10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(Mark One)

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

oTRANSITION 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	(IRS Employer Identification No.)
incorporation or organization)

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 $.69-4/9 Per Share	New York Stock Exchange

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

Class B Common Stock — Par Value $.69-4/9 Per Share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  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 a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “large accelerated filer,” “accelerated filer and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x	Accelerated Filer o
Non-accelerated Filer o	Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of February 14, 2014, there were outstanding 36,790,243 shares of Common Stock par value $.69-4/9 per share, and 22,253,125 shares of Class B Common Stock par value $.69-4/9 per share.

As of June 28, 2013, 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 $593,864,000.  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 22,253,125 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 28, 2013 (based upon the closing price of the stock on the New York Stock Exchange on such date) would have been approximately $718,457,000.  Determination of stock ownership by non-affiliates was made solely for the purpose of this requirement, and the Registrant is not bound by these determinations for any other purpose.

DOCUMENTS INCORPORATED BY REFERENCE

1.Portions of the Company’s Annual Report to Shareholders for the year ended December 31, 2013 (the “2013 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 “2014 Proxy Statement”) scheduled to be held on May 5, 2014 are incorporated by reference in Part III of this report.

TABLE OF CONTENTS

ITEM 1.	Business	3
ITEM 1A.	Risk Factors	5
ITEM 1B.	Unresolved Staff Comments	7
ITEM 2.	Properties	7
ITEM 3.	Legal Proceedings	7
ITEM 4.	Mine Safety Disclosures	8
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
ITEM 6.	Selected Financial Data	9
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	9
ITEM 8.	Financial Statements and Supplementary Data	10
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	10
ITEM 9A.	Controls and Procedures	10
ITEM 9B.	Other Information	10
ITEM 10.	Directors, Executive Officers and Corporate Governance	11
ITEM 11.	Executive Compensation	11
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	11
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	12
ITEM 14.	Principal Accounting Fees and Services	12
ITEM 15.	Exhibits, Financial Statements Schedules	12

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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.”  Forward-looking statements can be identified by the use of words such as “anticipated,” “believe,” “expect,” “intend,” “estimate,” “project,” and other words of similar meaning in connection with a discussion of future operating or financial performance and are subject to certain factors, risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in the 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, factors, among others, which could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein include those set forth in the subsection entitled “Risk Factors” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Pages 11 and 12 of the 2013 Report, which subsection is incorporated herein by reference. 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 and those factors described in Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K and in other Company filings with the Securities and Exchange Commission.

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,  CHARMS MINI POPS, CELLA’S, MASON DOTS, MASON CROWS, JUNIOR MINTS, CHARLESTON CHEW, SUGAR DADDY, SUGAR BABIES, ANDES, FLUFFY STUFF, DUBBLE BUBBLE, RAZZLES, CRY BABY and NIK-L-NIP.

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 sold through approximately 30 candy and grocery brokers and by the Company itself to approximately 4,000 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, mass merchandisers, 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 majority of production from the Company’s Canadian plants is sold in the United States. The majority of production from the Company’s Mexican plant is sold in Mexico.

The domestic confectionery business is highly competitive. The Company competes primarily with other manufacturers of confectionery products sold to the above mentioned customers. 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 competition for retail shelf space and 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 2013 or 2012.

Although the Company experienced moderating costs for some ingredients in 2013 compared to 2012, unit costs for certain ingredients, packaging materials, freight and delivery, wages and benefits, and plant operations continued to increase further in 2013 compared to 2012. The Company has made progress toward restoring margins to their historical levels before the increases in commodity and other input costs in recent years, but margins remain below historical levels prior to these increases in commodity and other input costs.

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The Company has historically hedged certain of its future sugar, corn syrup and soybean oil needs with derivatives at such times that it believes that the forward markets are favorable. The Company’s decision to hedge its major ingredient requirements is dependent on our evaluation of forward commodity markets and comparison to vendor quotations, if available, and/or historical costs. The Company has historically hedged these major commodities and ingredients with derivatives, primarily commodity futures and option contracts, before the commencement of the next calendar year to better ascertain the need for product pricing changes or product weight decline (indirect price change) adjustments to its product sales portfolio and better manage ingredient costs. The Company will generally purchase forward derivative contracts (i.e., “long” position) in selected future months that correspond to the Company’s estimated procurement and usage needs of the respective commodity in the respective forward periods.

From time to time, the Company also changes the size of certain of its products, which are usually sold at standard prices, to reflect significant changes in ingredient and other input 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 research and develops new products and product line extensions for existing brands, it also improves the quality of existing products, improves and modernizes production processes, and develops and implements new technologies to enhance the quality and reduce the costs of products. The Company does not expend material amounts of money on research or development activities.

The manufacture and sale of consumer food products is highly regulated. In the United States, the Company’s activities are subject to regulation by various government agencies, including the Food and Drug Administration, the Department of Agriculture, the Federal Trade Commission, the Department of Commerce and the Environmental Protection Agency, as well as various state and local agencies. Similar agencies also regulate the businesses outside of the United States. The Company maintains quality assurance and other programs to insure that all products we manufacture and distribute are safe and of high quality and comply with all applicable laws and regulations.

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 2,000 persons.

