the preceding sentence for such quarter shall be multiplied by a fraction, the numerator of which is the number of days from the beginning of the calendar quarter to the date of distribution and the denominator of which is the total number of days in such calendar quarter. 5. PAYMENT OF CAREER ACHIEVEMENT ACCOUNT UPON TERMINATION OF EMPLOYMENT. A participant's Career Achievement Account shall be paid to the participant, shall be paid to the participant's designated beneficiary in the event of the participant's death, or shall be forfeited, depending upon the time and -3- circumstances of the participant's termination of employment, as provided below: (a) TERMINATION OF EMPLOYMENT OTHER THAN FOR DEATH OR DISABILITY. Subject to Sections 5(c), 5(d) and 5(e) hereof, if a participant's employment with the Company terminates other than as a result of the participant's death or permanent disability, the participant shall be entitled to receive, on the "date of distribution", a lump sum payment equal to (x) the "vested" portion of the participant's Career Achievement Account as of the date of termination of employment (as such "vested" portion is determined below) and (y) amounts credited to the participant's account under Section 4(b)(2) following such date of termination of employment. For purposes of this Section 5(a), the "date of distribution" means the later of (i) the second anniversary of the date of the participant's termination of employment or (ii) sixty (60) days after the earlier of the participant's 65th birthday or his or her death. The portion of a participant's Career Achievement Account which has not "vested" as of the date of the participant's termination of employment shall be forfeited, and the participant shall not be entitled to any payment of such forfeited amount or any interest thereon. The "vested" portion of a participant's Career Achievement Account as of the date of termination shall equal the aggregate of the "vested" portions of each Career Achievement Award previously granted to the participant. The "vested" portion of each Career Achievement Award shall be separately determined and shall equal the product of the Career Achievement Award (plus any "interest" previously credited to the participant's account with respect to such Career Achievement Award -4- under Section 4(b)(1) hereof) multiplied by the Vested Percentage of such award. The Vested Percentage of a Career Achievement Award shall be determined according to the number of the participant's consecutive full calendar years of employment with the Company beginning with the calendar year in which such award was credited to the participant's Career Achievement Account and ending with the calendar year immediately prior to the year in which termination occurs, pursuant to the following table:
Years of Continuous Vested Employment Percentage ------------------- ---------- 1 20% 2 40% 3 60% 4 80% 5 or more 100%
For purposes of this Section 5(a), if a participant first becomes an employee of the Company during the calendar year in which a Career Achievement Award is credited to such participant's account, such year shall count as a full calendar year of employment. (b) TERMINATION OF EMPLOYMENT BY REASON OF DEATH OR DISABILITY. Subject to Section 5(e) hereof, if a participant's employment with the Company terminates by reason of the participant's death or permanent disability, the Company shall pay to the participant or the beneficiary designated by the participant pursuant to Section -5- 9(a) hereof, as the case may be, a lump sum amount equal to the full balance of the participant's Career Achievement Account as of the date of termination, and any amounts credited to the participant's account under Section 4(b)(2) following such termination of employment. Such payment shall be made not later than sixty (60) days after the participant's termination of employment. For purposes of this Plan, a participant shall be deemed to be permanently disabled if such participant is unable to perform his or her stated duties with the Company by reason of illness, accident or other incapacity and is not engaged in any occupation or employment for wage or profit for which he or she is reasonably qualified by education, training, or experience, provided however, that in the event the Company maintains a long- term disability plan in which the participant is entitled to receive benefits, the participant shall be deemed to be permanently disabled when he or she suffers a physical illness, injury or other impairment in respect to which the participant is entitled to receive benefits under such long-term disability plan. (c) TERMINATION OF EMPLOYMENT FOR CAUSE. Notwithstanding any provision of this Plan to the contrary, if the Board, in its sole discretion, shall determine that the participant's employment with the Company was terminated for "cause" (as defined below), the participant's Career Achieve- ment Account shall be forfeited in its entirety, and the participant shall not be entitled to any payments under this Plan. For purposes of this Plan, "cause" shall mean any act or conduct by a participant that consists of or constitutes fraud, theft, dishonesty, alcohol or drug use on the job, willful injury to or destruction of the Company's property or property of any person dealing with the Company, any act or conduct injurious to the goodwill of the -6- Company or its relations with its customers or any other person dealing with the Company or derogatory of any of the Company's methods or products, any violation of the duty imposed upon employees by contract or by law in their relationship with the Company, or engages in any activities in violation of Section 7 hereof. (d) FORFEITURE OF CAREER ACHIEVEMENT ACCOUNT. Notwithstanding any provision of this Plan to the contrary, a participant will forfeit all rights to any amounts previously credited to his or her Career Achievement Account if, after the termination of the participant's employment, the participant engages in any activities in violation of Section 7 hereof. (e) FURTHER DEFERRAL. To the extent determined by the Board in its sole discretion, the Board shall have the authority to delay any payments otherwise due under this Plan to the extent necessary to avoid a limitation on the deductibility of compensation paid to a participant pursuant to Section 162(m) of the Internal Revenue Code of 1986, or any successor provision. To the extent any payments under this Plan are deferred under this Section 5(e), such amounts shall continue to accrue "interest" pursuant to Section 4(b)(2) hereof, and shall be paid at such time or from time to time to the extent such payments would not cause or increase a limitation on deductibility under such Section 162(m). 