10-K

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
o	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 or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
7401 South Cicero Avenue, Chicago, Illinois 60629 (Address of principal executive offices) (Zip Code)

Registrant's Telephone Number: (773) 838-3400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock—Par Value $.694/9 Per Share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Class B Common Stock—Par Value $.69⁴/9 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 ý    No o

        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. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

        As of March 4, 2005, there were outstanding 34,764,570 shares of Common Stock par value $.69⁴/9 per share, and 17,510,379 shares of Class B Common Stock par value $.69⁴/9 per share.

        As of June 30, 2004, 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 $628,779,418. 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 17,510,379 shares of outstanding Class B Common Stock were converted into Common Stock, the aggregate market value of Common Stock held by non-affiliates on June 30, 2004 (based upon the closing price of the stock on the New York Stock Exchange on such date) would have been approximately $661,779,690. 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, 2004 (the "2004 Report") are incorporated by reference in Parts I and II of this report and filed as an exhibit to this report.

        2.     Portions of the Company's Definitive Proxy Statement for the Company's Annual Meeting of Shareholders (the "2005 Proxy Statement") scheduled to be held on May 2, 2005 are incorporated by reference in Part III of this report.

TABLE OF CONTENTS

ITEM 1.	Business.	1
ITEM 2.	Properties	3
ITEM 3.	Legal Proceedings	3
ITEM 4.	Submission of Matters to a Vote of Security Holders	3
ITEM 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4
ITEM 6.	Selected Financial Data	4
ITEM 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	4
ITEM 8.	Financial Statements and Supplementary Data	4
ITEM 9.	Changes in and Disagreements with Auditors on Accounting and Financial Disclosure	4
ITEM 9A.	Controls and Procedures	5
ITEM 9B.	Other Information	5
ITEM 10.	Directors and Executive Officers of the Registrant	6
ITEM 11.	Executive Compensation	6
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	6
ITEM 13.	Certain Relationships and Related Transactions	7
ITEM 14.	Principal Accountant Fees and Services	7
ITEM 15.	Exhibits and Financial Statement Schedules	7

i

Forward-Looking Information

        From time to time, in the Company's statements and written reports, including this report, the Company discusses its expectations regarding future performance by making certain "forward-looking statements." These forward-looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and actual results may differ materially from those expressed or implied herein. Consequently, the Company wishes to caution readers not to place undue reliance on any forward-looking statements. In connection with the "safe harbor provisions" of the Private Securities Litigation Reform Act of 1995, the Company notes the following factors which, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. Among the factors that could impact the Company's ability to achieve its stated goals are the following: (i) significant competitive activity, including advertising, promotional and price competition, and changes in consumer demand for the Company's products; (ii) fluctuations in the cost and availability of various raw materials; and (iii) inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance. In addition, the Company's results may be affected by general factors, such as economic conditions, political developments, currency exchange rates, interest and inflation rates, accounting standards, taxes, and laws and regulations affecting the Company in markets where it competes.

PART I

ITEM 1.    Business.

        Tootsie Roll Industries, Inc. and its consolidated subsidiaries (the "Company") have been engaged in the manufacture and sale of confectionery products for over 100 years. This is the only industry segment in which the Company operates and is its only line of business. The majority of the Company's products are sold under the registered trademarks TOOTSIE ROLL, TOOTSIE ROLL POPS, CHILD'S PLAY, CARAMEL APPLE POPS, CHARMS, BLOW-POP, BLUE RAZZ, ZIP-A-DEE-DOO-DA POPS, CELLA'S, MASON DOTS, MASON CROWS, JUNIOR MINT, CHARLESTON CHEW, SUGAR DADDY, SUGAR BABIES, ANDES, FLUFFY STUFF, DUBBLE BUBBLE, RAZZLES, CRY BABY and NIK-L-NIP. In 2000, the Company acquired the trademarks for Andes and Fluffy Stuff along with their corresponding manufacturing assets. In 2004 the Company acquired the trademarks for DUBBLE BUBBLE, RAZZLES, CRY BABY and NIK-L-NIP along with their corresponding manufacturing assets and a 50% equity interest in a Spanish joint venture that manufactures and sells confectionery products, principally gum, from Concord Confections, Inc. and its affiliates for an aggregate purchase price of $218,229,000. See Note 12 of the Notes to Consolidated Financial Statements on Page 17 of the Company's Annual Report to Shareholders for the year ended December 31, 2004 (the "2004 Report").

        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. They are distributed through approximately 100 candy and grocery brokers and by the Company itself to approximately 15,000 customers throughout the United States. These customers include wholesale distributors of candy and groceries, supermarkets, variety stores, dollar stores, chain grocers, drug chains, discount chains, cooperative grocery associations, warehouse and membership club stores, vending machine operators, the U. S. military and fund-raising 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 majority of production from the Company's Canadian plants is sold in the United States.

        The domestic confectionery business is highly competitive. The Company competes primarily with other manufacturers of bar candy, bagged candy and bubble gum of the type sold in the above mentioned 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.

        The Company did not have a material backlog of firm orders at the end of the calendar years 2004 or 2003.

        Packaging materials and ingredients used by the Company are readily obtainable from a number of suppliers at competitive prices. Cocoa prices declined from recent historic highs as supplies from the Ivory Coast, the world's largest producer, improved with calming of recent civil unrest. Corn syrup prices decreased due to weather-related improvements in crop yield. Vegetable oil prices were higher due to weather-related crop yield declines in certain foreign markets that effect world supply and pricing. The domestic price of both raw and refined sugar declined due to a combination of improved crops and lower demand as a result of the low-carb diet trend. Packaging material costs, including films, cartons, corrugated containers and waxed paper, were relatively stable in 2004. The Company continues to seek competitive bids to leverage the high volume of annual purchases it makes of these items and to lower per unit costs. The Company has engaged in hedging transactions, primarily in sugar, corn syrup and soybean oil 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 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.

        Although the Company does develop new products, including product line extensions for existing brands, the Company does not expend material amounts of money on research or development activities.

        The Company's compliance with Federal, State and local regulations 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.

        The Company employs approximately 2,200 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 associated with 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 collected, the Company invests such funds in various temporary cash investments.

        Revenues from Wal-Mart Stores, Inc. aggregated approximately 20.8%, 20.6% and 19.6% of total net sales during the years ended December 31, 2004, 2003 and 2002, respectively.

        For a summary of sales and long-lived assets of the Company by geographic area and additional information regarding the foreign subsidiaries of the Company, see Note 9 of the Notes to Consolidated Financial Statements on Page 16 of the 2004 Report and on Page 4 of the 2004 Report under the section entitled "International." Note 9 and the aforesaid section are incorporated herein by reference. Portions of the 2004 Report are filed as an exhibit to this report.

        Information regarding the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports, will be made available, free of charge, upon written request to Tootsie Roll Industries, Inc., 7401 South Cicero Avenue, Chicago, Illinois 60629, Attention: Barry Bowen, Treasurer and Assistant Secretary. The

2

Company does not make such reports available on its website at www.tootsie.com because it believes that they are readily available from the Securities Exchange Commission at www.sec.gov, and because the Company provides them free of charge upon request. Interested parties, including shareholders, may communicate to the Board of Directors or any individual director in writing, by regular mail, addressed to the Board of Directors or an individual director, in care of Tootsie Roll Industries, Inc., 7401 South Cicero Avenue, Chicago, Illinois 60629, Attention: Ellen R. Gordon, President. If you wish to communicate directly with the Company's non-employee directors, please note that on the cover of the communication.

ITEM 2.    Properties.

        The Company owns its principal plant and offices which are located in Chicago, Illinois in a building consisting of approximately 2,225,000 square feet which is utilized for offices, manufacturing and warehousing. 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 138,000 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.

        The Company's other principal manufacturing facilities, all of which are owned, are:

Location	Square Feet (a)
New York, New York	45,000
Covington, Tennessee	685,000
Cambridge, Massachusetts	142,000
Delevan, Wisconsin	162,000
Selma, Alabama	21,200
Concord, Ontario, Canada	280,500	(b)
Mexico City, Mexico	90,000

(a)

Square footage is approximate and includes production, warehousing and office space.

(b)

Two facilities; a third owned facility, comprising 225,000 square feet of warehousing space, is leased to a third party.

        The Company owns substantially all of the production machinery and equipment located in its plants and 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 2004.

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.

3

PART II

ITEM 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

        The Company's Common Stock is traded on the New York Stock Exchange. The Company's Class B Common Stock is subject to restrictions on transferability and no market exists for such shares of Class B Common Stock. The Class B Common Stock is convertible at the option of the holder into shares of Common Stock on a share-for-share basis. As of March 4, 2005, there were approximately 4,100 and 1,500 registered holders of record of Common and Class B Common Stock, respectively. In addition, the Company estimates that as of March 4, 2005 there were 14,000 and 3,500 beneficial holders of Common and Class B Common Stock, respectively. For information on the market price of, and dividends paid with respect to, the Company's Common Stock, see the section entitled "2004-2003 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Price and Dividends Per Share" which appears on Page 20 of the 2004 Report. This section is incorporated herein by reference and filed as an exhibit to this report.

        The Company does not have any compensation plans under which equity securities of the Company are authorized for issuance.

ITEM 6.    Selected Financial Data.

        See the section entitled "Five Year Summary of Earnings and Financial Highlights" which appears on Page 21 of the 2004 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 5-8 of the 2004 Report. This section is incorporated herein by reference and filed as an exhibit to this report.

ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk.

        See the section entitled "Market Risks" in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 7 of the 2004 Report. This section is incorporated herein by reference and filed as an exhibit to this report.

        See also Note 1 of the Notes of Consolidated Financial Statements commencing on Page 13 of the 2004 Report, which is incorporated herein by reference.

ITEM 8.    Financial Statements and Supplementary Data.

        The financial statements, together with the report thereon of PricewaterhouseCoopers LLP dated March 11, 2005, appearing on Pages 9-19 of the 2004 Report and the Quarterly Financial Data on Page 20 of the 2004 Report are incorporated by reference in this report. With the exception of the aforementioned information and the information incorporated in Items 1, 5, 6, 7 and 7A, the 2004 Report is not to be deemed filed as part of this report.

ITEM 9.    Changes in and Disagreements with Auditors on Accounting and Financial Disclosure.

        None.

4

ITEM 9A.    Controls And Procedures.

Disclosure Controls and Procedures

        The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission's rules and forms.

Internal Control over Financial Reporting

        (a)   See Page 18 of the 2004 Report for Management's Report on Internal Control over Financial Reporting, which is incorporated herein by reference.

        (b)   See Page 19 of the 2004 Report for the attestation report of the Company's independent registered public accounting firm, which is incorporated herein by reference.

        (c)   There were no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B.    Other Information.

        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 2005 Annual Meeting of Shareholders (the "2005 Proxy Statement"). Except for the last paragraph of this section relating to the compensation of Directors, this section is incorporated herein by reference. See the information in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's 2005 Proxy Statement, which section is incorporated herein by reference.

        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)	85
Ellen R. Gordon*	President and Chief Operating Officer (2)	73
G. Howard Ember Jr.	Vice President/Finance	52
John W. Newlin Jr.	Vice President/Manufacturing	68
Thomas E. Corr	Vice President/Marketing and Sales	56
John P. Majors	Vice President/Distribution	43
Barry P. Bowen	Treasurer	49

*

A member of the Board of Directors of the Company

(1)

All of the above named officers other than Mr. Majors have served in the positions set forth in the table as their principal occupations for more than the past ten years. From January, 2000 until joining the Company in October, 2004 Mr. Majors was employed by The Pepsi Bottling Group in various senior logistics management positions. Mr. and Mrs. Gordon also serve 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.