The Company has found that its sales normally maintain a consistent level throughout the year except for a substantial increase in the third quarter which reflects pre-Halloween and back-to-school sales. In anticipation of this high sales period, the Company generally begins building inventories in the second quarter of each year. The Company historically offers extended credit terms for sales made under seasonal sales programs, including Halloween. Each year, after accounts receivables related to third quarter sales have been collected, the Company invests such funds in various marketable securities.

Sales revenues from Wal-Mart Stores, Inc. aggregated approximately 23.8%, 23.5%, and 23.5% of net product sales during the years ended December 31, 2013, 2012 and 2011, respectively. Some of the aforementioned sales to Wal-Mart are sold to McLane Company, a large national grocery wholesaler, which services and delivers certain of the Company products to Wal-Mart and other retailers in the U.S.A. Net product sales revenues from McLane, which includes these Wal-Mart sales as well as sales and deliveries to other Company customers, were 15.1% in 2013; such revenues from McLane were less than 10% in 2012 and 2011. Although no other customers other than McLane Company, Inc. and Wal-Mart Stores, Inc. accounted for more than 10% of net sales, the loss of one or more significant customers could have a material adverse effect on the Company’s business.

For a summary of sales and long-lived assets of the Company by geographic area see Note 9 of the “Notes to Consolidated Financial Statements” on Page 22 of the 2013 Report and on Page 3 of the 2013 Report under the section entitled “International.” Note 9 and the aforesaid section are incorporated herein by reference.

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 Company does not make all 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 an interested party wishes to communicate directly with the Company’s non-employee directors, it should be noted on the cover of the communication.

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ITEM 1A.Risk Factors.

Significant factors that could impact the Company’s financial condition or results of operations include, without limitation, the following:

·Risk of changes in the price and availability of raw materials - The principal ingredients used by the Company are subject to price volatility. Although the Company engages in commodity hedging transactions and annual supply agreements as well as leveraging the high volume of its annual purchases, the Company may experience price increases in these ingredients that it may not be able to offset, which could have an adverse impact on the Company’s results of operations and financial condition. In addition, although the Company has historically been able to procure sufficient supplies of its ingredients, market conditions could change such that adequate supplies might not be available or only become available at substantially higher costs. Adverse weather patterns, including the effects of climate change, can significantly affect the cost and availability of these ingredients.

·Risk of changes in product performance and competition - The Company competes with other well-established manufacturers of confectionery products. A failure of new or existing products to be favorably received, a failure to retain preferred shelf space at retail or a failure to sufficiently counter aggressive competitive actions could have an adverse impact on the Company’s results of operations and financial condition.

·Risk of discounting and other competitive actions - Discounting and pricing pressure by the Company’s retail customers and other competitive actions could make it more difficult for the Company to maintain its operating margins.

·Risk of dependence on large customers - The Company’s largest customer, Wal-Mart Stores, Inc. accounted for approximately 23.8% of net product sales in 2013, and other large national chains are also material to the Company’s sales. The loss of Wal-Mart Stores, Inc. or one or more other large customers, or a material decrease in purchases by one or more large customers, could result in decreased sales and adversely impact the Company’s results of operations and financial condition.

·Risk of changes in consumer preferences and tastes - Failure to adequately anticipate and react to changing demographics, consumer trends, consumer health concerns and product preferences could have an adverse impact on the Company’s results of operations and financial condition.

·Risk of economic conditions on consumer purchases - The Company’s sales are impacted by consumer spending levels and impulse purchases which are affected by general macroeconomic conditions, consumer confidence, employment levels, disposable income, availability of consumer credit and interest rates on that credit, consumer debt levels, energy costs and other factors. Volatility in food and energy costs, rising unemployment, declines in personal spending, and recessionary economic conditions could adversely impact the Company’s revenues, profitability and financial condition.

·Risks related to environmental matters - The Company’s operations are not particularly impactful on the environment, but increased government environmental regulation or legislation could adversely impact the Company’s profitability.

·Risks relating to participation in the multi-employer pension plan for certain Company union employees - As outlined in Note 7 (page 21) to the consolidated financial statements and discussed in the Management Discussion & Analysis (page 6), the Company participates in a multi-employer pension plan (Plan) which is currently in critical status, the “Red Zone”, as defined by applicable law. Under terms of a rehabilitation plan, the Company is to be assessed 5% annual compounded surcharges on its contributions to the Plan until such time as the Plan emerges from critical status.

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The Company was advised by the Plan that if the Company had withdrawn from the Plan during 2012 its estimated withdrawal liability would have been $37.2 million; the Company does not have any updated information regarding its withdrawal liability for 2013. The Company is currently unable to determine the ultimate outcome of this matter and therefore, is unable to determine the effects on its consolidated financial statements, but, the ultimate outcome could be material to its consolidated results of operations in one or more future periods.

·Risk of new governmental laws and regulations - Governmental laws and regulations, including those that affect food advertising and marketing, including products for children, use of ingredients in products, including the use of hydrogenated oils, income and other taxes and tariffs, including those targeted toward confectionery products, and the environment, both in and outside the U.S., are subject to change over time, which could adversely impact the Company’s results of operations and ability to compete in domestic or foreign marketplaces.

·Risk of labor stoppages - To the extent the Company experiences any significant labor stoppages, such disputes or strikes could negatively affect shipments from suppliers or shipments of finished product.

·Risk of impairment of goodwill or indefinite-lived intangible assets - In accordance with authoritative guidance, goodwill and indefinite-lived intangible assets are not amortized but are subject to an impairment evaluation annually or more frequently upon the occurrence of a triggering event, and other long-lived assets are likewise tested for impairment upon the occurrence of a triggering event.