6. IMMEDIATE DISTRIBUTION OF CAREER ACHIEVEMENT ACCOUNTS UPON CHANGE OF CONTROL OF THE COMPANY. Notwithstanding any provision of this Plan to the -7- contrary, the Company shall pay the entire balance of a participant's Career Achievement Account to such participant within three business days after the occurrence of a "change of control" of the Company. A "change of control" of the Company shall occur when: (1) any person, including a "group," as described in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires after the effective date of this Plan the beneficial ownership of, and the right to vote, shares having the right to cast at least twenty percent (20%) of the votes permitted to be cast in any election of members to the Board of Directors of the Company; or (2) as the result of any tender or exchange offer, substantial purchase of the Company's equity securities, merger, consolidation, sale of assets or contested election, or any combination of the foregoing transactions, the persons who were directors of the Company immediately prior to such transaction or transactions do not constitute a majority of the Board (or of the board of directors of any successor to or assignee of the Company) immediately after the next meeting of stockholders of the Company (or any successor or assignee) following such transaction; except that no event described in clause (1) or (2) above shall constitute a "change of control" if immediately after such event Melvin J. Gordon, Ellen R. Gordon, their descendants (and spouses of such descendants) and any trusts or estates in which such persons have an interest own, directly or indirectly, shares having the right to cast at least fifty percent (50%) of the votes permitted to be cast in any election of members of the Board of Directors of the Company. 7. NONCOMPETITION. In connection with the receipt of a Career Achievement Award hereunder, each participant will be required to enter into an -8- agreement with the Company which provides that during the term of employment, and for a period ending on the second anniversary of the effective date of the participant's termination of employment by the Company, the participant will not: (1) directly or indirectly engage in, own, manage, operate, participate in, render advice to or have any interest in any person, firm, corporation, or business (whether as an owner, partner, employee, officer, director, agent, security holder, creditor, consultant, or otherwise) that engages in any activity which is the same as, similar to, or competitive with any activity then, or within the prior twelve (12) months, engaged in by the Company or any affiliate of the Company; or (2) directly or indirectly solicit for employment or employ or become employed by any person then, or within the prior twelve (12) months, employed by the Company or any affiliate of the Company, or request, influence or advise any person who is or shall be employed by or is in the service of the Company or any affiliate of the Company to leave such employment or service of the Company or any affiliate of the Company; or (3) directly or indirectly influence or advise any competitor of or anyone intending to compete with the Company or any affiliate of the Company to employ or otherwise engage the services of any person who is or shall be employed by or is in the service of the Company or any affiliate of the Company; or -9- (4) directly or indirectly solicit or accept any business which is the same as, similar to or competitive with that of the Company or any affiliate of the Company from customers of the Company or any affiliate of the Company or request, induce or advise customers of the Company or any affiliate of the Company to withdraw, curtail or cancel their business with the Company or any affiliate of the Company. For purposes of this Plan, the term "affiliate" means any entity engaged in the same or similar business as the Company or a related business, which is controlled by or under common control with the Company. 8. ADMINISTRATION OF THE PLAN. The Plan shall be administered and interpreted by the Board. The Board shall, subject to the terms of the Plan, make or refrain from making Career Achievement Awards, determine the amount of Career Achievement Awards, establish rules and regulations for the administration of the Plan, impose conditions with respect to competitive employment or other activities with respect to any such award, and establish the written form to be used to evidence such awards pursuant to Section 3 hereof. The Board shall have full authority to construe and interpret the terms and provisions of the Plan, to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan and to perform all acts, including the delegation of its administrative responsibilities as it shall, from time to time, deem advisable, and to otherwise supervise the administration of this Plan. All such rules, regulations and interpretations relating to the Plan which are -10- adopted by the Board shall be conclusive and binding on all parties. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any award granted hereunder, in the manner and to the extent it shall deem necessary to carry the Plan into effect. 