Code of Ethics

        The Company has a Code of Business Conduct and Ethics, which applies to all of the Company's directors and employees, and which meets the Securities Exchange Commission criteria for a "code of ethics." The Code of Ethics is available on the Company's website, located at www.tootsie.com, and the information in such Code of Conduct is available in print to any shareholder who requests a copy.

ITEM 11.    Executive Compensation.

        See the information set forth in the section entitled "Executive Compensation and Other Information" of the Company's 2005 Proxy Statement. Except for the "Report on Executive Compensation" and "Performance Graph," this section of the 2005 Proxy Statement is incorporated herein by reference. See the last paragraph of the section entitled "Election of Directors" of the 2005 Proxy Statement, which paragraph is incorporated herein by reference.

ITEM 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

        For information with respect to the beneficial ownership of the Company's Common Stock and Class B Common Stock 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

6

Common Stock by Certain Beneficial Owners" and "Ownership of Common Stock and Class B Common Stock by Management" of the 2005 Proxy Statement. These sections of the 2005 Proxy Statement are incorporated herein by reference. The Company does not have any compensation plans under which equity securities of the Company are authorized for issuance.

ITEM 13.    Certain Relationships and Related Transactions.

        See the section entitled "Certain Relationships and Related Transactions" of the 2005 Proxy Statement, which is incorporated herein by reference.

ITEM 14.    Principal Accountant Fees and Services.

        See the section entitled "Independent Auditor Fees and Services" of the 2005 Proxy Statement, which is incorporated herein by reference.

ITEM 15.    Exhibits and Financial Statement Schedules.

(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 Registered Public Accounting Firm

Consolidated Statements of Earnings, Comprehensive Earnings and Retained Earnings for the three years ended December 31, 2004

Consolidated Statements of Cash Flows for the three years ended December 31, 2004

Consolidated Statements of Financial Position at December 31, 2004 and 2003

Notes to Consolidated Financial Statements

(2)

Financial Statement Schedule:

Report of Independent Registered Public Accounting Firm Auditors on Financial Statement Schedule

For the three years ended December 31, 2004—Valuation and Qualifying Accounts

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 II.

7

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 15, 2005

        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 Melvin J. Gordon	Chairman of the Board of Directors and Chief Executive Officer (principal executive officer)	March 15, 2005
/s/  ELLEN R. GORDON Ellen R. Gordon	Director, President and Chief Operating Officer	March 15, 2005
/s/  CHARLES W. SEIBERT Charles W. Seibert	Director	March 15, 2005
/s/  LANA JANE LEWIS-BRENT Lana Jane Lewis-Brent	Director	March 15, 2005
/s/  RICHARD P. BERGEMAN Richard P. Bergeman	Director	March 15, 2005
/s/  G. HOWARD EMBER, JR. G. Howard Ember, Jr.	Vice President, Finance (principal financial officer and principal accounting officer)	March 15, 2005

8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
Tootsie Roll Industries, Inc.:

        Our audits of the consolidated financial statements, of management's assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated March 11, 2005 appearing in the 2004 Annual Report to Shareholders of Tootsie Roll Industries, Inc. (which report, consolidated financial statements and assessment are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Chicago, Illinois
March 11, 2005

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

DECEMBER 31, 2004, 2003 AND 2002

Description		Balance at beginning of year		Additions charged to costs and expenses		Deductions(1)		Balance at End of Year
2004:
	Reserve for bad debts	$	1,628,000	$	489,091	$	163,091	$	1,954,000
	Reserve for cash discounts		342,000		7,511,842		7,367,842		486,000
		$	1,970,000	$	8,000,933	$	7,530,933	$	2,440,000
2003:
	Reserve for bad debts	$	1,629,000	$	720,152	$	721,152	$	1,628,000
	Reserve for cash discounts		376,000		7,260,504		7,294,504		342,000
		$	2,005,000	$	7,980,656	$	8,015,656	$	1,970,000
2002:
	Reserve for bad debts	$	1,746,000	$	347,226	$	464,226	$	1,629,000
	Reserve for cash discounts		291,000		7,510,884		7,425,884		376,000
		$	2,037,000	$	7,858,110	$	7,890,110	$	2,005,000

(1)

Deductions against reserve for bad debts consist of accounts receivable written off net of recoveries and exchange rate movements. Deductions against reserve for cash discounts consist of allowances to customers.

INDEX TO EXHIBITS

	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.
2.1	Purchase Agreement dated August 11, 2004 among the Company, Concord, certain of Concord's affiliates and Concord's stockholders, including a list of omitted exhibits and schedules. Incorporated by reference to Exhibit 2.1 to the Company's Report on Form 8-K dated August 27, 2004; 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.
2.2	First Amendment to Purchase Agreement dated August 27, 2004 among the Company, certain of the Company's affiliates, Concord, certain of Concord's affiliates and Concord's stockholders. Incorporated by reference to Exhibit 2.2 to the Company's Report on Form 8-K dated August 27, 2004; Commission File No. 1-1361.
3.1	Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997; Commission File No. 1-1361.
3.2	Amendment to Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999; Commission File No. 1-1361.
3.3	Amended and Restated By-Laws. Incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996; Commission File No. 1-1361.
4.1	Specimen Class B Common Stock Certificate. Incorporated by reference to Exhibit 1.1 of the Company's Registration Statement on Form 8-A dated February 29, 1988. 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*	Amended and Restated Career Achievement Plan of the Company. Incorporated by reference to Exhibit 10.8.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998; Commission File No. 1-1361.
10.8.3*	Amendment to the Amended and Restated Career Achievement Plan of the Company. Incorporated by reference to Exhibit 10.8.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999; Commission File No. 1-1361.
10.12*	Restatement of Split Dollar Agreement (Special Trust) between the Company and the trustee of the Gordon Family 1993 Special Trust dated January 31, 1997. Incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996; Commission File No. 1-1361.
10.21*	Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and G. Howard Ember Jr. dated July 30, 1994. Incorporated by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361.
10.22*	Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and John W. Newlin dated July 30, 1994. Incorporated by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361.

10.23*	Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and Thomas E. Corr dated July 30, 1994. Incorporated by reference to Exhibit 10.23 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361.
10.24*	Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and James Hunt dated July 30, 1994. Incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361.
10.25*	Form of Change In Control Agreement dated August, 1997 between the Company and certain executive officers. Incorporated by reference to Exhibit 10.25 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997; Commission File No. 1-1361.
10.26*	Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and Barry Bowen dated April 1, 1997. Incorporated by reference to Exhibit 10.26 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997; Commission File No. 1-1361.
10.27*	Amendment to Split Dollar Agreement (Special Trust) dated April 2, 1998 between the Company and the trustee of the Gordon Family 1993 Special Trust, together with related Collateral Assignments. Incorporated by reference to Exhibit 10.27 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998; Commission File No. 1-1361.
10.28*	Tootsie Roll Industries, Inc. Bonus Incentive Plan. Incorporated by reference to Exhibit A of the Company's Proxy Statement dated March 27, 1997; Commission File No. 1-1361.
10.29*	Tootsie Roll Industries, Inc. 2002 Bonus Incentive Plan. Incorporated by reference to Exhibit A of the Company's Proxy Statement dated March 30, 2002; Commission File No. 1-1361.
10.30*	Executive Officer Compensation
10.31*	Director Compensation
10.32	Loan Agreement dated August 27, 2004 between the Company and Bank of America, N.A. Incorporated by reference to Exhibit 2.3 to the Company's Report on Form 8-K dated August 27, 2004, Commission File No. 1-1361.
13	The following items incorporated by reference herein from the Company's 2004 Annual Report to Shareholders for the year ended December 31, 2004 (the "2004 Report"), are filed as Exhibits to this report:
	(i)	Information under the section entitled "International" set forth on Page 4 of the 2004 Report;
	(ii)	Information under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth on Pages 5-8 of the 2004 Report;
	(iii)	Consolidated Statement of Earnings, Comprehensive Earnings and Retained Earnings for the three years ended December 31, 2004 set forth on Page 11 of the 2004 Report;
	(iv)	Consolidated Statement of Financial Position at December 31, 2004 and 2003 set forth on Pages 9-10 of the 2004 Report;
	(v)	Consolidated Statement of Cash Flows for the three years ended December 31, 2004 set forth on Page 12 of the 2004 Report;

	(vi)	Notes to Consolidated Financial Statements set forth on Pages 13-17 of the 2004 Report;
	(vii)	Management's Report on Internal Control over Financial Reporting set forth on Page 18 of the 2004 Report,(viii) Report of Independent Registered Public Accounting Firm set forth on Page 19 of the 2004 Report;
	(ix)	Quarterly Financial Data set forth on Page 20 of the 2004 Report;
	(x)	Information under the section entitled "2004-2003 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Price and Dividends per Share" set forth on Page 20 of the 2004 Report; and
	(xi)	Information under the section entitled "Five Year Summary of Earnings and Financial Highlights" set forth on Page 21 of the 2004 Report.
21	List of Subsidiaries of the Company.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Executive compensation plan or arrangement.

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TABLE OF CONTENTS
Forward-Looking Information
PART I

ITEM 1. Business.
ITEM 2. Properties.
ITEM 3. Legal Proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders.

PART II

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
ITEM 6. Selected Financial Data.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
ITEM 8. Financial Statements and Supplementary Data.
ITEM 9. Changes in and Disagreements with Auditors on Accounting and Financial Disclosure.
ITEM 9A. Controls And Procedures.
ITEM 9B. Other Information.

PART III

ITEM 10. Directors and Executive Officers of the Registrant.
ITEM 11. Executive Compensation.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
ITEM 13. Certain Relationships and Related Transactions.
ITEM 14. Principal Accountant Fees and Services.
ITEM 15. Exhibits and Financial Statement Schedules.

SIGNATURES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE
INDEX TO EXHIBITS

EX-10.30

EXHIBIT 10.30

EXECUTIVE OFFICER COMPENSATION

1)    Base Salary

        The Board of Directors annually reviews each executive officer's salary. The Board considers the following with respect to the determination of an individual executive officer's base salary: performance and contribution to the Company, including length of service in the position, comparative compensation levels of other companies, including periodic compensation studies performed by independent compensation and benefit consultants, overall competitive environment for executives and the level of compensation considered necessary to attract and retain executive talent, historical compensation and performance levels for the Company; and a desire to adhere to Internal Revenue Code Section 162(m) regulations on deductible compensation, thus maximizing the Company's ability to receive federal income tax deductions.

        Companies used in comparative analyses for the purpose of determining each executive officer's salary are selected periodically with the assistance of professional compensation consultants. Selection of such companies is based on a variety of factors, including market capitalization, revenue size and industry classification. The Board of Directors believes that the Company's primary competitors for executive talent are companies with a similar market capitalization and, accordingly, relies on a broad array of companies in various industries for comparative analyses. 2005 base salary for the named executive officers is $999,000, each, for Melvin J. Gordon and Ellen R. Gordon, $923,000 for John W. Newlin, $866,000 for Thomas E. Corr, and $653,000 for G. Howard Ember.

2)    Annual Incentives and Other Awards

        Effective January 1, 1997, the Compensation Committee established the Tootsie Roll Industries, Inc. Bonus Incentive Plan. In 2001, the shareholders approved the 2001 Bonus Incentive Plan to replace the previous Bonus Incentive Plan for 2001 and future years. The 2001 Bonus Incentive Plan was adopted to ensure the tax deductibility of the annual bonus that may be earned by executive officers of the Company. Under the Plan, certain key employees (including employees who are also directors) designated by the Compensation Committee may receive annual incentive compensation determined by pre-established objective performance goals. This year, all executive officers named in the summary compensation table included in this proxy statement were eligible for the 2001 Bonus Incentive Plan. Performance goals were based on the measures, objectives and financial criteria discussed below.