·Risk of the cost of energy increasing — Higher energy costs would likely result in higher distribution, freight and other operating costs. The Company may not be able to offset these cost increases or pass such cost increases onto customers in the form of price increases, which could have an adverse impact on the Company’s results of operations and financial condition.

·Risk of a product recall - Issues related to the quality and safety of the Company’s products could result in a voluntary or involuntary large-scale product recall. Negative publicity associated with this type of situation, including a product recall relating to product contamination or product tampering, whether valid or not, could negatively impact demand for our products. Costs associated with these potential actions, including a product recall and related litigation or fines, and marketing costs relating to the re-launch of such products or brands, could negatively affect operating results.

·Risk of operational interruptions relating to computer software or hardware failures - The Company is reliant on computer systems to operate its business. Software failure or corruption, including cyber-based attacks or network security breaches, or catastrophic hardware failures or disaster could disrupt supply chain planning and activities relating to sales demand forecasts, materials procurement, production planning, customer shipments, and financial and accounting, all of which could negatively impact sales and profits.

·Risk of production interruptions - The majority of the Company’s products are manufactured in a single production facility on specialized equipment. In the event of a disaster, such as a fire or earthquake, at a specific plant location, it would be difficult to transfer production to other facilities or a new location in a timely manner, which could result in loss of market share for the affected products.

·Risk related to international operations - To the extent there is political or social unrest, civil war, terrorism or significant economic instability in the countries in which the Company operates, the results of the Company’s business in such countries could be adversely impacted. Currency exchange rate fluctuations between the U.S. dollar and foreign currencies could also have an adverse impact on the Company’s results of operations and financial condition. The Company’s principal markets are the U.S.A., Canada, and Mexico.

·Risk related to investments in marketable securities and equity method investments - The Company invests its surplus cash in a diversified portfolio of highly rated marketable securities, including tax exempt municipal bonds, with maturities of generally up to three years. Nonetheless, such investments could become impaired in the event of certain adverse economic and/or geopolitical events.

·Disruption to our supply chain could impair our ability to produce or deliver our finished products, resulting in a negative impact on our operating results - Disruption to our manufacturing operations or our supply chain, some of which are discussed above, could result from, but are not limited to natural disasters, pandemic outbreak of disease, weather, fire or explosion, terrorism or other acts of violence, unavailability of ingredients or packaging materials, labor strikes or other labor activities, operational and/or financial instability of key suppliers, and other vendors or service

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providers. Although we take precautions to mitigate the impact of possible disruptions, if we are unable, or if it is not financially feasible, to effectively mitigate the likelihood or potential impact of such disruptive events, our results of operations and financial condition could be negatively impacted.

·The Company is a controlled company due to the common stock holdings of the Gordon family - The Gordon family’s share ownership represents a majority of the combined voting power of all classes of the Company’s common stock as of December 31, 2013. As a result, the Gordon family has the power to elect the Company’s directors and approve actions requiring the approval of the shareholders of the Company.

The factors identified above are believed to be significant factors, but not necessarily all of the significant factors, that could impact our business.  Unpredictable or unknown factors could also have material effects on the Company.

Additional significant factors that may affect the Company’s operations, performance and business results include the risks and uncertainties listed from time to time in filings with the Securities and Exchange Commission and the risk factors or uncertainties listed herein or listed in any document incorporated by reference herein.

ITEM 1B.Unresolved Staff Comments.

None.

ITEM 2.Properties.

The Company owns its principal manufacturing, warehousing and distribution and offices facilities which are located in Chicago, Illinois in a building consisting of approximately 2,354,000 square feet. In addition, the Company leases manufacturing and warehousing facilities at a second location in Chicago which comprises 137,000 square feet.  The lease is renewable by the Company every five years through June, 2041; the Company expects to renew this lease prior to termination. 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, warehousing and distribution facilities, all of which are owned, are:

Location	Square Feet (a)
Covington, Tennessee	685,000
Cambridge, Massachusetts	142,000
Delavan, Wisconsin	162,000
Concord, Ontario, Canada	280,500	(b)
Hazelton, Pennsylvania	240,000	(c)
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, and which is excluded from the reported totals above, is leased to a third party.

(c)Warehousing only.

The Company owns substantially all of the production machinery and equipment located in its plants.  The Company also holds four commercial real estate properties for investment which were acquired with the proceeds from a sale of surplus real estate in 2005.

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, and no penalties have been imposed by the Internal Revenue Service on the Company.

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ADDITIONAL ITEM.Executive Officers of the Registrant.

See the information on Executive Officers set forth in the table in Part III, Item 10, Page 11 of this report, which is incorporated herein by reference.

ITEM 4.Mine Safety Disclosures.

None

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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.  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 February 28, 2014, there were approximately 3,200 and 1,200 registered holders of record of Common and Class B Common Stock, respectively.  In addition, the Company estimates that as of February 28, 2014 there were 17,000 and 4,500 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 “2013-2012 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Price and Dividends Per Share” which appears on Page 28 of the 2013 Report.  This section is incorporated herein by reference and filed as an exhibit to this report.