9. MISCELLANEOUS. (a) DESIGNATION OF BENEFICIARY. In the event of the death of a participant, the amount payable under Section 5 hereof shall, unless the participant shall designate to the contrary as provided below, thereafter be made to such person or persons who, as of the date payment is to be made under this Plan, would receive distribution of the participant's account balance under the terms of the Tootsie Roll Employee's Pension Plan. Notwithstanding the preceding sentence, a participant may specifically designate the person or persons (who may be designated successively or contingently) to receive payments under this Plan following the participant's death by filing a written beneficiary designation with the Company during the participant's lifetime. Such beneficiary designation shall be in such form as may be prescribed by the Company and may be amended from time to time or may be revoked by the participant pursuant to written instruments filed with the Company during his or her lifetime. Beneficiaries designated by a participant may be any natural or legal person or persons, including a fiduciary, such as a trustee of a trust or the legal representative of an estate. Unless otherwise provided by the beneficiary designation filed by a participant, if all of the persons so designated die before a participant on the occurrence of a contingency not contemplated in such beneficiary designation, then the amount payable under this Plan shall be paid to the person or persons -11- determined in accordance with the first sentence of this Section 9(a). (b) ASSETS. No assets shall be segregated or earmarked in respect of any Career Achievement Award or Career Achievement Account and no participant shall have any right to assign, transfer, pledge or hypothecate his or her interest, or any portion thereof, in his or her Career Achievement Account. The Plan and the crediting of Career Achievement Accounts hereunder shall not constitute a trust and shall be structured solely for the purpose of recording an unsecured contractual obligation. All amounts payable pursuant to the terms of this Plan shall be paid from the general assets of the Company. (c) REPORTS. Until a participant's entire Career Achievement Account shall have been paid in full or forfeited, the Company will furnish to the participant a report, at least annually, setting forth transactions in such account and the status of such account with respect to the vested and unvested portions thereof and the "interest" credited thereon. (d) ACCELERATION OF VESTING AND PAYMENT. Notwithstanding any other provision of this Plan to the contrary, the Board, in its sole discretion, is empowered to accelerate the vesting and to accelerate the payment of all or a portion of a participant's Career Achievement Account for any reason the Board may determine to be appropriate. Neither the Company nor the Board shall have any obligation to make any such acceleration for any reason whatsoever. -12- (e) LIABILITY. No member of the Board shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated or, except in circumstances involving such member's bad faith, gross negligence or fraud, for anything done or omitted to be done by such member. The Company will fully indemnify and hold each member of the Board harmless from any liability hereunder, except in circumstances involving such member's bad faith, gross negligence or fraud. The Company or the Board may consult with legal counsel, who may be counsel for the Company, with respect to its obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of such counsel. (f) AMENDMENT OR TERMINATION. Notwithstanding any other provision of this Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however that any such amendment, suspension or termination may not, without the participant's consent, adversely affect any Career Achievement Awards previously credited to the participant's account prior to the effective date of such amendment, suspension or termination. Notwithstanding the foregoing, upon any termination of this Plan, the Board may in its sole discretion accelerate the vesting and payment of the entire balance of all Career Achievement Accounts as of the date of termination of this Plan. The Plan shall remain in effect until terminated pursuant to this Section 9(f). -13- (g) EXPENSES. The Company will bear all expenses incurred by it in administering this Plan. (h) WITHHOLDING. The Company shall have the right to deduct from any payment to be made pursuant to this Plan or to otherwise require prior to the payment of any amount hereunder, payment by the participant of any Federal, state or local taxes required by law to be withheld. (i) NO OBLIGATION. The Board's designation of an individual as a participant in any year shall not require the Board to designate such person to receive a Career Achievement Award in any other year. Neither this Plan nor any Career Achievement Awards made hereunder shall create any obligation on the Company to continue any other existing award plans or policies or to establish or continue any other programs, plans or policies of any kind. Neither this Plan nor any Career Achievement Award made pursuant to this Plan shall give any participant or other employee any right with respect to continuance of employment by the Company or any of its affiliates or of any specific aggregate amount of compensation, nor shall there be a limitation in any way on the right of the Company or any of its affiliates by which an employee is employed to terminate such employee at any time for any reason whatsoever, nor shall this Plan nor any Career Achievement Award made hereunder create a contract of employment. (j) NO ASSIGNMENT; RESOLUTION OF DISPUTES. Except as otherwise permitted under Section 9(a), no right or interest in any Career Achievement -14- Account under this Plan shall be assignable or transferable, and no right or interest of any participant in any Career Achievement Account hereunder shall be subject to any lien, obligation or liability of such participant. In the event any conflicting demands are made upon the Company with respect to any payments due as a result of this Plan, provided that the Company shall not have received prior written notice that said conflicting demands have been finally settled by court adjudication, arbitration, joint order or otherwise, the Company may pay to the participant any and all amounts due hereunder and thereupon the Company shall stand fully relieved and discharged of any further duties or liabilities under this Plan. (k) GOVERNING LAW. This Plan and all actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Illinois (regardless of the law that might otherwise govern under applicable Illinois