        Annual incentive bonuses to some executive officers and CAP and split-dollar insurance awards for all executive officers are made at the discretion of the Board of Directors in order to recognize and reward each executive officer's contribution to the Company's overall performance in terms of both financial results and attainment of individual and Company goals.The annual cash incentive bonus is designed to reward executives, as well as other management personnel, for their contributions to the Company's financial performance during the recently completed year.

        The annual CAP award and split-dollar life insurance program is principally designed to provide an incentive to executive officers to achieve both short-term and long-term financial and other goals, including strategic objectives. These programs are also designed to provide an incentive for the executive to remain with the Company on a long-term basis. These awards are determined by the Board of Directors based on the performance of the Company and the executive's contribution to the growth and success of the Company.

        The Board of Directors considers both achievement of strategic objectives and financial performance measures in determining compensation levels. The following measures of Company performance are considered in the determination of bonuses and awards: earnings per share, increase

in sales of core brands and total sales, return on assets, return on equity; and net earnings as a percentage of sales.

3)    Other

        Each named executive officer is provided an automobile except for Mr. and Mrs. Gordon who share an automobile and are provided with the services of a driver. As disclosed in the proxy, Mr. and Mrs. Gordon also share the use of a corporate apartment in connection with travel to their Chicago offices and share the use of a corporate aircraft in connection with such travel and other business purposes. Mr. and Mrs. Gordon also made personal use of the corporate aircraft at a cost of $2,037 each in 2004. No personal use has been made in 2005.

EX-10.31

EXHIBIT 10.31

DIRECTOR COMPENSATION

        Mr. and Mrs. Gordon do not receive fees for their service on the Board of Directors or committees. Other directors receive an annual fee of $40,000 plus $1,250 per meeting attended. Each member of the Audit Committee receives an annual retainer of $5,000 and each member of the Compensation Committee receives $1,250 per meeting attended. The Chairman of the Audit Committee receives an additional annual fee of $5,500. Board members are reimbursed for reasonable travel expenses in connection with attending meetings, and, in their capacity as ambassadors of the Company, receive free samples of the Company's products at Halloween and at other times throughout the year.

EX-13

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Exhibit 3

Corporate Profile

Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of confectionery products for 108 years. Our products are primarily sold under the familiar brand names, Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child's Play, Charms, Blow Pop, Blue Razz, Cella's chocolate covered cherries, Mason Dots, Mason Crows, Junior Mints, Charleston Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff cotton candy, Dubble Bubble, Razzles, Cry Baby, Nik-L-Nip and EI Bubble.

Corporate Principles

We believe that the differences among companies are attributable to the caliber of their people, and therefore we strive to attract and retain superior people for each job.

We believe that an open family atmosphere at work combined with professional management fosters cooperation and enables each individual to maximize his or her contribution to the company and realize the corresponding rewards.

We do not jeopardize long-term growth for immediate, short-term results.

We maintain a conservative financial posture in the deployment and management of our assets.

We run a trim operation and continually strive to eliminate waste, minimize cost and implement performance improvements.

We invest in the latest and most productive equipment to deliver the best quality product to our customers at the lowest cost.

We seek to outsource functions where appropriate and to vertically integrate operations where it is financially advantageous to do so.

We view our well known brands as prized assets to be aggressively advertised and promoted to each new generation of consumers.

We conduct business with the highest ethical standards and integrity which are codified in the Company's "Code of Business Conduct and Ethics."

Melvin J. Gordon, Chairman and Chief Executive Officer and
Ellen R. Gordon, President and Chief Operating Officer.

1

To Our Shareholders

Sales in 2004 increased to $420 million compared to 2003 sales of $392 million. This represents a new record level of sales for the company.

Net earnings in 2004 were $64 million as compared to $65 million in 2003. On a per share basis, earnings increased from $1.22 in 2003 to $1.23 in 2004. The increase in earnings per share results from fewer shares outstanding in 2004 due to stock repurchases.

Other highlights of 2004 include:

•

We purchased Concord Confections, the largest acquisition in the company's history.

Financial Highlights

	December 31,
	2004	2003
	(in thousands except per share data)
Net Sales	$420,110	$392,656
Net Earnings	64,174	65,014
Working Capital	110,376	180,818
Net Property, Plant and Equipment	178,750	129,163
Shareholders' Equity	570,179	536,581
Average Shares Outstanding*	52,366	53,305
Per Share Items*
Net Earnings	$1.23	$1.22
Cash Dividends Paid	.28	.27

*Adjusted for stock dividends.

•

Cash dividends were paid for the sixty-second consecutive year, earning us recognition as a "Dividend Aristocrat" by Standard & Poors and a "Dividend Achiever" by Mergent.



•

Our fortieth consecutive annual 3% stock dividend was distributed in April.



•

Again this year, capital expenditures were made for projects that will improve operating efficiencies and support growth.

Our conservative financial posture coupled with many years of profitable operations enabled us to make these significant outlays without incurring undue leverage or putting the company at financial risk. Of the $154 million borrowed in August in conjunction with the Concord purchase, approximately 40% or $62 million was paid back, and cash and investments, net of interest bearing debt, was $86 million by year end.

We remain prepared to capitalize on appropriate investment opportunities as they may arise. These may include initiatives to develop niche products, investment in strategically or economically prudent capital projects and pursuit of additional complementary business acquisitions. We remain active in our evaluation of opportunities in each of these areas.

Sales and Marketing

We have long recognized the competitive advantage of having strong brands which position us well against the continuing onslaught of low priced foreign imports, private label imitators and branded competition from other confectionery manufacturers.

In 2004 we again offered focused promotional programs such as bonus bags, shippers and combo packs to high volume classes of trade. These programs reinforce the attributes of quality and value that consumers expect and generate high-turn, profitable use of shelf and floor space that retailers demand.

We also successfully continued our sales initiatives in the growing dollar store class of trade. Consumers who frequent these outlets tend to be value oriented in their purchasing decisions, and find that our brands deliver excellent quality at an affordable price.

Halloween was once again our strongest sales period. Our bagged goods, in particular our popular mixed bags assortments such as Childs Play, continued to sell well through the mass merchandise, drug, supermarket and warehouse club venues.

Outside of Halloween, our line of "theater" products continued to receive good consumer acceptance in the drug, mass merchandise, supermarket and dollar store trade classes. This family of products presents many of our most popular candies to consumers in large "theater sized" reclosable boxes with attractive display panels.

Brands featured in this line include four varieties of Dots as well as Crows, Sugar Babies, Mini-Charleston Chews and Junior Mints. In 2004 we introduced a new item in the theater box format-Junior Caramels. These boxed candies put the company in a strong position in regard to sales to theaters and to home video sections of self-service outlets.

Junior Caramels

Junior Caramels consist of delicious, soft caramel centers enrobed in a shell of rich milk chocolate and polished to a beautiful shine. They were offered on a limited introductory basis in 2004, and met with enthusiastic consumer acceptance. National rollout is planned for 2005. Junior Caramels are an excellent example of the type of niche product extension we continually seek.

2

We also brought out two popular items from mixed assortments, and introduced them as stand-alone, "Limited Edition" goods. Packaged in foil bags to preserve freshness, Chocolate Tootsie Pops and Vanilla Tootsie Rolls gave consumers an opportunity to indulge in their personal favorite treats.

Limited Edition Tootsie Rolls and Tootsie Pops

Excitement about the Tootsie Pop brand was further stimulated by the addition of a sixth flavor to our traditional five-flavor mix. Consumers can now enjoy one of three tantalizing new "mystery" flavors, watermelon, strawberry or blue raspberry, in every package they buy.

Mean Green Blow Pops

In the Blow pop line, we updated the packaging with enhanced graphics on a brighter white, opaque background. We also introduced Mean Green, an intensely lime flavored translucent candy shell surrounding a bright green, sour lime flavored bubble gum center. Its distinctive packaging cautions consumers to "Prepare to be Limed!"

Concord Confections

In keeping with our stated goal of making complimentary business acquisitions, in August we purchased Concord Confections, maker of Dubble Bubble, to our knowledge the largest maker of bubble gum in the world. This icon brand comes in two primary formats.

Dubble Bubble

"Chunk gum" is the familiar pink colored, tutti-frutti flavored bubble gum wrapped in wax paper bearing the instantly recognizable red oval Dubble Bubble trademark. "Gum balls" are brightly colored, spherically shaped and come in many sizes and flavors, primarily for sale in gumball machines and tube packs. Dubble Bubble is the market leader in both the chunk and ball gum categories.

Many other brands were included in the acquisition. Some of these are:

Razzles—the magic dextrose candy that turns into gum while you eat it.

Cry Baby—gum so sour it can bring a tear to your eye!

Nik-L-Nip—chewable wax bottles filled with tasty juice.

Along with these and other brands, the Concord acquisition included its principal manufacturing facilities located near Toronto.

Our sales and marketing departments are integrating Concord's broad product assortment and developing appropriate promotional strategies for these new items.

Advertising and Public Relations

Our products again received extensive cable television exposure through special interest features. The Food Network's Unwrapped program produced new segments on Fluffy Stuff Cotton Candy, Super Blow Pops and Tootsie Fruit Rolls. These are in addition to previous Unwrapped shows that feature nearly all of our major brands.

Tootsie Rolls and Tootsie Pops were spotlighted in "Snack Food Tech" on Modern Marvels, the History Channel's signature series. That show, based on engineering accomplishments, explored the snack food industry from early discoveries to the present innovative technologies employed today.

Exposure on these highly rated shows, including periodic replays, generates positive awareness of our products.

We also utilized cable television to convey our classic "How Many Licks?" Tootsie Pops advertising message. The 2004 campaign was directed toward cartoon and family programs, and generated the inevitable letters from many consumers who succumbed to the urge to convey just how many licks it does take. Alas, the precise answer remains elusive, lending credence to Mr. Owl's wise observation: "the world may never know!"

3

The company has had a long history of making products for military rations. We continue to receive many gratifying letters from soldiers in Iraq and elsewhere, commenting on how Tootsie Rolls in their ration kits brightened their day or brought forth a nostalgic reminder of home.

There were also numerous articles and stories in newspapers and other publications throughout the year publicizing our products. Many of these focus on holiday themes such as "popular Halloween candies" or "what's new for the Easter season." Other articles highlight certain consumer trends such as the current popularity of nostalgic 'retro' products and feature many of our brands, which have stood the test of time and remain consumer favorites.

Manufacturing and Distribution

We continue to invest in projects that support growing product lines, keep our production facilities as efficient as possible and improve product quality.

We began new capital projects of these types during the year and completed several other major initiatives, which began in prior years. As technology evolves, we have continued to realize benefits through automation.

We have long found merit in sharing ideas among facilities. As with past acquisitions, we anticipate that the addition of Concord's operations will enhance this process. Accordingly, we have eagerly begun to share ideas and best practices between our other manufacturing and distribution centers and Concord.

Our distribution centers are physically capable of handling the volume of Concord inventory, enabling us to focus on the complex process of integrating these products into our supply chain. This effort is already well underway.

Purchasing

Prices for key raw materials and packaging were generally favorable during the year. In particular, cocoa eased substantially from recent historically high levels. However, this saving was nearly offset by increased costs in edible oils.

We are in the process of bringing the procurement activities for Concord on line with our purchasing systems. Where possible we will leverage this additional volume in our competitive bidding, hedging and forward purchase programs to ensure that the company's purchases are sourced as economically as possible, with minimum exposure to short-term market fluctuations.