The following table sets forth information about the shares of Common Stock the Company purchased on the open market during the fiscal quarter ended December 31, 2013:

Issuer Purchases of Equity Securities

				Total Number of	Maximum Number (or
	Total	Average		Shares Purchased	Approximate Dollar Value)
	Number	Price		as Part of Publicly	of Shares that May Yet
	of Shares	Paid per		Announced Plans	be Purchased Under the
Period	Purchased	Share		or Programs	Plans or Programs
Sep 29 to Oct 26	65,000	$	30.30	Not Applicable	Not Applicable
Oct 27 to Nov 23	158,055	31.74		Not Applicable	Not Applicable
Nov 24 to Dec 31	145,312	32.44		Not Applicable	Not Applicable
Total	368,367	$	31.76

While the Company does not have a formal or publicly announced Company Common Stock purchase program, the Company’s Board of Directors periodically authorizes a dollar amount for such share purchases. The treasurer executes share purchase transactions according to these guidelines.

ITEM 6.Selected Financial Data.

See the section entitled “Five Year Summary of Earnings and Financial Highlights” which appears on Page 29 of the 2013 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 4-12 of the 2013 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 Pages 10-11 of the 2013 Report.  This section is incorporated herein by reference and filed as an exhibit to this report.

See also Note 1 of the “Notes to Consolidated Financial Statements” commencing on Page 18 of the 2013 Report, which is incorporated herein by reference.

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ITEM 8.Financial Statements and Supplementary Data.

The financial statements, together with the report thereon of PricewaterhouseCoopers LLP dated February 28, 2014, appearing on Pages 13-26 of the 2013 Report and the “Quarterly Financial Data (Unaudited)” on Page 28 of the 2013 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, 7A, and 9A, the 2013 Report is not to be deemed filed as part of this report.

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

None.

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 Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) ) are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is (i)  recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

(a) See Page 27 of the 2013 Report for “Management’s Report on Internal Control Over Financial Reporting,” which is incorporated herein by reference.

(b) See Page 26 of the 2013 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, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.Other Information.

None

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PART III

ITEM 10.Directors,  Executive Officers and Corporate Governance.

See the information with respect to the Directors of the Company which is set forth in the section entitled “Election of Directors” of the 2014 Proxy Statement, which section of the 2014 Proxy Statement is incorporated herein by reference. See the information in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s 2014 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)	94
Ellen R. Gordon*	President and Chief Operating Officer (2)	82
G. Howard Ember Jr.	Vice President/Finance	61
John W. Newlin Jr.	Vice President/Manufacturing	76
Thomas E. Corr	Vice President/Marketing and Sales	65
John P. Majors	Vice President/Distribution	52
Barry P. Bowen	Treasurer	58

*A member of the Board of Directors of the Company

(1)All of the above named officers have served in the positions set forth in the table as their principal occupations for more than the past five years. 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 Business Conduct and Ethics is available on the Company’s website, located at www.tootsie.com, and the information in such is available in print to any shareholder who requests a copy.

ITEM 11.Executive Compensation.

See the information set forth in the sections entitled “Executive Compensation” and “Director Compensation” of the Company’s 2014 Proxy Statement, which are 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 Common Stock by Certain Beneficial Owners” and “Ownership of Common Stock and Class B Common Stock by Management” of the 2014 Proxy Statement. These sections of the 2014 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.

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ITEM 13.Certain Relationships and Related Transactions, and Director Independence.

See the section entitled “Related Person Transactions” of the 2014 Proxy Statement, which is incorporated herein by reference.

Our board of directors has determined that our non-management directors, Messrs. Seibert and Bergeman and Ms. Lewis-Brent, are independent under the New York Stock Exchange listing standards because they have no direct or indirect relationship with the Company other than through their service on the Board of Directors.

ITEM 14.Principal Accounting Fees and Services.

See the section entitled “Independent Auditor Fees and Services” of the 2014 Proxy Statement, which is incorporated herein by reference.

ITEM 15.Exhibits, Financial Statements Schedule.

(a)Financial Statements.

The following financial statements and schedule 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 each of the three years ended December 31, 2013, 2012 and 2011

Consolidated Statements of Financial Position at December 31, 2013 and 2012

Consolidated Statements of Cash Flows for each of the three years ended in the period December 31, 2013, 2012 and 2011

Notes to Consolidated Financial Statements

(2)Financial Statement Schedule:

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

For the three years ended December 31, 2013, 2012 and 2011 — Valuation and Qualifying Accounts

(3)Exhibits required by Item 601 of Regulation S-K:

See Index to Exhibits which appears following Financial Schedule II.

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:	Melvin J. Gordon
	Melvin J. Gordon, Chairman of the Board of Directors and Chief Executive Officer
Date:	February 28, 2014

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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.

Melvin J. Gordon	Chairman of the Board of Directors and Chief Executive Officer	February 28, 2014
Melvin J. Gordon	(principal executive officer)
Ellen R. Gordon	Director, President and Chief Operating Officer	February 28, 2014
Ellen R. Gordon
Richard P. Bergeman	Director	February 28, 2014
Richard P. Bergeman
Lana Jane Lewis-Brent	Director	February 28, 2014
Lana Jane Lewis-Brent
Barre A. Seibert	Director	February 28, 2014
Barre A. Seibert
G. Howard Ember, Jr.	Vice President, Finance	February 28, 2014
G. Howard Ember, Jr.	(principal financial officer and principal accounting officer)

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 and of the effectiveness of internal control over financial reporting referred to in our report dated February 28, 2014 appearing in the 2013 Annual Report to Shareholders of Tootsie Roll Industries, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement 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.