principles of conflict of laws). -15- EX-10.12 5 SPLIT DOLLAR AGREEMENT (SPECIAL AND DAUGHER TRUST) SPLIT DOLLAR AGREEMENT (SPECIAL TRUST) AGREEMENT, made and entered into by and between Tootsie Roll Industries, Inc., a Virginia corporation (the "Corporation"), and Wendy J. Gordon, not individually, but as trustee of the Gordon Family 1993 Special Trust (the "Owner"). WHEREAS, Melvin J. Gordon and Ellen R. Gordon (individually, an "Employee," and collectively, the "Employees") are presently employed by the Corporation in which capacity their services have contributed to the successful operation of the Corporation, and the Corporation and its board of directors believe it is in the best interest of the Corporation to retain the services of the Employees; and WHEREAS, the Corporation is desirous of assisting the Owner in paying for life insurance on the joint lives of the Employees; and WHEREAS, the Corporation has determined that this assistance can best be provided under a "split dollar" arrangement for the insurance policies (the "policies") owned by the Owner listed on the attached Schedule A on the joint lives of the Employees; and WHEREAS, the Corporation and the Owner agree to make the policies subject to this split dollar agreement; and WHEREAS, the Owner agrees to assign each policy to the Corporation as collateral for the premium payments to be made by the Corporation under this agreement by an instrument of collateral assignment (the "assignment") and to record such assignment with the respective issuing insurance company. NOW, THEREFORE, in consideration of the premises, and the services to be rendered to the Corporation by the Employees, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Owner hereby mutually covenant and agree as follows: ARTICLE I PAYMENT OF PREMIUMS AND ECONOMIC BENEFIT 1.1. As long as this agreement is in force, the Owner and the Corporation agree to pay the amounts and in the manner set forth below. 1.2. The Owner shall pay each year to the Corporation an amount equal to the economic benefit that would be taxable as gross income for federal income tax purposes to one or both of the Employees but for the payment by the Owner of such amount. The Owner shall have the option, exercisable upon 30 days' written notice delivered to the Corporation, to pay a greater amount to the Corporation. -1- 1.3. For purposes of Section 1.2 above, the economic benefit that would be taxable to one or both of the Employees shall be computed in accordance with Revenue Rulings 64-328, 1964-2 C.B. 11, and 66-110, 1966-1 C.B 12, and the Corporation shall be responsible for computing such amount. The Corporation will advise the Owner of the amount payable by the Owner pursuant to Section 1.2, and the Owner shall pay that amount directly to the Corporation. 1.4. In order to facilitate the payment of premiums on the policies, the Owner and the Corporation agree that the Corporation will forward to the respective company issuing each policy the entire premiums due on that policy, if any. ARTICLE II POLICY OWNERSHIP 2.1. The Owner shall be the sole owner and beneficiary of the policy. The Corporation's payment of premiums hereunder shall constitute a liability of the Owner subject to repayment as provided herein. The Owner agrees to assign each policy to the Corporation as collateral for such liabilities and the Corporation shall have those rights granted to it under the assignments and this agreement. As between the Owner and the Corporation, this agreement shall take precedence over any provisions of the assignments in case of a conflict between the terms of this agreement and the assignments. ARTICLE III DEATH OF EMPLOYEES 3.1. On the death of the last to die of the Employees while this agreement is in force, the Owner will pay to the Corporation an amount equal to the total premiums paid by the Corporation from the date of this agreement to the date of death of the last to die of the Employees, reduced by the total payments made to the Corporation by the Owner pursuant to Section 1.2 above. ARTICLE IV TERMINATION OF AGREEMENT 4.1. As to each policy, this agreement shall automatically terminate upon the happening of any of the following events: (a) At the option of the Corporation, if both the Employees terminate employment for any reason other than the death of both Employees. An Employee shall be deemed to be employed by the Corporation during any period of temporary or permanent disability. -2- (b) At the surrender, lapse or termination of the policy. (c) Upon delivery by the Owner of written notice of such termination to the Corporation. (d) Upon failure of the Owner to make a payment required by Section 1.2 above. (e) Upon agreement of the parties. 4.2. In the event of a termination under Section 4.1 above, the Corporation shall be entitled to receive from the Owner within 120 days after such termination an amount equal to the amount the Corporation would have been entitled to receive at the death of the last to die of the Employees under Section 3.1 determined as if such death occurred on the date of such termination (the "termination amount"). 4.3. If full payment of the termination amount is not received by the Corporation pursuant to Section 4.2 above within the 120-day period, the remaining amount owed by the Owner to the Corporation shall be deemed to be in default (the "default amount"). Thereafter, the Owner, at the Owner's option, immediately shall: (a) Pay the default amount to the Corporation; or (b) Transfer complete ownership of the policy to the Corporation. ARTICLE V OTHER PROVISIONS 5.1. The Corporation agrees that it will not merge or consolidate with another corporation or organization, or permit its business activities to be taken over by any other organization unless and until the succeeding or continuing corporation or other organization shall expressly assume the rights and obligations of the Corporation herein set forth. 5.2. This agreement will be governed by and construed in accordance with the laws of Illinois, where it is made and to be performed. It sets forth the entire agreement between the parties concerning the subject matter thereof, and any amendment or discharge will be made only in writing. This agreement will bind and benefit the parties and their legal representatives and successors. 