Information Technology and Internal Controls

Integrating Concord into our systems was a major operational initiative during 2004. Planning was completed, certain systems have been brought over and the remaining system areas will be converted to our platform during the first half of 2005.

Projects of this scope reinforce the wisdom of past investments of time and money toward developing state-of-the-art business systems and data management protocols. We remain convinced that information technology is a prime strategic tool to support future growth.

Also during 2004 we, as well as other large public companies, undertook the substantial task of documenting and testing our system of internal controls in order to meet the requirements of the Sarbanes-Oxley Act. Completing this process in a timely fashion required commitment and cooperation throughout our organization. We are pleased to note that our controls over financial reporting, which we always believed to be good, are now documented and tested.

International

Our international sales increased during 2004. We manufacture and sell products in Mexico under the Tutsi trademark. We also sell Tootsie, Charms and Concord products to Canada and over 30 other countries in Europe, Asia and South and Central America. Our legacy product line, coupled with newly acquired Dubble Bubble products, offer a compelling and broad assortment of items that can be extended to additional foreign markets.

In Appreciation

We believe that people have been the key ingredient in our recipe for success over the years. Excellence is required at every level of the organization to meet the growing demands in today's increasingly competitive marketplace. Accordingly, we wish to thank our many loyal employees, customers, foreign distributors, suppliers and sales brokers for their efforts on behalf of the company during 2004. We also thank our shareholders for their support through the years.

We remain committed to growing the sales and profits of the company and believe that we are well positioned in this regard as we enter 2005.

Melvin J. Gordon
Chairman of the Board and
Chief Executive Officer

Ellen R. Gordon
President and
Chief Operating Officer

4

Management's Discussion and Analysis of Financial
Condition and Results of Operations
(in thousands except per share, percentage and ratio figures)

FINANCIAL REVIEW

This financial review discusses the company's financial condition, results of operations, liquidity and capital resources, market risks and other matters. It should be read in conjunction with the Consolidated Financial Statements and related footnotes that follow this discussion.

FINANCIAL CONDITION

The strong financial condition in which the company entered 2004, coupled with profitable operations during the year, enabled us to make the largest acquisition in the company's history without incurring undue leverage or placing the company at financial risk. Working capital ended the year at $110,376, down from $180,818 at the beginning of the year. The decrease of $70,442 is due to lower cash and short-term investments and higher current debt used to finance the Concord acquisition, partially offset by the working capital acquired.

Interest bearing debt was $99,500 at year end, $62,000 lower than the peak of $161,500 on August 31, 2004 immediately following the acquisition. Debt was paid down through a combination of cash flow provided by operating activities and investment maturities.

Shareholders equity increased to $570,179 in 2004 from $536,581 primarily due to net earnings during the year, net of cash dividends and share repurchases. The company has paid cash dividends for sixty-two consecutive years and has distributed a stock dividend for forty consecutive years.

The company has a simple financial structure, and aside from an immaterial amount of operating leases, the company has no "off-balance sheet" financing arrangements. We maintain a conservative financial posture and funds generated from operations plus maturities of short term investments are expected to be adequate to meet the company's financing needs over the coming year. These funds may be augmented by prudent borrowing for significant investments such as was done for the Concord acquisition.

RESULTS OF OPERATIONS

2004 vs. 2003

Net sales in 2004 grew to a record $420,110, an increase of $27,454 from 2003 sales of $392,656. Sales benefited from successful marketing and promotional programs, including pre-Halloween sales programs that have traditionally made our third quarter the highest selling period of the year and did so again this year.

However, the sales increase in 2004 is attributable to sales resulting from the Concord acquisition as core brand sales were approximately even with the prior year.

Cost of goods sold increased from 56.7% to 58.2% of sales. This increase is due to lower margins on acquired brands, lower production volumes in several core product lines, approximately $1,800 in start-up costs associated with a new production line and a $600 inventory adjustment for a discontinued product line. These expenses were partially offset by somewhat lower raw material and packaging costs.

Due to the seasonal nature of our business and corresponding variations in product mix, gross margins have historically been lower in the second half of the year, and this was the case in 2004. The impact of the factors discussed above was concentrated in the fourth quarter. As a result, fourth quarter gross margins were lower than in 2003.

5

Selling, marketing and administrative expense increased as a percent of sales to 20.4% in 2004 from 19.8% in 2003. The increase is due to expenses associated with Concord and approximately $1,500 higher freight costs related to fuel surcharges, as well as higher fees associated with Sarbanes-Oxley compliance and general cost increases.

Other income declined from $5,594 in 2003 to $4,784 in 2004 due to higher interest expense and lower investment earnings, both related to financing the Concord acquisition. The consolidated effective tax rate declined from 33.6% in 2003 to 32.2%. This decline generally reflects a reduction in foreign income taxes.

Consolidated net earnings were $64,174 and $65,014 and earnings per share were $1.23 and $1.22 in 2004 and 2003, respectively. Average shares outstanding declined from 53,305 to 52,366 due to share repurchases.

2003 vs. 2002

Net sales were $392,656 in 2003 compared to $393,185 in 2002, a decrease of $529 or 0.1%. Factors effecting sales growth were generally sluggish US economic conditions, higher promotional expense and lower sales in Mexico. Seasonal sales again peaked in the third quarter due to Halloween sales and promotions.

Cost of goods sold as a percentage of net sales was 56.7% and 56.5% for 2003 and 2002, respectively. Higher costs for our principal ingredients and increased plant overhead costs incurred during 2003 were generally offset by selective price increases. Gross margins were lower in the second half of the year due to seasonality and corresponding variations in product mix.

Selling, marketing and administrative expenses were $77,756 in 2003 as compared to $75,751 in 2002, an increase of 2.6%. These costs were 19.8% of sales in 2003 versus 19.3% in the prior year.

Accordingly, earnings from operations were $92,353 in 2003, or $2,877 below the $95,230 attained in 2002. Other income was $5,594 in 2003 as compared to $5,458 in 2002. The increase of $136 is primarily attributable to a $541 property tax refund in 2003, partially offset by lower interest income due to lower interest rates.

The consolidated effective tax rate decreased from 34.1% in 2002 to 33.6% in 2003. This decline generally reflects a reduction in state income taxes.

Net earnings were $65,014 and $66,388 and earnings per share were $1.22 in both 2003 and 2002. Earnings per share remained constant on lower net earnings due to share repurchases. Average shares outstanding declined from 54,592 in 2002 to 53,305 in 2003.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities were $76,228 in 2004, $83,466 in 2003 and $75,473 in 2002. Both the decline in 2004 and the increase in 2003 were principally attributable to changes in accounts receivable due to the timing of sales and customer payments. Also, while inventories grew in each of 2004, 2003 and 2002, the 2004 increase was higher because of the addition of Concord items to our supply chain.

Cash flows from investing activities reflect the purchase of Concord Confections for $218,229 as well as capital expenditures of $17,948 and a $72,138 net decrease in marketable securities associated with financing the acquisition. In 2003, capital expenditures were $12,150 and marketable securities increased by a net of $38,233. In 2002, capital expenditures were $10,308 and marketable securities increased by $19,263.

6

Cash flows from financing activities reflect a borrowing of $154,000 for the acquisition and $62,000 of payments against this loan. Share repurchases were $16,407, $40,096 and $32,313 in 2004, 2003 and 2002, respectively. Cash dividends of $14,877, $14,410 and $14,614 were paid in 2004, 2003 and 2002, respectively. 2004 was the sixty-second consecutive year in which we have paid cash dividends.

MARKET RISKS

The company is exposed to market risks related to commodity prices, interest rates, equity prices and foreign exchange.

Commodity price risks relate to ingredients (primarily sugar, cocoa, corn syrup and vegetable oils). The company believes its competitors face similar risks, and the industry has historically adjusted prices to compensate for adverse fluctuations in commodity costs.

To mitigate the impact of commodity cost fluctuations, the company enters into commodity futures contracts to hedge anticipated purchases of certain ingredients (primarily sugar). These contracts are effective as hedges under Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities." The unrealized gains and losses on such contracts are deferred as a component of accumulated other comprehensive earnings (loss) and are recognized as a component of cost of goods sold when the related inventory is sold.

Interest rate risks relate to the company's investments in debt securities (primarily municipal bonds) with maturities of generally up to four years. The majority of these have historically been held to maturity, which limits the company's exposure to interest rate fluctuations. Interest rates on the company's debt obligations are reset weekly.

Equity price risk relates to the company's investments in mutual funds.

Foreign exchange risk relates to the company's foreign operations including Concord and purchase commitments.

The company has no outstanding guarantees of obligations to third parties.

Commodities

The potential change in fair value of commodity derivative instruments (primarily sugar futures contracts) held by the company, assuming a 10% change in the underlying commodity price, was $858. This analysis only includes commodity derivative instruments and, therefore, does not consider the offsetting effect of changes in the price of the underlying commodity. This amount is not significant compared with the net earnings and shareholders equity of the company.

Equity price

At December 31, 2004, the company has investments in mutual funds of $25,332. These investments primarily relate to hedging deferred compensation liabilities, and any potential change in their fair value would be offset by a corresponding change in such liabilities.

Interest Rates

The accompanying chart summarizes the maturities of the company's investments in debt securities at December 31, 2004.

Less than 1 year	$	28,701
1 - 2 years		53,014
2 - 3 years		18,293
Total	$	100,008

Foreign Exchange

Prior to the acquisition of Concord, the company's operations outside of the United States represented less than 10% of its consolidated operations. Accordingly, the company did not use derivative financial instruments to hedge its foreign currency assets or liabilities or its overall investments in its foreign subsidiaries.

Certain of Concord's manufacturing expenses, including labor and a portion of its packaging, ingredients and supplies are sourced in Canadian dollars. From time to time the company may use forward foreign exchange contracts and derivative instruments to mitigate its exposure to these costs as well as those related to firm commitments to purchase equipment from foreign vendors. As of December 31, 2004 the company had not entered into any forward foreign exchange contracts with respect to the Canadian dollar, and other outstanding foreign exchange contracts were not material.

CRITICAL ACCOUNTING POLICIES

Preparation of the company's financial statements involves judgments due to uncertainties affecting the application of accounting policies, and the likelihood that different amounts would be reported under different conditions or using different assumptions. In the opinion of management, the company does not have any individual accounting policy that is "critical." However, following is a summary of the more significant accounting policies and methods where estimates are used.

7

Revenue recognition

Revenue, net of applicable provisions for discounts, returns, allowances, and certain advertising and promotional costs, is recognized when products are delivered to customers and collectibility is reasonably assured. The accounting for such promotional programs is discussed below.

Provisions for bad debts are recorded as selling, marketing and administrative expense. Such provisions have not exceeded 0.2% of net sales for 2004, 2003 and 2002 and, accordingly, have not been significant to the company's financial position or results of operations.

Intangible assets

Effective January 1, 2002 the company adopted SFAS No. 142, whereby goodwill and other indefinite lived assets are not amortized, but are instead subjected to annual testing for impairment. The company's intangible assets consist primarily of trademarks, the values of which the company has determined are not impaired.

This determination is made by comparing the carrying value of the asset with its estimated fair value, which is calculated on the basis of discounted projected future cash flows. These projected future cash flows are dependent on a number of factors including future business plans and projected operating results. Although the majority of the company's trademarks relate to well established brands with a long history of consumer acceptance, projected cash flows are inherently uncertain. A change in the assumptions underlying the impairment analysis, such as a reduction in projected cash flows or the use of a different discount rate, could cause an impairment in the future.