/s/ PricewaterhouseCoopers LLP

Chicago, IL

February 28, 2014

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TOOTSIE ROLL INDUSTRIES, INC.
AND SUBSIDIARY COMPANIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS (in thousands)

DECEMBER 31, 2013, 2012 AND 2011

Description	Balance at beginning of year		Additions (reductions) charged (credited) to expense			Deductions(1)			Balance at End of Year
2013:
Reserve for bad debts	$	1,462	$	16		$	80		$	1,398
Reserve for cash discounts	680		9,725			9,761			644
Deferred tax asset valuation	2,040		(1,083		)	—			957
	$	4,182	$	8,658		$	9,841		$	2,999
2012:
Reserve for bad debts	$	998	$	511		$	47		$	1,462
Reserve for cash discounts	733		9,959			10,012			680
Deferred tax asset valuation	2,190		(150		)	—			2,040
	$	3,921	$	10,320		$	10,059		$	4,182
2011:
Reserve for bad debts	$	1,121	$	(186	)	$	(63	)	$	998
Reserve for cash discounts	410		10,007			9,684			733
Deferred tax asset valuation	686		1,504			—			2,190
	$	2,217	$	11,325		$	9,621		$	3,921

(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.

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INDEX TO EXHIBITS

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.
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.
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.
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.
10.1*	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.
10.2*	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.
10.3*	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.
10.4*	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.
10.5*	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.
10.6*	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
10.7*	Form of amendment to Change in Control Agreement between the Company and certain executive officers. Incorporated by reference to Exhibit 10.28 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
10.8*	Post 2004 Supplemental Savings Plan of the Company. Incorporated by reference to Exhibit 10.29 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
10.9*	Post 2004 Excess Benefit Plan of the Company. Incorporated by reference to Exhibit 10.30 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
10.10*	Amended and Restated Career Achievement Plan of the Company. Incorporated by reference to Exhibit 10.31 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
10.11*	Exhibit 10.1- Tootsie Roll Industries, Inc. Management Incentive Plan. Incorporated by reference to Appendix A to the Company’s definitive Proxy Statement filed with the Commission on March 24, 2006.
13	The following items incorporated by reference herein from the Company’s 2013 Annual Report to Shareholders for the year ended December 31, 2013 (the “2013 Report”), are filed as Exhibits to this report:
	(i)	Information under the section entitled “International” set forth on Page 3 of the 2013 Report;
	(ii)	Information under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth on Pages 4-12 of the 2013 Report;

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	(iii)	Information under the subsection entitled “Risk Factors” set forth on Pages 11-12 of the 2013 Report;
	(iv)	Consolidated Statements of Financial Position at December 31, 2013 and 2012 set forth on Pages 15-16 of the 2013 Report;
	(v)	Consolidated Statements of Earnings, and Retained Earnings for the three years ended December 31, 2013, 2012 and 2011 set forth on Page 13 of the 2013 Report;
	(vi)	Consolidated Statements of Comprehensive Earnings for the three years ended December 31, 2013, 2012 and 2011 set forth on Page 14 of the 2013 Report;
	(vii)	Consolidated Statements of Cash Flows for the three years ended December 31, 2013, 2012 and 2011 set forth on Page 17 of the 2013 Report;
	(viii)	Notes to Consolidated Financial Statements set forth on Pages 18-25 of the 2013 Report;
	(ix)	Management’s Report on Internal Control over Financial Reporting set forth on Page 27 of the 2013 Report;
	(x)	Report of Independent Registered Public Accounting Firm set forth on Page 26 of the 2013 Report;
	(xi)	Quarterly Financial Data set forth on Page 28 of the 2013 Report;
	(xii)	Information under the section entitled “2013-2012 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Price and Dividends per Share” set forth on Page 28 of the 2013 Report; and
	(xiii)	Information under the section entitled “Five Year Summary of Earnings and Financial Highlights” set forth on Page 29 of the 2013 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.
101	The following financial statements and notes from Tootsie Roll Industries, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission on February 28, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, Comprehensive Earnings and Retained Earnings; (ii) Consolidated Statements of Financial Position;  (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to Consolidated Financial Statements.

*Management compensation plan or arrangement.

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EX-13

Exhibit 13

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

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.”

Financial Highlights

	December 31,
	2013		2012
	(in thousands except per share data)
Net Product Sales	$	539,627	$	545,985
Net Earnings	60,849		52,004
Working Capital	179,990		136,476
Net Property, Plant and Equipment	196,916		201,290
Shareholders’ Equity	680,305		649,815
Average Shares Outstanding*	59,634		60,484
Per Share Items*
Net Earnings	$	1.02	$	0.86
Cash Dividends Paid	0.24		0.90

*Adjusted for stock dividends.

1

To Our Shareholders

Net product sales in 2013 were $540 million compared to $546 million in 2012. We had another strong Halloween selling season and many of our core brands delivered good sales results.

Net earnings in 2013 were $61 million compared to $52 million in 2012, and earnings per share were $1.02 as compared to $0.86 in the prior year.

Our margins began to move toward more normal historical levels as certain commodity costs began to moderate somewhat during the year. Still, many commodities we use remain costly by historical standards, and we are continually challenged to keep our operations lean in order to deliver maximum value to our consumers and our shareholders.