5.3. This agreement shall not be deemed to constitute a contract of employment between the Corporation and either of the Employees, nor shall any provision restrict the right of the Corporation to discharge either of the Employees, or restrict the right of either of the Employees to terminate employment. -3- 5.4. For the purposes of the Employee Retirement Income Security Act of 1974 (ERISA), the Corporation will be the "Named Fiduciary" and Plan Adminis- trator of the split dollar life insurance plan (the "Plan") for which this agreement is hereby designated the written plan instrument. 5.5. The Corporation's board of directors may authorize a person or group of persons to fulfill the responsibilities of the Corporation as Plan Administrator. The Named Fiduciary or the Plan Administrator may employ others to render advice with regard to its responsibilities under the Plan. The Named Fiduciary may also allocate fiduciary responsibilities to others and may exercise any other powers necessary for the discharge of its duties to the extent not in conflict with ERISA. 5.6. The following Claims Procedure shall control the determination of benefit payments under the Plan: (a) Filing of Claim for Benefits Any person or entity ("Claimant") entitled to benefits under the Plan or under a policy will file a claim request with the Plan Administrator with respect to benefits under the Plan and with the "Insurer" (defined below) with respect to benefits under the policy. The Plan Administrator will, upon written request of a Claimant, make available copies of any claim forms or instructions provided by the Insurer or advise the Claimant where copies of such forms or instructions may be obtained. (b) Denial of Claim A claim for Benefits under the Plan will be denied if the Corporation determines that the Claimant is not entitled to receive benefits under the Plan. Notice of a denial shall be furnished to the Claimant within a reasonable period of time after receipt of the Claim for Benefit by the Plan Administrator. In the case of benefits which are provided under the policy, the initial decision on the claims will be made by the Insurer. (c) Content of Notice The Plan Administrator shall provide to every Claimant who is denied a Claim for Benefits written notice setting forth, in a manner calculated to be understood by the Claimant, the following: (i) The specific reason or reasons for the denial; (ii) Specific reference to pertinent Plan provisions on which the denial is based: (iii) A description of any additional material or information necessary for the Claimant to perfect the claim, and -4- an explanation of why such material or information is necessary; and (iv) An explanation of the Plan's Claim Review Procedure as set forth below. (d) Review Procedure The purpose of the Review Procedure is to provide a method by which a Claimant may have a reasonable opportunity to appeal a denial of a Claim to the Named Fiduciary for a full and fair review. To accomplish that purpose, the Claimant or his duly authorized representative: (i) May require a review upon written application to the Named Fiduciary; (ii) May review pertinent Plan documents; and (iii) May submit issues and comments in writing. A Claimant (or his duly authorized representative) shall request a review by filing a written application for review with the Named Fiduciary at any time within 60 days after receipt by the Claimant of written notice of the denial of his claim. (e) Decision on Review A decision on review of a denied claim shall be made in the following manner: (i) The decision on review shall be made by the Named Fiduciary, who may in his discretion hold a hearing on the denied claim. Such decision shall be made promptly, and not later than 60 days after receipt of the request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. (ii) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the Claimant, and specific references to the pertinent Plan provisions upon which the decision is based. 5.7. This agreement may be amended or modified in whole or in part by the Owner and the Corporation in writing at any time. -5- 5.8. Notwithstanding the provisions of this agreement, each life insurance company (the "Insurer") which has issued a policy which is subject to the provisions of this agreement is hereby authorized to act in accordance with the terms of such policy as if this agreement did not exist, and the payment or other performance of the contractual obligations by the Insurer, in accordance with the terms of such policy, shall completely discharge the Insurer from all claims, suits and demands of all persons whatsoever. IN WITNESS WHEREOF, the parties hereto have signed this agreement as of July 10, 1993. ____________________________________ Wendy J. Gordon not individually, but as trustee TOOTSIE ROLL INDUSTRIES, INC. By _________________________________ As its___________________________ -6-
SCHEDULE A (SPECIAL TRUST) -------------------------- Name Policy No. ---- ---------- Guardian 3733408 John Hancock 80042963 Mass Mutual 8858899 New York Life 44956816 Principal Mutual 6450780 Security Life 1526881 Sun Life 9293268Z
COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Family 1993 Special Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 8858899 issued by Massachusetts Mutual Life Insurance Company on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. ________________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By _____________________________________________ Its _______________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By__________________________________ Its____________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Family 1993 Special Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 80042963 issued by John Hancock Mutual Life Insurance Company on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. ________________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By________________________________________________ Its __________________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By ___________________________________ Its ______________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Family 1993 Special Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 6450780 issued by Principal Mutual Life Insurance Company on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By _____________________________________________ Its ________________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By ________________________________________ Its ___________________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Family 1993 Special Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 1526881 issued by Security Life of Denver Insurance Company on the life of Ellen R. Gordon, subject to all the terms and con- ditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the insured, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. ______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By ____________________________________________ Its _______________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. SECURITY LIFE OF DENVER INSURANCE COMPANY By _____________________________________________ Its ________________________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Family 1993 Special Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 44956816 issued by New York Life Insurance Company on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _________________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By ______________________________________________ Its _________________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. NEW YORK LIFE INSURANCE COMPANY By ______________________________________________ Its _________________________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Family 1993 Special Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 3733408 issued by Guardian Life Insurance Company of America on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By _______________________________________________ Its __________________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. GUARDIAN LIFE INSURANCE COMPANY OF AMERICA By _____________________________________________ Its ________________________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Family 1993 Special Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 9293268Z issued by Sun Life Assurance Company of Canada on the life of Ellen R. Gordon, subject to all the terms and con- ditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the insured, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By ____________________________________________ Its _______________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. SUN LIFE ASSURANCE COMPANY OF CANADA By ____________________________________________ Its _______________________________________ -2- SPLIT DOLLAR AGREEMENT (DAUGHTERS REVOCABLE TRUST) AGREEMENT, made and entered into by and between Tootsie Roll Industries, Inc., a Virginia corporation (the "Corporation"), and Wendy J. Gordon, not individually, but as trustee of the Gordon Daughters 1993 Revocable Trust (the "Owner"). WHEREAS, Melvin J. Gordon and Ellen R. Gordon (individually, an "Employee," and collectively, the "Employees") are presently employed by the Corporation in which capacity their services have contributed to the successful operation of the Corporation, and the Corporation and its board of directors believe it is in the best interest of the Corporation to retain the services of the Employees; and WHEREAS, the Corporation is desirous of assisting the Owner in paying for life insurance on the joint lives of the Employees; and WHEREAS, the Corporation has determined that this assistance can best be provided under a "split dollar" arrangement for the insurance policies (the "policies") owned by the Owner listed on the attached Schedule A on the joint lives of the Employees; and WHEREAS, the Corporation and the Owner agree to make the policies subject to this split dollar agreement; and WHEREAS, the Owner agrees to assign each policy to the Corporation as collateral for the premium payments to be made by the Corporation under this agreement by an instrument of collateral assignment (the "assignment") and to record such assignment with the respective issuing insurance company. NOW, THEREFORE, in consideration of the premises, and the services to be rendered to the Corporation by the Employees, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Owner hereby mutually covenant and agree as follows: ARTICLE I PAYMENT OF PREMIUMS AND ECONOMIC BENEFIT 1.1. As long as this agreement is in force, the Owner and the Corporation agree to pay the amounts and in the manner set forth below. 1.2. The Owner shall pay each year to the Corporation an amount equal to the economic benefit that would be taxable as gross income for federal income tax purposes to one or both of the Employees but for the payment by the Owner of such amount. The Owner shall have the option, exercisable upon 30 days' written notice -1- delivered to the Corporation, to pay a greater amount to the Corporation. 1.3. For purposes of Section 1.2 above, the economic benefit that would be taxable to one or both of the Employees shall be computed in accordance with Revenue Rulings 64-328, 1964-2 C.B. 11, and 66-110, 1966-1 C.B 12, and the Corporation shall be responsible for computing such amount. The Corporation will advise the Owner of the amount payable by the Owner pursuant to Section 1.2, and the Owner shall pay that amount directly to the Corporation. 