Customer incentive programs, advertising and marketing

Advertising and marketing costs are recorded in the period to which such costs relate. The company does not defer the recognition of any amounts on its consolidated balance sheet with respect to such costs. Customer incentives and other promotional costs are recorded at the time of sale based upon incentive program terms and historical utilization statistics, which are generally consistent from year to year.

The liabilities associated with these programs are reviewed quarterly and adjusted if utilization rates differ from management's original estimates. Such adjustments have not historically been material to the company's operating results.

Investments

The company invests in certain high-quality debt securities primarily Aa or better rated municipal bonds. The accounting for such investments is outlined in Note 1 and does not involve any significant estimates on the part of management. Due to their relatively short maturities, changes in interest rates have an immaterial effect on the principal value of these investments and no credit losses have been incurred.

Guarantees

The Financial Accounting Standards Board issued Interpretation No. 45 relating to the accounting for and disclosure of certain types of guarantees. The disclosure provisions are effective for financial statements with years ending after December 15, 2002. No disclosures were required for the company as a result of adoption of this standard, as it has no such guarantees outstanding.

Other matters

In the opinion of management, other than contracts for raw materials, including commodity hedges and outstanding purchase orders for packaging, ingredients

Open Contractual Commitments as of December 31, 2004

Payable in	Total	Less than 1 year	1 to 3 Years	3 to 5 Years	More than 5 Years
Commodity hedges	$8,588	$5,176	$3,412	$     —	$     —
Purchase obligations	68,919	68,919	—	—	—
Split dollar insurance	8,256	3,441	4,815	—	—
Interest bearing debt	99,500	6,333	85,667	—	7,500
Operating leases	1,350	851	499	—	—
Total	$186,613	$84,720	$94,393	$     —	$7,500
Note: the above amounts exclude deferred income tax liabilities of $25,995, post retirement health care and life insurance benefits of $10,075 and deferred compensation and other liabilities of $30,020 because the timing of payments relating to these items cannot be reasonably determined.

and supplies, all entered into in the ordinary course of business, the company does not have any significant contractual obligations or future commitments. The company's outstanding contractual commitments as of December 31, 2004, all of which are normal and recurring in nature, are summarized in the accompanying chart.

The company provides split dollar life insurance benefits to certain executive officers and records an asset equal to the cumulative premiums paid on the related policies, as the company will fully recover these premiums under the terms of the plan.

The results of our operations and our financial condition are expressed in the following financial statements.

8

CONSOLIDATED STATEMENT OF
Financial Position

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands)

Assets				December 31,
				2004	2003
CURRENT ASSETS:
	Cash and cash equivalents			$  56,989	$  84,084
	Investments			32,369	86,961
	Accounts receivable trade, less allowances of $2,440 and $1,970			28,456	18,131
	Other receivables			9,001	3,076
	Inventories:
		Finished goods and work-in-process		37,384	28,969
		Raw materials and supplies		21,393	17,117
	Prepaid expenses			5,719	4,416
	Deferred income taxes			1,382	951
			Total current assets	192,693	243,705
PROPERTY, PLANT AND EQUIPMENT, at cost:
	Land			14,973	8,265
	Buildings			61,714	44,960
	Machinery and equipment			244,367	206,697
				321,054	259,922
	Less—Accumulated depreciation			142,304	130,759
				178,750	129,163
OTHER ASSETS:
	Goodwill			74,002	38,151
	Trademarks			193,342	79,348
	Investments			96,640	112,431
	Split dollar officer life insurance			66,094	62,499
	Investment in joint venture			10,232	—
				440,310	292,429
				$811,753	$665,297

(The accompanying notes are an integral part of these statements.)

9

(in thousands except per share data)

Liabilities and Shareholders' Equity			December 31,
			2004		2003
CURRENT LIABILITIES:
	Bank loan		$     6,333		$ —
	Accounts payable		19,315		11,947
	Dividends payable		3,659		3,589
	Accrued liabilities		44,722		38,834
	Income taxes payable		8,288		8,517
		Total current liabilities	82,317		62,887
NONCURRENT LIABILITIES:
	Bank loan		85,667		—
	Deferred income taxes		25,995		22,631
	Postretirement health care and life insurance benefits		10,075		9,302
	Industrial development bonds		7,500		7,500
	Deferred compensation and other liabilities		30,020		26,396
		Total noncurrent liabilities	159,257		65,829
SHAREHOLDERS' EQUITY:
	Common stock, $.69-4/9 par value— 120,000 shares authorized— 34,760 and 34,082, respectively, issued		24,139		23,668
	Class B common stock, $.69-4/9 par value— 40,000 shares authorized— 17,515 and 17,145, respectively, issued		12,163		11,906
	Capital in excess of par value		397,745		357,922
	Retained earnings, per accompanying statement		149,055		156,786
	Accumulated other comprehensive earnings (loss)		(10,931	)	(11,709	)
	Treasury stock (at cost)— 58 shares and 56 shares, respectively		(1,992	)	(1,992	)
			570,179		536,581
			$811,753		$665,297

10

CONSOLIDATED STATEMENT OF
Earnings, Comprehensive Earnings and Retained Earnings

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)

		For the year ended December 31,
		2004		2003		2002
Net sales		$420,110		$392,656		$393,185
Cost of goods sold		244,501		222,547		222,204
Gross margin		175,609		170,109		170,981
Selling, marketing and administrative expenses		85,705		77,756		75,751
Earnings from operations		89,904		92,353		95,230
Other income, net		4,784		5,594		5,458
Earnings before income taxes		94,688		97,947		100,688
Provision for income taxes		30,514		32,933		34,300
Net earnings		$  64,174		$  65,014		$  66,388
Net earnings		$  64,174		$  65,014		$  66,388
Other comprehensive earnings (loss)		778		(657	)	(1,139	)
Comprehensive earnings		$  64,952		$  64,357		$  65,249
Retained earnings at beginning of year		$156,786		$148,705		$161,345
	Net earnings	64,174		65,014		66,388
	Cash dividends ($.28, $.27 and $.26 per share, respectively)	(14,547	)	(14,362	)	(14,304	)
	Stock dividends	(57,358	)	(42,571	)	(64,724	)
Retained earnings at end of year		$149,055		$156,786		$148,705
Earnings per share		$       1.23		$      1.22		$      1.22
Average common and class B common shares outstanding		52,366		53,305		54,592

(The accompanying notes are an integral part of these statements.)

11

CONSOLIDATED STATEMENT OF
Cash Flows

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands)

				For the year ended December 31,
				2004		2003		2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net earnings			$    64,174		$  65,014		$  66,388
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization		11,680		11,379		12,354
		Amortization of marketable securities		1,885		2,534		1,407
		Purchase of trading securities		(2,507	)	(3,154	)	(2,602	)
		Changes in operating assets and liabilities:
			Accounts receivable	673		4,266		(2,886	)
			Other receivables	1,574		490		619
			Inventories	(4,567	)	(2,579	)	(2,734	)
			Prepaid expenses and other assets	(5,054	)	(4,864	)	(6,502	)
			Accounts payable and accrued liabilities	2,478		2,582		5,052
			Income taxes payable and deferred	2,712		3,827		318
			Postretirement health care and life insurance benefits	773		1,151		701
			Deferred compensation and other liabilities	2,227		2,651		2,554
			Other	180		169		804
	Net cash provided by operating activities			76,228		83,466		75,473
CASH FLOWS FROM INVESTING ACTIVITIES:
	Acquisition of business, net of cash acquired			(218,229	)	—		—
	Capital expenditures			(17,948	)	(12,150	)	(10,308	)
	Purchase of held to maturity securities			(22,049	)	(57,823	)	(64,956	)
	Maturity of held to maturity securities			44,113		25,643		46,797
	Purchase of available for sale securities			(83,987	)	(57,578	)	(34,795	)
	Sale and maturity of avail- able for sale securities			134,061		51,525		33,691
	Net cash used in investing activities			(164,039	)	(50,383	)	(29,571	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from bank loan			154,000		—		—
	Repayment of bank loan			(62,000	)	—		—
	Shares repurchased and retired			(16,407	)	(40,096	)	(32,313	)
	Dividends paid in cash			(14,877	)	(14,410	)	(14,614	)
	Net cash provided by (used in) financing activities			60,716		(54,506	)	(46,927	)
Decrease in cash and cash equivalents				(27,095	)	(21,423	)	(1,025	)
Cash and cash equivalents at beginning of year				84,084		105,507		106,532
Cash and cash equivalents at end of year				$    56,989		$  84,084		$105,507
Supplemental cash flow information:
	Income taxes paid			$    28,966		$  31,561		$  34,099
	Interest paid			$         879		$       172		$       309
	Stock dividend issued			$    56,959		$  42,513		$  64,371

(The accompanying notes are an integral part of these statements.)

12

Notes to Consolidated Financial Statements
($ in thousands except per share data)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

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), which are primarily engaged in the manufacture and sale of candy products. All significant intercompany transactions have been eliminated.

    The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

    Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

Revenue recognition and other accounting pronouncements:

    Products are sold to customers based on accepted purchase orders which include quantity, sales price and other relevant terms of sale. Revenues are recognized when products are delivered to customers and collectibility is reasonably assured. Shipping and handling costs of $31,795, $28,217 and $28,579 in 2004, 2003 and 2002, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured. Revenues from a major customer aggregated approximately 20.8%, 20.6% and 19.6% of total net sales during the years ended December 31, 2004, 2003 and 2002, respectively.

    In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs—an amendment to ARB No. 43, Chapter 4," which amends guidance in accounting for abnormal amounts of idle facility expense. The company believes that the pronouncement is generally not applicable to the company's operations and to the extent it may be applicable it is not expected to have a significant impact on the company's consolidated financial statements.

Cash and cash equivalents:

    The company considers temporary cash investments with an original maturity of three months or less to be cash equivalents.

Investments:

    Investments consist of various marketable securities with maturities of generally up to four years. The company classifies debt and equity securities as either held to maturity, available for sale or trading. Held to maturity securities represent those securities that the company has both the positive intent and ability to hold to maturity and are carried at amortized cost. Available for sale securities represent those securities that do not meet the classification of held to maturity, are not actively traded and are carried at fair value. Unrealized gains and losses on these securities are excluded from earnings and are reported as a separate component of shareholders' equity, net of applicable taxes, until realized. Trading securities relate to deferred compensation arrangements and are carried at fair value.

Hedging activities:

    From time to time, the company enters into commodities futures contracts that are intended and effective as hedges of market price risks associated with the anticipated purchase of certain raw materials (primarily sugar). To qualify as a hedge, the company evaluates a variety of characteristics of these transactions, including the probability that the anticipated transaction will occur. If the anticipated transaction were not to occur, the gain or loss would then be recognized in current earnings. The company does not engage in trading or other speculative use of derivative instruments. The company does assume the risk that counter parties may not be able to meet the terms of their contracts. The company does not expect any losses as a result of counter party defaults.

    The company's derivative instruments are being accounted for as cash flow hedges and are recorded on the balance sheet at fair value. Changes therein are recorded in other comprehensive earnings and are reclassified to earnings in the periods in which earnings are affected by the hedged item. Substantially all amounts reported in accumulated other comprehensive earnings (loss) are expected to be reclassified to cost of goods sold. During the years ended December 31, 2004, 2003 and 2002, ineffectiveness related to cash flow hedges was not material.