We strive to implement measures that improve every aspect of our operations without jeopardizing the long-term strength of the Company. Our many well-known confectionery brands tend to be value-oriented. As such, one of our key goals is to be the low-cost producer in each product category in which we compete.

To achieve this goal, we actively pursue investments in the latest technology, and in 2013 capital expenditures were $16 million. This included new state of the art equipment installations at a number of our plants, as well as investments in information technology, which plays an ever-increasing role in the Company.

Other highlights of 2013 include:

·Cash dividends were paid for the seventy-first consecutive year.

·Our forty-ninth consecutive 3% stock dividend was distributed.

·752,100 shares of the Company’s common stock were purchased in the open market for an aggregate price of $23 million.

These actions were accomplished using internally generated funds. We ended 2013 with $200 million of cash and investments, net of interest bearing debt and investments that hedge deferred compensation.

This financial strength enables the Company to continue to reinvest in operating assets and in our brands, develop new products or line extensions, distribute dividends, repurchase Company stock and to consider business acquisition opportunities as they arise. We are constantly active in each of these aspects of our business.

Sales and Marketing

Halloween was once again our largest selling period. Sales were supported by promotions tailored to our most significant trade class which includes mass merchandisers, drug chains, warehouse clubs, grocery and dollar stores. Packaged goods have remained highly successful in these channels, including large mixed assortments of our most popular items.

We also have several market leading entries in the “theater box” category which sold well again in 2013. These items generate high volumes through a variety of trade classes either as straight goods or in combo packs, display ready cases and floor displays.

Candy is sold in almost every retail trade channel, and we face intense competition in our industry. Retailers are highly selective as to the products they carry, and consumers can choose from a broad array of appealing products. The market is also fluid, as pack sizes, product presentations and assortments evolve to meet changing preferences in the trade and among consumers. Our iconic brands evolve in response to these shifting market conditions yet remain pure and satisfying to the sweet tooth of the many long term consumers who enjoy them.

Line extensions and other new products generated incremental sales and added to the excitement of our product portfolio. Cry Baby Chews were a super-sour, super-chewy, addition to our theater box line. In five delicious fruit flavors and dusted with a supercharged sour powder, this item is true to the mouth-puckering sour experience Cry Baby consumers have come to expect.

Cry Baby Chews

Our leadership in the lollipop category was bolstered by two seasonal offerings in the Charms line. New Candy Corn Pops of orange, yellow and white deliver great flavor along with the nostalgic feeling of fall candy corn.

Candy Corn Pops

Pumpkin Pops, another fall favorite from Charms, got an extreme make-over in 2013 with vivid new graphics. Despite the hauntingly sinister jack-o-lantern on the bag, this treat makes an eye-catching and tasty addition to any Halloween candy bowl.

Pumpkin Pops

For the Christmas season, Naughty (sour apple) or Nice (sweet cherry)

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Pops became a fitting treat no matter which of Santa’s lists you were on!

Naughty or Nice Pops

Another seasonal line extension was Andes Crème de Menthe Trees, featuring Christmas tree-shaped layers of our famous Andes confection, individually wrapped in festive foil. This item makes a great stocking stuffer, that is, unless Santa’s helpers succumb to temptation and eat it first!

Andes Crème de Menthe Trees

Advertising and Public Relations

During 2013, we further expanded our digital marketing and social media initiatives on Facebook, Twitter, You Tube and Pinterest. Our primary demographic in these initiatives is candy buying mothers ages 25 to 44. We leveraged several brands along with our famous Mr. Owl character through a variety of website game experiences, banner ads and prize contests.

Social media efforts were enhanced by mobile device ads and internet ads also featuring our Mr. Owl in the famous “How Many Licks” commercial. We also promoted the “How Many Licks?” theme through traditional cable television ads. Having sought the answer to this famous question in a variety of media over many years, it seems that, as a wise owl once observed, “The world may never know!”

Again in 2013, several of our products were highlighted in special interest food programs on cable television. These, along with other previous cable programs, remain popular with viewing audiences and generate extensive exposure for our brands.

Supply Chain

In addition to the routine maintenance associated with a large manufacturing enterprise, we continually strive to improve our operations by upgrading facilities, equipment and business systems. Each year we undertake a variety of projects to add capacity, increase efficiency or improve quality. Emerging technology in production and control systems used throughout our process in blending, cooking, forming, wrapping, packaging and material handling, as well as new information technologies, continually present opportunities for attractive, cost saving capital projects.

In planning and designing these projects, we are careful to build in flexibility that will enable the Company to react to future changes in packaging or product assortments. Although this type of forward planning can add significant cost to these projects, it is imperative if we are to meet the future demands of an evolving market place. We are fortunate to have sufficient financial resources which enable us to take this extra step.

Purchasing

Prices of many commodities that we use moderated somewhat during the year from near record levels. Still, most remain high by historical standards and dairy powders, along with packaging costs, actually increased.

We continue to use competitive bidding, hedging and forward purchase contracts to manage commodity costs to the greatest extent we prudently can.

International

We manufacture and sell products in Mexico under the Tutsi trademark. We also sell Tootsie products, along with most of our other domestic brands, in the Canadian market and in many countries in Europe, Asia, and South and Central America.

We continue to see opportunities to market our products to confectionery consumers in a variety of international markets and we are actively cultivating these opportunities.

In Appreciation

We wish to thank our many loyal employees, customers, suppliers, sales brokers, and distributors for their efforts during 2013. We also thank our fellow shareholders for their support over the years. We are committed to success in the present environment, as well as, preparing the Company to succeed tomorrow and beyond.