1.4. In order to facilitate the payment of premiums on the policies, the Owner and the Corporation agree that the Corporation will forward to the respective company issuing each policy the entire premiums due on that policy, if any. ARTICLE II POLICY OWNERSHIP 2.1. The Owner shall be the sole owner and beneficiary of the policy. The Corporation's payment of premiums hereunder shall constitute a liability of the Owner subject to repayment as provided herein. The Owner agrees to assign each policy to the Corporation as collateral for such liabilities and the Corporation shall have those rights granted to it under the assignments and this agreement. As between the Owner and the Corporation, this agreement shall take precedence over any provisions of the assignments in case of a conflict between the terms of this agreement and the assignments. ARTICLE III DEATH OF EMPLOYEES 3.1. On the death of the last to die of the Employees while this agreement is in force, the Owner will pay to the Corporation an amount equal to the total premiums paid by the Corporation from the date of this agreement to the date of death of the last to die of the Employees, reduced by the total payments made to the Corporation by the Owner pursuant to Section 1.2 above. ARTICLE IV TERMINATION OF AGREEMENT 4.1. As to each policy, this agreement shall automatically terminate upon the happening of any of the following events: (a) At the option of the Corporation, if both the Employees terminate employment for any reason other than the death of both -2- Employees. An Employee shall be deemed to be employed by the Corporation during any period of temporary or permanent disability. (b) At the surrender, lapse or termination of the policy. (c) Upon delivery by the Owner of written notice of such termination to the Corporation. (d) Upon failure of the Owner to make a payment required by Section 1.2 above. (e) Upon agreement of the parties. 4.2. In the event of a termination under Section 4.1 above, the Corporation shall be entitled to receive from the Owner within 120 days after such termination an amount equal to the amount the Corporation would have been entitled to receive at the death of the last to die of the Employees under Section 3.1 determined as if such death occurred on the date of such termination (the "termination amount"). 4.3. If full payment of the termination amount is not received by the Corporation pursuant to Section 4.2 above within the 120-day period, the remaining amount owed by the Owner to the Corporation shall be deemed to be in default (the "default amount"). Thereafter, the Owner, at the Owner's option, immediately shall: (a) Pay the default amount to the Corporation; or (b) Transfer complete ownership of the policy to the Corporation. ARTICLE V OTHER PROVISIONS 5.1. The Corporation agrees that it will not merge or consolidate with another corporation or organization, or permit its business activities to be taken over by any other organization unless and until the succeeding or continuing corporation or other organization shall expressly assume the rights and obligations of the Corporation herein set forth. 5.2. This agreement will be governed by and construed in accordance with the laws of Illinois, where it is made and to be performed. It sets forth the entire agreement between the parties concerning the subject matter thereof, and any amendment or discharge will be made only in writing. This agreement will bind and benefit the parties and their legal representatives and successors. 5.3. This agreement shall not be deemed to constitute a contract of employment between the Corporation and either of the Employees, nor shall any provision restrict the right of the Corporation to discharge either of the Employees, -3- or restrict the right of either of the Employees to terminate employment. 5.4. For the purposes of the Employee Retirement Income Security Act of 1974 (ERISA), the Corporation will be the "Named Fiduciary" and Plan Administrator of the split dollar life insurance plan (the "Plan") for which this agreement is hereby designated the written plan instrument. 5.5. The Corporation's board of directors may authorize a person or group of persons to fulfill the responsibilities of the Corporation as Plan Administrator. The Named Fiduciary or the Plan Administrator may employ others to render advice with regard to its responsibilities under the Plan. The Named Fiduciary may also allocate fiduciary responsibilities to others and may exercise any other powers necessary for the discharge of its duties to the extent not in conflict with ERISA. 5.6. The following Claims Procedure shall control the determination of benefit payments under the Plan: (a) Filing of Claim for Benefits Any person or entity ("Claimant") entitled to benefits under the Plan or under a policy will file a claim request with the Plan Administrator with respect to benefits under the Plan and with the "Insurer" (defined below) with respect to benefits under the policy. The Plan Administrator will, upon written request of a Claimant, make available copies of any claim forms or instructions provided by the Insurer or advise the Claimant where copies of such forms or instructions may be obtained. (b) Denial of Claim A claim for Benefits under the Plan will be denied if the Corporation determines that the Claimant is not entitled to receive benefits under the Plan. Notice of a denial shall be furnished to the Claimant within a reasonable period of time after receipt of the Claim for Benefit by the Plan Administrator. In the case of benefits which are provided under the policy, the initial decision on the claims will be made by the Insurer. (c) Content of Notice The Plan Administrator shall provide to every Claimant who is denied a Claim for Benefits written notice setting forth, in a manner calculated to be understood by the Claimant, the following: (i) The specific reason or reasons for the denial; (ii) Specific reference to pertinent Plan provisions on which the denial is based: -4- (iii) A description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) An explanation of the Plan's Claim Review Procedure as set forth below. (d) Review Procedure The purpose of the Review Procedure is to provide a method by which a Claimant may have a reasonable opportunity to appeal a denial of a Claim to the Named Fiduciary for a full and fair review. To accomplish that purpose, the Claimant or his duly authorized representative: (i) May require a review upon written application to the Named Fiduciary; (ii) May review pertinent Plan documents; and (iii) May submit issues and comments in writing. A Claimant (or his duly authorized representative) shall request a review by filing a written application for review with the Named Fiduciary at any time within 60 days after receipt by the Claimant of written notice of the denial of his claim. (e) Decision on Review A decision on review of a denied claim shall be made in the following manner: (i) The decision on review shall be made by the Named Fiduciary, who may in his discretion hold a hearing on the denied claim. Such decision shall be made promptly, and not later than 60 days after receipt of the request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. (ii) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the Claimant, and specific references to the pertinent Plan provisions upon which the decision is based. 