Inventories:

    Inventories are stated at cost, not to exceed market. The cost of substantially all of the company's inventories ($54,794 and $42,735 at December 31, 2004 and 2003, respectively) has been determined by the last-in, first-out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $5,868 and $6,442 at December 31, 2004 and 2003, respectively. The cost of certain foreign inventories ($3,983 and $3,351 at December 31, 2004 and 2003, respectively) has been determined by the first-in, first-out (FIFO) method. Rebates, discounts and other cash consideration received from a vendor related to inventory purchases is reflected as a reduction in the cost of the related inventory item, and is therefore reflected in cost of sales when the related inventory item is sold.

Property, plant and equipment:

    Depreciation is computed for financial reporting purposes by use of the straight-line method based on useful lives of 20 to 35 years for buildings and 5 to 20 years for machinery and equipment. Depreciation expense was $11,680, $11,379 and $12,354 in 2004, 2003 and 2002, respectively, including $744 relating to equipment disposals.

Carrying value of long-lived assets:

    The company reviews long-lived assets to determine if there are events or circumstances indicating that the amount of the asset reflected in the company's balance sheet may not be recoverable. When such indicators are present, the company compares the carrying value of the long-lived asset, or asset group, to the future undiscounted cash flows of the underlying assets to determine if an impairment exists. If applicable, an impairment charge would be recorded to write down the carrying value to its fair value. The determination of fair value involves the use of estimates of future cash flows that involve considerable management judgment and are based upon assumptions about expected future operating performance. The actual cash flows could differ from management's estimates due to changes in business conditions, operating performance, and economic conditions. No impairment charges were recorded by the company during 2004, 2003 or 2002.

Postretirement health care and life insurance benefits:

    The company provides certain postretirement health care and life insurance benefits. The cost of these postretirement benefits is accrued during employees' working careers. The company also provides split dollar life insurance benefits to certain executive officers. The company records an asset equal to the cumulative insurance premiums that will be recovered upon the death of a covered employee(s) or earlier under the terms of the plan. Split dollar premiums paid were $3,620, $4,237 and $6,890 in 2004, 2003 and 2002, respectively.

13

Intangible assets:

    The company accounts for intangible assets in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," which was adopted by the company on January 1, 2002. In accordance with this statement, goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. The company has completed its annual impairment testing of its goodwill and trademarks during the fourth quarter of each of the years presented, and no impairment was found.

Income taxes:

    Deferred income taxes are recorded and recognized for future tax effects of temporary differences between financial and income tax reporting. Federal income taxes are provided on the portion of income of foreign subsidiaries that is expected to be remitted to the U.S. and become taxable, but not on the portion that is considered to be permanently invested in the foreign subsidiary.

Foreign currency translation:

    The company has determined the functional currency for each foreign subsidiary. The U.S. dollar is used as the functional currency where a substantial portion of the subsidiary's business is indexed to the U.S. dollar or where its manufactured products are principally sold in the U.S. All other foreign subsidiaries use the local currency as their functional currency. Where the U.S. dollar is used as the functional currency, foreign currency translation adjustments are recorded as a charge or credit to other income in the statement of earnings. Where the foreign currency is used as the functional currency, translation adjustments are recorded as a separate component of comprehensive earnings (loss).

Joint venture:

    The company's 50% interest in two Spanish companies is accounted for using the equity method. The company records an increase in its investment in the joint venture to the extent of its share of the joint venture's earnings, and reduces its investment to the extent of dividends received. No dividends were received during 2004.

Comprehensive earnings:

    Comprehensive earnings includes net earnings, foreign currency translation adjustments and unrealized gains/losses on commodity hedging contracts and marketable securities.

Earnings per share:

    A dual presentation of basic and diluted earnings per share is not required due to the lack of potentially dilutive securities under the company's simple capital structure. Therefore, all earnings per share amounts represent basic earnings per share.

    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.

NOTE 2—ACCRUED LIABILITIES:

    Accrued liabilities are comprised of the following:

	December 31,
	2004		2003
Compensation	$	13,839	$	12,213
Other employee benefits		5,261		4,998
Taxes, other than income		2,248		2,531
Advertising and promotions		13,710		11,525
Other		9,664		7,567
	$	44,722	$	38,834

NOTE 3—BANK LOAN AND INDUSTRIAL DEVELOPMENT BONDS:

    The bank loan is payable in quarterly installments through August of 2006. As a result of prepayments made in 2004, the next quarterly installment is due in December, 2005. The loan is collateralized by investments in marketable securities and is subject to other terms and conditions, none of which are significant. Interest is LIBOR based, and the average rate was 2.0% in 2004.

    Industrial development bonds are due in 2027. The average floating interest rate was 1.3% and 1.2% in 2004 and 2003, respectively.

NOTE 4—INCOME TAXES:

    The domestic and foreign components of pretax income are as follows:

	2004		2003		2002
Domestic	$	89,164	$	96,170	$	98,978
Foreign		5,524		1,777		1,710
	$	94,688	$	97,947	$	100,688

    The provision for income taxes is comprised of the following:

		2004			2003			2002
Current:
	Federal	$	26,303		$	27,904		$	32,303
	Foreign		731			485			553
	State		1,070			1,202			1,523
			28,104			29,591			34,379
Deferred:
	Federal		2,907			3,465			(286	)
	Foreign		(605	)		(252	)		176
	State		108			129			31
			2,410			3,342			(79	)
		$	30,514		$	32,933		$	34,300

14

    Significant components of the company's net deferred tax liability at year end were as follows:

		December 31,
		2004			2003
Deferred tax assets:
	Deferred compensation	$	9,937		$	8,855
	Post retirement benefits		3,493			3,076
	Reserve for uncollectible accounts		480			480
	Other accrued expenses		2,380			2,337
	Foreign subsidiary tax loss carry forward		1,164			157
	Foreign subsidiary tax credit carry forward		2,039			2,098
	Inventory reserves		1,106			1,080
	Other		1,512			1,231
			22,111			19,314
	Valuation reserve		(1,183	)		(1,522	)
	Total deferred tax assets	$	20,928		$	17,792
Deferred tax liabilities:
	Depreciation	$	19,638		$	18,333
	Deductible goodwill and trademarks		15,840			12,835
	Accrued export company commissions		3,087			2,825
	VEBA funding		711			460
	Inventory reserves		2,233			2,629
	Prepaid insurance		985			—
	Other		3,047			2,390
	Total deferred tax liabilities	$	45,541		$	39,472
	Net deferred tax liability	$	24,613		$	21,680

    At December 31, 2004, the tax benefit of foreign subsidiary tax loss carry forwards expiring by year are as follows: $27 in 2005, $11 in 2009, $928 in 2011, $27 in 2012 and $171 in 2014.

    Also at December 31, 2004, the amounts of the foreign subsidiary tax credit carry forwards expiring by year are as follows: $48 in 2005, $244 in 2007, $222 in 2008, $198 in 2009, $329 in 2010, $342 in 2011, $328 in 2012, $279 in 2013 and $49 in 2014. A valuation allowance has been established for these carry forward credits to reduce the future income tax benefits to amounts expected to be realized.

    The effective income tax rate differs from the statutory rate as follows:

	2004		2003		2002
U.S. statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net	0.8		0.9		1.0
Exempt municipal bond interest	(1.2	)	(1.6	)	(1.8	)
Foreign tax rates	(1.9	)	—		—
Other, net	(0.5	)	(0.7	)	(0.1	)
Effective income tax rate	32.2	%	33.6	%	34.1	%

    The company has not provided for U.S. federal or foreign withholding taxes on $13,411 and $7,763 of foreign subsidiaries' undistributed earnings as of December 31, 2004 and December 31, 2003, respectively, because such earnings are considered to be permanently reinvested. It is not practicable to determine the amount of income taxes that would be payable upon remittance of the undistributed earnings.

    On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the "Act"). The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and, as of today, uncertainty remains as to how to interpret certain provisions of the Act. As such, the Company has not yet determined whether, and to what extent, it may repatriate earnings that have not yet been remitted to the U.S. and therefore makes no estimate as to the amount of future remittances.

    The Act also provides for a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. This provision also is subject to a number of limitations which effect the effective tax rate in 2005 and later. The company has not yet determined the extent to which its effective rate will change.

    Certain Mexican tax laws were amended during 2004. These become effective primarily during 2005. The company has considered these amendments in determining the 2004 income tax provision, and will continue to monitor their impact during 2005.

NOTE 5—SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:

						Class B Common Stock
	Common Stock										Treasury Stock
																Capital in excess of par value
	Shares		Amount			Shares		Amount			Shares		Amount
	(000's)					(000's)					(000's)
Balance at January 1, 2002	34,139		$	23,708		16,319		$	11,332		(53	)	$	(1,992	)	$	323,981
Issuance of 3% stock dividend	1,009			700		488			339		(2	)		—			63,332
Conversion of Class B common shares to common shares	48			33		(48	)		(33	)	—			—			—
Purchase and retirement of common shares	(948	)		(658	)	—			—		—			—			(31,655	)
Balance at December 31, 2002	34,248			23,783		16,759			11,638		(55	)		(1,992	)		355,658
Issuance of 3% stock dividend	1,017			706		502			349		(1	)		—			41,458
Conversion of Class B common shares to common shares	116			81		(116	)		(81	)	—			—			—
Purchase and retirement of common shares	(1,299	)		(902	)	—			—		—			—			(39,194	)
Balance at December 31, 2003	34,082			23,668		17,145			11,906		(56	)		(1,992	)		357,922
Issuance of 3% stock dividend	1,009			701		513			356		(2	)		—			55,901
Conversion of Class B common shares to common shares	143			99		(143	)		(99	)	—			—			—
Purchase and retirement of common shares	(474	)		(329	)	—			—		—			—			(16,078	)
Balance at December 31, 2004	34,760		$	24,139		17,515		$	12,163		(58	)	$	(1,992	)	$	397,745

    Average shares outstanding and all per share amounts included in the financial statements and notes thereto have been adjusted retroactively to reflect annual three percent stock dividends.

    While the company does not have a formal or publicly announced stock repurchase program, the company's board of directors periodically authorizes a dollar amount for share repurchases.

    Based upon this policy, shares were purchased and retired as follows:

Year	Total Number Of Shares Purchased	Average Price Paid Per Share
2004	474	$	34.56
2003	1,299	$	30.82
2002	948	$	34.03

NOTE 6—OTHER INCOME, NET:

    Other income (expense) is comprised of the following:

	2004			2003			2002
Interest and dividend income	$	3,784		$	4,465		$	5,556
Interest expense		(912	)		(172	)		(309	)
Joint venture income		232			—			—
Foreign exchange gains (losses)		453			(78	)		(206	)
Royalty income		698			542			371
Capital gains (losses)		(163	)		112			(35	)
Rental income		413			88			2
Miscellaneous, net		279			637			79
	$	4,784		$	5,594		$	5,458

15

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 2004, 2003 and 2002 approximated $3,135, $3,073 and $2,867, respectively. The company also maintains certain profit sharing and savings-investment plans. Company contributions in 2004, 2003 and 2002 to these plans were $806, $796 and $709, respectively.

    The company also contributes to multi-employer defined benefit pension plans for its union employees. Such contributions aggregated $1,007, $1,048 and $1,055 in 2004, 2003 and 2002, 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.

Deferred compensation

    The company sponsors three deferred compensation plans for selected executives and other employees: (i) the Excess Benefit Plan, which restores retirement benefits lost due to IRS limitations on contributions to tax-qualified plans, (ii) the Supplemental Plan, which allows eligible employees to defer the receipt of eligible compensation until designated future dates and (iii) the Career Achievement Plan, which provides a deferred annual incentive award to selected executives. Participants in these plans earn a return on amounts due them based on several investment options, which mirror returns on underlying investments (primarily mutual funds). The company hedges its obligations under the plans by investing in the actual underlying investments. These investments are classified as trading securities and are carried at fair value. At December 31, 2004 and 2003, these investments totaled $25,300 and $21,200, respectively. All gains and losses in these investments are equally offset by corresponding gains and losses in the company's deferred compensation liabilities.