Melvin J. Gordon

Chairman of the Board and

Chief Executive Officer

Ellen R. Gordon

President and

Chief Operating Officer

3

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, significant accounting policies and estimates, new accounting pronouncements, 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 Company’s overall financial position remains very strong as a result of its improving 2013 gross profit margins, net earnings and cash flows provided by operating activities. Cash flows from operating activities totaled $109,809 in 2013 compared to $101,919 in 2012. The Company used its 2013 cash flows to pay cash dividends of $14,282, purchase and retire $23,143 of its outstanding shares, and make capital expenditures of $15,752.

The Company’s net working capital was $179,990 at December 31, 2013 compared to $136,476 at December 31, 2012 which generally reflects higher cash and cash equivalents and short-term investments. As of December 31, 2013, the Company’s aggregate cash, cash equivalents and investments, including all long-term investments in marketable securities, was $270,387 compared to $209,420 at December 31, 2012, an increase of $60,967. The aforementioned includes $63,215 and $49,378 in trading securities as of December 31, 2013 and 2012, respectively. The Company invests in trading securities to provide an economic hedge for its deferred compensation liabilities, as further discussed herein and in Note 7 to the Consolidated Financial Statements.

Shareholders’ equity increased from $649,815 at December 31, 2012 to $680,305 as of December 31, 2013, principally reflecting 2013 net earnings of $60,849, less cash dividends of $14,282 and share repurchases of $23,143 during 2013.

The Company has a relatively straight-forward financial structure and has historically maintained a conservative financial position. Except for an immaterial amount of operating leases, the Company has no special financing arrangements or “off-balance sheet” special purpose entities. Cash flows from operations plus maturities of short-term investments are expected to be adequate to meet the Company’s overall financing needs, including capital expenditures, in 2014. Periodically, the Company considers possible acquisitions, and if the Company were to pursue and complete such an acquisition, that could result in bank borrowings or other financing.

Results of Operations

2013 vs. 2012

Net product sales were $539,627 in 2013 compared to $545,985 in 2012, a decrease of $6,358 or 1.2%. The decline in 2013 sales reflects some special promotional sales in 2012 that were not repeated in 2013.

Product cost of goods sold were $350,960 in 2013 compared to $365,573 in 2012, a decrease of $14,613 or 4.0%. Product cost of goods sold includes $2,457 and $1,034 in certain deferred compensation expenses in 2013 and 2012, respectively. These deferred compensation expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Adjusting for the aforementioned, product cost of goods sold decreased from $364,539 in 2012 to $348,503 in 2013, a decrease of $16,036 or 4.4%. As a percent of net product sales, these adjusted costs decreased from 66.8% in 2012 to 64.6% in 2013, a favorable decrease of 2.2% as a percent of net product sales. Although certain key ingredient costs were higher in 2013, our overall comparative ingredient costs are more favorable this year; however, our packaging materials and manufacturing plant operating costs did increase in 2013 compared to 2012. We are continuing our focus on cost reductions and savings and are making progress on restoring our margins to their historical levels before the increases in commodity and other input costs in recent years.

Selling, marketing and administrative expenses were $119,133 in 2013 compared to $113,842 in 2012, an increase of $5,291 or 4.6%. Selling, marketing and administrative expenses include $8,131 and $3,582 in certain deferred compensation expenses in 2013 and 2012, respectively. These deferred compensation expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Adjusting for the aforementioned, selling, marketing and administrative expenses increased from $110,260 in 2012 to $111,002 in 2013, an increase of $742 or 0.7%. As a percent of net product sales, these adjusted expenses increased slightly from 20.2% of net product sales in 2012 to 20.6% of net product sales in 2013. Selling, marketing and

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administrative expenses include $45,367 and $45,072 of freight, delivery and warehousing expenses in 2013 and 2012, respectively, which increased slightly from 8.3% of net product sales in 2012 to 8.4% of net product sales in 2013.

The Company believes that the carrying values of its goodwill and trademarks have indefinite lives as they are expected to generate cash flows indefinitely. In accordance with current accounting guidance, these indefinite-lived intangible assets are assessed at least annually for impairment as of December 31 or whenever events or circumstances indicate that the carrying values may not be recoverable from future cash flows. No impairments were recorded in 2013 or 2012. The fair values of trademarks are assessed each year using the present value of estimated future cash flows and estimated royalties. Based on the Company’s estimate at December 31, 2013, the individual fair values of the indefinite lived intangible assets exceed the net book value by more than 10%. For certain trademarks, holding all other assumptions constant at the test date, a 100 basis point increase in the discount rate or a 100 basis point decrease in the royalty rate would reduce the fair value of certain trademarks by approximately 16% and 13%, respectively. Individually, a 100 basis point increase in the discount rate would indicate a potential impairment of approximately $7,000 as of December 31, 2013. However, if the royalty rate were decreased by 100 basis points a potential impairment of approximately $3,000 would be indicated as of December 31, 2013.

Earnings from operations were $72,353 in 2013 compared to $69,479 in 2012, an increase of $2,874. Earnings from operations include $10,588 and $4,616 in certain deferred compensation expense in 2013 and 2012, respectively, which are discussed above. Adjusting for these deferred compensation expenses, earnings from operations were $82,941 and $74,095 in 2013 and 2012, respectively, an increase of $8,846 or 11.9%. This increase in 2013 earnings from operations principally reflects more favorable ingredient costs, plant efficiencies driven by capital investments, and on-going cost control programs.