5.7. This agreement may be amended or modified in whole or in part by the -5- Owner and the Corporation in writing at any time. 5.8. Notwithstanding the provisions of this agreement, each life insurance company (the "Insurer") which has issued a policy which is subject to the provisions of this agreement is hereby authorized to act in accordance with the terms of such policy as if this agreement did not exist, and the payment or other performance of the contractual obligations by the Insurer, in accordance with the terms of such policy, shall completely discharge the Insurer from all claims, suits and demands of all persons whatsoever. IN WITNESS WHEREOF, the parties hereto have signed this agreement as of July 10, 1993. ________________________________________________ Wendy J. Gordon not individually, but as trustee TOOTSIE ROLL INDUSTRIES, INC. By _____________________________________________ As its ______________________________________ -6-
SCHEDULE A (DAUGHTERS REVOCABLE TRUST) -------------------------------------- Name Policy No. ---- ---------- Metropolitan 930750242A Northwestern Mutual 12606422 Principal Mutual 6450724 Prudential 79728873
COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Daughters 1993 Revocable Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 6450724 issued by Principal Mutual Life Insurance Company on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By ____________________________________________ Its _______________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By ____________________________________________ Its _______________________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Daughters 1993 Revocable Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 12606422 issued by Northwestern Mutual Life Insurance Company on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By ____________________________________________ Its _______________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By ____________________________________________ Its ________________________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Daughters 1993 Revocable Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 930750242A issued by Metropolitan Life Insurance Company on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By ____________________________________________ Its ________________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. METROPOLITAN LIFE INSURANCE COMPANY By ____________________________________________ Its ________________________________________ -2- COLLATERAL ASSIGNMENT (SPLIT DOLLAR) 1. Wendy J. Gordon, not individually but as trustee of the Gordon Daughters 1993 Revocable Trust (the "Assignor"), hereby assigns, transfers and sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the "Assignee"), to the extent of the amounts defined in and owing from time to time from Assignor to Assignee under that certain Split Dollar Agreement dated July 10, 1993, between Assignor and Assignee (the "Assignee's Interest"), Policy No. 79728873 issued by Prudential Insurance Company of America on the joint lives of Melvin J. Gordon and Ellen R. Gordon, subject to all the terms and conditions of the policy and to all superior liens, if any, which the insurer may have against the policy. The Assignor by this instrument agrees and the Assignee by the acceptance of this assignment agrees to the conditions and provisions herein set forth. 2. It is expressly agreed that only the following specific rights are included in this assignment and may be exercised solely by the Assignee: (a) The right to obtain, upon surrender of the policy by the Assignor, an amount of the cash surrender proceeds up to the amount of the Assignee's Interest in the policy. (b) The right to collect, upon the death of the last to die of the insureds, the net proceeds of the policy up to the amount of the Assignee's Interest in the policy. 3. The insurer hereby is authorized to recognize the Assignee's claim to rights hereunder without investigating the reason for any action taken by the Assignee, or the giving of any notice, or the application to be made by the Assignee of any amounts to be paid to the Assignee. The sole signature of the Assignee shall be sufficient for the exercise of its rights under the policy and the sole receipt of the Assignee for any sums received shall be a full discharge and release therefor to the insurer. Dated: July 10, 1993. _______________________________________________ Wendy J. Gordon, not individually, but as trustee Assignor TOOTSIE ROLL INDUSTRIES, INC. Assignee By ____________________________________________ Its ________________________________________ -1- Accepted an executed counterpart of this Collateral Assignment as of the date last above written. PRUDENTIAL INSURANCE COMPANY OF AMERICA By ____________________________________________ Its ________________________________________ -2- EX-21 6 EXHIBIT 21 SUBSIDIARIES OF TOOTSIE ROLL INDUSTRIES, INC. AND STATE OF INCORPORATION Arrendadora Gorvac S.A. De C.V. Mexico City, Mexico C.G.C. Corporation Delaware Cambridge Brands, Inc. Delaware Cambridge Mfg., Inc. Delaware Cambridge Services, Inc. Delaware Cella's Confections, Inc. Virginia Charms Company Delaware Charms Marketing Company Illinois Henry Eisen Advertising Agency, Inc. New Jersey J.T. Company, Inc. Delaware Tootsie Roll of Canada, Ltd. Canada The Tootsie Roll Company, Inc. Illinois Tootsie Roll Management, Inc. Illinois Tootsie Roll Mfg., Inc. Illinois Tootsie Rolls-Latin America, Inc. Delaware Tootsie Roll Worldwide, Ltd. Illinois The Sweets Mix Company, Inc. Ilinois TRI de Latino America Mexico TRI International Co. Illinois TRI-MASS, Inc. Massachusetts TRI Sales Co. Delaware Tutsi S.A. de C.V. Mexico City, Mexico World Trade & Marketing Ltd. Grand Cayman, BWI -----END PRIVACY-ENHANCED MESSAGE-----