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. Employees become eligible for these benefits based upon their age and service and if they agree to contribute a portion of the cost. The company has the right to modify or terminate these benefits. The company does not fund postretirement health care and life insurance benefits in advance of payments for benefit claims.

    The changes in the accumulated postretirement benefit obligation at December 31, 2004 and 2003 consist of the following:

	December 31,
	2004			2003
Benefit obligation, beginning of year	$	9,302		$	8,151
Net periodic postretirement benefit cost		992			1,327
Benefits paid		(219	)		(176	)
Benefit obligation, end of year	$	10,075		$	9,302

    Net periodic postretirement benefit cost included the following components:

	2004			2003		2002
Service cost—benefits attributed to service during the period	$	521		$	638	$	462
Interest cost on the accumulated postretirement benefit obligation		514			604		481
Amortization of unrecognized net gain		(43	)		85		(30	)
Net periodic postretirement benefit cost	$	992		$	1,327	$	913

    For measurement purposes, a 9.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2004; the rate was assumed to decrease gradually to 5.5% for 2011 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 5.75% and 6.0% at December 31, 2004 and 2003, respectively.

    Increasing or decreasing the health care trend rates by one percentage point in each year would have the following effect on:

	1% Increase		1% Decrease
Postretirement benefit obligation	$	1,315	$	(1,075	)
Total of service and interest cost components	$	212	$	(170	)

    The company estimates future benefit payments will be $364, $355, $424, $447 and $455 in 2005 through 2009, respectively, and a total of $2,633 in 2010 through 2014. In December 2003, the FASB issued a revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which the company adopted in 2003. In January 2004, the FASB issued Staff Position No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003" (FSP 106-1) which the company adopted during 2004. The company intends to integrate its retiree prescription drug benefit with the federal benefit that will become available to Medicare eligible retirees in 2006. In accordance with FSP 106-1 the company's accumulated postretirement benefit obligation has been reduced by an unrecognized gain of $864 as of December 31, 2004 related to the federal benefit.

NOTE 8—COMMITMENTS:

    Rental expense aggregated $1,012, $962 and $941 in 2004, 2003 and 2002, respectively.

    Future operating lease commitments are not significant.

NOTE 9—SEGMENT AND GEOGRAPHIC INFORMATION:

    The company operates as a single reportable segment encompassing the manufacture and sale of confectionery products. Its principal manufacturing operations are located in the United States and Canada, and its principal market is the United States. The company also manufactures and sells confectionery products in Mexico, and exports products to Canada as well as to over 30 countries worldwide.

    The following geographic data include net sales summarized on the basis of the customer location and long-lived assets based on their physical location.

		2004		2003		2002
Net Sales:
	United States	$	387,280	$	362,373	$	361,446
	Foreign		32,830		30,283		31,739
		$	420,110	$	392,656	$	393,185
Long-lived assets:
	United States	$	293,618	$	283,362	$	297,894
	Foreign		58,098		5,013		5,738
		$	351,716	$	288,375	$	303,632

NOTE 10—DISCLOSURES ABOUT THE FAIR VALUE AND CARRYING AMOUNT OF FINANCIAL INSTRUMENTS:

    The carrying amount approximates fair value of cash and cash equivalents because of the short maturity of those instruments. The fair values of investments are estimated based on quoted market prices. The fair value of the company's bank loan and industrial development bonds approximates their carrying value because they have a floating interest rate.

    During the third quarter of 2004 approximately $36,000 of held to maturity investments were liquidated in connection with financing the acquisition of Concord Confections. As a result, the $101,000 balance of held to maturity securities was reclassified to available for sale. This change in classification was not significant to the company's 2004 net earnings or comprehensive earnings.

16

    The carrying amount and estimated fair values of the company's financial instruments are as follows:

	2004				2003
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	56,989	$	56,989	$	84,084	$	84,084
Investments held to maturity		—		—		136,801		137,609
Investments available for sale		103,676		103,676		41,346		41,346
Investments in trading securities		25,332		25,332		21,243		21,243
Bank loan and industrial development bonds		99,500		99,500		7,500		7,500

    A summary of the aggregate fair value, gross unrealized gains, gross unrealized losses and amortized cost basis of the company's investment portfolio by major security type is as follows:

	December 31, 2004
					Unrealized
Available for Sale:			Fair Value
	Cost				Gains		Losses
Municipal bonds	$	100,630	$	100,008	$	—	$	(622	)
Mutual funds		2,714		3,668		954		—
	$	103,344	$	103,676	$	954	$	(622	)
	December 31, 2003
					Unrealized
Held to Maturity:	Amortized Cost
			Fair Value		Gains		Losses
Municipal bonds	$	136,356	$	137,170	$	814	$	—
Unit investment trusts of municipal bonds		445		439		—		(6	)
	$	136,801	$	137,609	$	814	$	(6	)
Available for Sale:
Municipal bonds	$	53,061	$	53,202	$	141	$	—
Mutual funds		2,454		3,075		621		—
	$	55,515	$	56,277	$	762	$	—

    Available for sale securities of $14,931 were included in cash and cash equivalents at December 31, 2003. There were no securities with maturities greater than four years and gross realized gains and losses on the sale of available for sale securities in 2004 and 2003 were not significant.

NOTE 11—COMPREHENSIVE INCOME:

    The following table sets forth information with respect to accumulated other comprehensive income (loss):

		Foreign Currency Translation Adjustment			Unrealized Gain (Loss) On Investments			Unrealized Gains (Losses) on Derivatives			Accumulated Other Comprehensive Earnings (Loss)
Balance at January 1, 2002		$	(9,977	)	$	449		$	(385	)	$	(9,913	)
	Unrealized gains (losses)		(1,533	)		(798	)		(65	)		(2,396	)
	(Gains) losses reclassified to net earnings		—			60			1,429			1,489
	Tax effect		—			273			(505	)		(232	)
	Net of tax amount		(1,533	)		(465	)		859			(1,139	)
Balance at December 31, 2002			(11,510	)		(16	)		474			(11,052	)
	Unrealized gains (losses)		(647	)		784			890			1,027
	(Gains) losses reclassified to net earnings		—			2			(1,690	)		(1,688	)
	Tax effect		—			(290	)		294			4
	Net of tax amount		(647	)		496			(506	)		(657	)
Balance at December 31, 2003			(12,157	)		480			(32	)		(11,709	)
	Unrealized gains (losses)		193			(585	)		2,594			2,202
	(Gains) losses reclassified to net earnings		—			155			(1,237	)		(1,082	)
	Tax effect		—			159			(501	)		(342	)
	Net of tax amount		193			(271	)		856			778
Balance at December 31, 2004		$	(11,964	)	$	209		$	824		$	(10,931	)

NOTE 12—ACQUISITION:

    On August 30, 2004, the company purchased certain assets and assumed certain liabilities from Concord Confections, Inc. and its affiliates (collectively Concord) including its 50% equity interest in a Spanish joint venture. Cash consideration paid of $218,229 was funded by the liquidation of $64,229 of marketable securities and a bank term loan of $154,000. The results of Concord's operations have been included in the company's condensed consolidated financial statements since August 30, 2004. Concord holds a strong market position in the bubble gum category and its products are sold primarily under the Dubble Bubble brand name and trademark.

    The acquisition has been accounted for under SFAS 141, "Business Combinations," and accordingly the purchase method of accounting has been used. The allocation of purchase price is based on management's determination and professional valuations of the fair value of the assets acquired and liabilities to be assumed. The final allocation to goodwill could be affected by the final determination of the required minimum working capital amount that was to be provided under the terms of the Concord purchase contract. The adjusted purchase price was allocated as follows:

Calculation of adjusted purchase price:
	Cash consideration paid for net assets acquired	$218,229
	Direct transactions fees and expenses	1,000
	Less—Adjustment to purchase relating to minimum working capital required	(6,642)
Total adjusted purchase price		$212,587
Allocation of adjusted purchase price:
	Net working capital	$    7,722
	Step up of inventories	1,622
	Investment in joint venture	10,000
	Property, plant and equipment	43,399
	Indefinite lived trademarks	113,994
	Goodwill—deductible for income tax	35,850
Total adjusted purchase price		$212,587

    The following table includes the unaudited pro forma net sales, net earnings and net earnings per share for 2004 and 2003 as if the company had acquired Concord as of January 1, 2003. Pro forma adjustments are necessary to reflect costs and expenses of financing the purchase, including additional interest expense relating to bank borrowings and the decrease in investment income reflecting the sale of marketable securities, and changes in depreciation expense resulting from fair value adjustments to net tangible assets.

    The unaudited pro forma combined financial information presented does not reflect any cost savings or synergies that might be realized, including the anticipated elimination of substantially all of the Concord historical senior executive compensation and other management expenses which aggregated approximately $3,872 and $10,283 net of income taxes for the twelve months of 2004 and 2003, respectively. The pro forma results also reflect $495 and $12,007 of historical foreign exchange gains net of tax for 2004 and 2003, respectively.

UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT OF TOOTSIE ROLL AND CONCORD
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2004 AND 2003

	2004 Combined Pro forma		2003 Combined Pro forma
Net sales	$	479,278	$	467,522
Net earnings	$	64,673	$	71,802
Earnings per share	$	1.24	$	1.35

    The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the presented periods, nor are they necessarily indicative of future consolidated results.

17

Management's Report on Internal Control Over Financial Reporting

The management of Tootsie Roll Industries, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 (SEC) Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of the company's internal control over financial reporting as of December 31, 2004 as required by SEC Rule 13a-15(c). In making this assessment, we used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Based on our evaluation under the COSO criteria, our management concluded that our internal control over financial reporting was effective as of December 31, 2004.

Management has excluded Concord Confections, Ltd. from its assessment of internal control over financial reporting as of December 31, 2004 because it was acquired by the company in a purchase business combination during 2004. Concord Confections, Ltd. is a wholly-owned subsidiary whose total assets and total revenues represent 29% and 6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2004.

Our management's assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers, LLP an independent registered public accounting firm, as stated in their report which appears on page 19.

Tootsie Roll Industries, Inc.

Chicago, Illinois
March 11, 2005

Required Certifications

In 2004, the Company's Chief Executive Officer submitted to the New York Stock Exchange the required Annual CEO Certification certifying that he was not aware of any violation by the Company of the exchange's corporate governance listing standards, other than that the certification itself was inadvertently filed later than within 30 days subsequent to the 2004 annual stockholders' meeting date as required.

The Company filed with the Securities and Exchange Commission the certifications required of the Company's Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes–Oxley Act of 2002 as exhibits to the Form 10-K for the years ended December 31, 2003 and 2004.

18

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Tootsie Roll Industries, Inc.:

We have completed an integrated audit of Tootsie Roll Industries, Inc.'s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, comprehensive earnings, retained earnings, and cash flows present fairly, in all material respects, the financial position of Tootsie Roll Industries, Inc. and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements 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 our opinion.

Internal control over financial reporting

Also, in our opinion, management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the COSO. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management's assessment and on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management's Report on Internal Control Over Financial Reporting, management has excluded Concord Confections, Ltd. from its assessment of internal control over financial reporting as of December 31, 2004 because it was acquired by the Company in a purchase business combination during 2004. We have also excluded Concord Confections, Ltd. from our audit of internal control over financial reporting. Concord Confections, Ltd. is a wholly-owned subsidiary whose total assets and total revenues represent 29% and 6% , respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2004.

Chicago, Illinois
March 11, 2005

19

Quarterly Financial Data (Unaudited)

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

	(Thousands of dollars except per share data)
2004	First	Second	Third	Fourth	Total
Net sales	$80,046	$77,157	$156,971	$105,936	$420,110
Gross margin	34,730	34,992	64,804	41,083	175,609
Net earnings	11,493	11,828	26,976	13,877	64,174
Net earnings per share	.22	.22	.52	.27	1.23
2003
Net sales	$75,570	$77,725	$147,201	$92,160	$392,656
Gross margin	32,601	35,541	61,932	40,035	170,109
Net earnings	10,909	12,317	26,945	14,843	65,014
Net earnings per share	.20	.23	.51	.28	1.22
2002
Net sales	$78,991	$77,131	$146,298	$90,765	$393,185
Gross margin	35,505	35,411	61,560	38,505	170,981
Net earnings	12,772	12,316	26,616	14,684	66,388
Net earnings per share	.23	.23	.49	.27	1.22

Net earnings per share is based upon average outstanding shares as adjusted for 3% stock dividends issued during the second quarter of each year. The sum of the per share amounts may not equal annual amounts due to rounding.

2004-2003 QUARTERLY SUMMARY OF TOOTSIE ROLL INDUSTRIES, INC. STOCK PRICE AND DIVIDENDS PER SHARE

STOCK PRICES*

	2004				2003
	High		Low		High		Low
1st Qtr	$	37.86	$	35.00	$	30.91	$	27.30
2nd Qtr	$	37.60	$	32.41	$	32.37	$	28.75
3rd Qtr	$	32.60	$	29.08	$	32.05	$	29.60
4th Qtr	$	34.63	$	29.24	$	36.94	$	32.08

*NYSE — Composite Quotations

Estimated Number of shareholders at March 2005:
	Common Stock	18,000
	Class B Common Stock	5,000

DIVIDENDS

	2004		2003
1st Qtr	$	.0681	$	.0662
2nd Qtr	$	.0701	$	.0680
3rd Qtr	$	.0700	$	.0680
4th Qtr	$	.0700	$	.0680

NOTE: In addition to the above cash dividends, a 3% stock dividend was issued on April 14, 2004 and April 16, 2003. Cash dividends are restated to reflect 3% stock dividends.

20

Five Year Summary of Earnings and Financial Highlights

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
	(Thousands of dollars except per share, percentage and ratio figures)

(See Management's Comments starting on page 5)
			2004			2003			2002			2001			2000
Sales and Earnings Data (2)
	Net sales		$	420,110		$	392,656		$	393,185		$	391,755		$	396,816
	Gross margin			175,609			170,109			170,981			173,858			188,585
	Inter- est expense			912			172			309			356			866
	Provi- sion for income taxes			30,514			32,933			34,300			35,100			42,071
	Net earnings			64,174			65,014			66,388			65,687			75,737
		% of sales		15.3	%		16.6	%		16.9	%		16.8	%		19.1	%
		% of shareholders' equity		11.3	%		12.1	%		12.6	%		12.9	%		16.5	%
Per Common Share Data (1)
	Net earnings		$	1.23		$	1.22		$	1.22		$	1.19		$	1.37
	Cash dividends declared			.28			.27			.26			.26			.24
	Stock dividends			3	%		3	%		3	%		3	%		3	%
Additional Financial Data (2)
	Work- ing capital		$	110,376		$	180,818		$	161,852		$	188,250		$	145,765
	Net cash provided by operating activities			76,228			83,466			75,473			80,915			82,591
	Net cash used in investing activities			164,039			50,383			29,571			19,165			64,177
	Net cash provided by (used in) financing activities			60,716			(54,506	)		(46,927	)		(16,100	)		(46,036	)
	Prop- erty, plant & equipment additions			17,948			12,150			10,308			14,148			16,189
	Net property, plant & equipment			178,750			129,163			128,869			132,575			131,118
	Total assets			811,753			665,297			646,080			618,676			562,442
	Long term debt			93,167			7,500			7,500			7,500			7,500
	Share- holders' equity			570,179			536,581			526,740			508,461			458,696
	Aver- age shares out- standing (1)			52,366			53,305			54,592			54,985			55,432

(1)

Adjusted for annual 3% stock dividends.

(2)

Certain reclassifications have been made to prior year numbers to conform to current year presentation.

21

Board of Directors
Melvin J. Gordon(1)	Chairman of the Board and Chief Executive Officer
Ellen R. Gordon(1)	President and Chief Operating Officer
Charles W. Seibert(2)(3)	Retired Banker
Lana Jane Lewis-Brent(2)(3)	President, Paul Brent Designer, Inc., an art publishing, design and licensing company
Richard P. Bergeman(2)(3)	Retired Senior Vice President, Bestfoods
(1)Executive Committee        (2)Audit Committee        (3)Compensation Committee
Officers
Melvin J. Gordon	Chairman of the Board and Chief Executive Officer
Ellen R. Gordon	President and Chief Operating Officer
G. Howard Ember, Jr.	Vice President, Finance & Chief Financial Officer
John W. Newlin, Jr.	Vice President, Manufacturing
Thomas E. Corr	Vice President, Marketing & Sales
John P. Majors	Vice President, Physical Distribution
Barry P. Bowen	Treasurer & Asst. Secy.
Daniel P. Drechney	Controller
Offices, Plants
Executive Offices	7401 S. Cicero Ave. Chicago, Illinois 60629 www.tootsie.com
Plants	Illinois Tennessee Massachusetts Wisconsin New York Alabama Concord, Ontario Mexico City, Mexico
Foreign Sales Offices	Mexico City, Mexico Concord, Ontario

Subsidiaries

Andes Candies LP Andes Manufacturing LLC Andes Services LLC C.C.L.P., INC. C.G.P., INC. Cambridge Brands Manufacturing, Inc. Cambridge Brands Services, Inc. Cambridge Brands, Inc. Candy Realty, Inc. Cella's Confections, Inc. CGC Corp. CGCLP, INC. Charms Company Charms LP Charms Marketing Concord (GP) Inc. Concord Brands, Ltd. Concord Canada Holdings ULC Concord Confections Holdings USA, Inc. Concord Confections Ltd. Concord Partners LP Concord Wax, Inc.

Henry Eisen Advertising Agency, Inc. JT Company, Inc. OTEC Industries, Inc. Sweets Company of New York, Inc. The Sweets Mix Company, Inc. Tootsie Roll Worldwide, Ltd. Tootsie Roll Brands LLC Tootsie Roll Central Europe, Ltd. Tootsie Roll Company, Inc. Tootsie Roll Management, Inc Tootsie Roll Mfg., Inc. Tootsie Roll of Canada Ltd. Tootsie Rolls—Latin America TRI Captive Insurance Company, Inc. TRI de Latinoamerica S.A. de C.V. TRI Finance, Inc. Tri International Inc. TRI Sales Co. TRI Sales Finance LLC TRI-MASS, Inc. Tutsi S.A. de C.V. World Trade & Marketing Ltd.

Other Information
Stock Exchange	New York Stock Exchange, Inc. (Since 1922)
Stock Identification	Ticker Symbol: TR CUSIP No. 890516 10-7
Stock Transfer Agent and Stock Registrar	Mellon Investor Services LLC Overpeck Centre 85 Challenger Road Ridgefield Park, NJ 07660 1-800-710-0932 www.melloninvestor.com
Independent Accountants	PricewaterhouseCoopers LLP One North Wacker Chicago, IL 60606
General Counsel	Becker Ross, LLP 317 Madison Avenue New York, NY 10017
Annual Meeting	May 2, 2005 Mutual Building, Room 1200 909 East Main Street Richmond, VA 23219

Printed on recycled paper.

22

QuickLinks

Corporate Profile
Corporate Principles
To Our Shareholders
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Consolidated Statement of Financial Position
Consolidated Statement of Earnings, Comprehensive Earnings and Retained Earnings
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Management's Report on Internal Control Over Financial Reporting
Required Certifications
Report of Independent Registered Public Accounting Firm
Quarterly Financial Data (Unaudited)
Five Year Summary of Earnings and Financial Highlights

EX-21

EXHIBIT 21

LIST OF SUBSIDIARIES OF THE COMPANY

NAME	JURISDICTION OF INCORPORATION
Andes Candies L.P.	Illinois
Andes Manufacturing LLC	Illinois
Andes Services LLC	Illinois
C. C. L. P., Inc.	Delaware
C. G. C. Corporation	Delaware
C. G. C. L. P., Inc.	Delaware
C. G. P., Inc.	Delaware
Cambridge Brands, Inc.	Delaware
Cambridge Brands Manufacturing., Inc.	Delaware
Cambridge Brands Services, Inc.	Delaware
Candy Realty, Inc.	New Jersey
Cella's Confections, Inc.	Virginia
Charms Company	Delaware
Charms L. P.	Illinois
Charms Marketing Company	Illinois
Concord (GP) Inc.	Ontario
Concord Brands, Ltd	Alberta
Concord Canada Holdings ULC	Nova Scotia
Concord Confections Holdings USA, Inc.	Delaware
Concord Confections Ltd.	Ontario
Concord Partners LP	Ontario
Concord Wax, Inc.	Delaware
General Magnetics, Inc.	New Jersey
Henry Eisen Advertising Agency, Inc.	New Jersey
Impel Movie Line, Inc	Delaware
J. T. Company, Inc.	Delaware
O'Tec Industries, Inc.	Delaware
Sweets Company of New York, Inc.	New York
Tootsie Roll Brands LLC	Delaware
Tootsie Roll of Canada Ltd.	Ontario
Tootsie Roll Central Europe Ltd.	Delaware
The Tootsie Roll Company, Inc.	Illinois
Tootsie Roll Management, Inc.	Illinois
Tootsie Roll Manufacturing., Inc.	Illinois
Tootsie Rolls—Latin America, Inc.	Delaware
Tootsie Roll Worldwide Ltd.	Illinois
TRI Captive Insurance Company, Inc.	Arizona
The Sweets Mix Company, Inc.	Illinois
TRI de Latino America S.A. de C.V.	Mexico
TRI Finance, Inc.	Delaware
TRI International Co.	Illinois
TRI-MASS., Inc.	Massachusetts
TRI Sales Co.	Delaware
TRI Sales Finance LLC	Delaware
Tutsi S. A. de C. V.	Mexico
World Trade & Marketing Ltd.	British West Indies

EX-31.1

Exhibit 31.1

CERTIFICATIONS

        I, Melvin J. Gordon, Chairman and Chief Executive Officer of Tootsie Roll Industries, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of Tootsie Roll Industries, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 15, 2005

By:
/s/  MELVIN J. GORDON Melvin J. Gordon

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

        I, G. Howard Ember, Jr., Vice President/Finance and Chief Financial Officer of Tootsie Roll Industries, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of Tootsie Roll Industries, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 15, 2005

By:
/s/  G. HOWARD EMBER, JR. G. Howard Ember, Jr.
Vice President/Finance and
Chief Financial Officer

EX-32

Exhibit 32

Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

        Each of the undersigned officers of Tootsie Roll Industries, Inc. certifies that (i) the Annual Report on Form 10-K of Tootsie Roll Industries, Inc. for the year ended December 31, 2004 (the Form 10-K) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Tootsie Roll Industries, Inc.

Dated: March 15, 2005	/s/  MELVIN J. GORDON Melvin J. Gordon Chairman and Chief Executive Officer
Dated: March 15, 2005	/s/  G. HOWARD EMBER, JR. G. Howard Ember, Jr. Vice President/Finance and Chief Financial Officer