Management believes the comparisons presented in the preceding paragraphs after adjusting for changes in deferred compensation are more reflective of the underlying operations of the Company.

Other income, net was $12,130 in 2013 compared to $4,685 in 2012, an increase of $7,445. Other income, net principally reflects $10,588 and $4,616 of aggregate net gains and investment income on trading securities in 2013 and 2012, respectively. These trading securities provide an economic hedge of the Company’s deferred compensation liabilities; and the related net gains and investment income were offset by a like amount of expense in aggregate product cost of goods sold and selling, marketing, and administrative expenses in the respective years as discussed above. Other income, net also includes foreign exchange gains (losses) of $(790) and $442 in 2013 and 2012, respectively.

During the fourth quarter 2013, the Company sold its investment in Jefferson County Alabama Sewer Revenue Refunding Warrants for $10,840. This was an auction rate security (ARS) originally purchased for $13,550 in 2008 with an insurance-backed AAA rating. Because the Company recorded an other-than-temporary pre-tax impairment of $5,140 in 2008 on this ARS investment which resulted in a carrying value of $8,410 at that time, a net gain of $2,430 was recorded on this sale in fourth quarter 2013. Since recording this initial impairment in 2008, the Company has carried this ARS investment at its estimated fair value utilizing a valuation model with Level 3 inputs, as defined by guidance, and resulting changes in the market value since the original impairment charge in 2008 have been recorded as changes to accumulated other comprehensive income (loss) each year.

Other income, net includes the results of the Company’s 50% share of two Spanish companies which are accounted for using the equity method. These equity method losses were $967 and $1,019 for 2013 and 2012, respectively. In addition, pre-tax impairment charges of $975 and $850 were recorded in 2013 and 2012, respectively, to write-down the Company’s carrying value to estimated fair value. Management estimated fair value principally using discounted cash flow as well as other market valuation analyses. The Company’s carrying value of this investment at December 31, 2013 is not significant.

The consolidated effective tax rate was 28.0% and 29.9% in 2013 and 2012, respectively; a reconciliation of the differences between the U.S. statutory rate and these effective tax rates is provided in Note 4 to the Consolidated Financial Statements. At December 31, 2013, the Company’s deferred tax assets include $12,512 of income tax benefits relating to foreign subsidiary tax loss carry-forwards which the Company expects to realize before their expiration dates (2026 through 2031). The Company utilized approximately $400 and $3,000 of these carry-forward tax loss benefits in 2013 and 2012, respectively. The Company has concluded that it is more-likely-than-not that it would realize these deferred tax assets relating to such tax operating loss carry-forwards because it is expected that sufficient levels of taxable income will be generated during the carry-forward periods. The Company has not provided for U.S. federal or foreign withholding taxes on $10,988 and $8,868 of foreign subsidiaries’ undistributed

5

earnings as of December 31, 2013 and December 31, 2012, respectively, because such earnings are considered to be permanently reinvested. The Company estimates that the federal income tax liability on such undistributed earnings would approximate 30% of these amounts.

Net earnings were $60,849 in 2013 compared to $52,004 in 2012, and earnings per share were $1.02 and $0.86 in 2013 and 2012, respectively, an increase of $0.16 or 18.6%. Net earnings benefited from improved gross profit margins, as well as a gain on the sale of an ARS investment security and a lower effective tax rate, all of which are discussed above. Earnings per share benefited from the reduction in average shares outstanding resulting from purchases of the Company’s common stock in the open market by the Company. Average shares outstanding decreased from 60,484 in 2012 to 59,634 in 2013.

During 2012, the Company received notices from the Bakery and Confectionery Union and Industry International (BC&T) Pension Fund (Plan), a multi-employer defined benefit pension plan for certain Company union employees. Theses notices indicated that the Plan’s actuary certified that the Plan was in critical status, the “Red Zone”, as defined by the Pension Protection Act (PPA), and that a plan of rehabilitation was adopted by the Trustees of the Plan (Trustees) in fourth quarter 2012. The rehabilitation plan adopted requires that employer contributions include 5% compounded annual surcharges each year for an unspecified period of time beginning in January 2013 (in addition to a 5% interim surcharge initiated in June 2012) as well as certain plan benefit reductions. The Trustees will review the Plan’s progress each year and will consider if further adjustments, including employer surcharges or plan benefit modifications, are necessary to meet the objectives of the rehabilitation plan. Under the rehabilitation plan adopted, the Plan is projected to emerge from critical status sometime beyond a 30 year projection period. In the event that a plan does not have the financial resources to ultimately pay benefits at a level specified by law, then it must apply to the Pension Benefits Guaranty Corporation for government financial assistance. The Trustees have advised that neither the PPA nor regulatory guidance currently defines the rehabilitation standards for a plan that is not designed to emerge from critical status within the prescribed 10-year rehabilitation period. Company contributions, including surcharges, to the Plan were $2,231, $2,131, and $2,046 in each of the years 2013, 2012 and 2011, respectively. Surcharges included in aforementioned amounts were $242 and $65 in 2013 and 2012, respectively.

The Company was advised by the Plan that if the Company had withdrawn from the Plan during 2012 its estimated withdrawal liability would have been $37,200. The Company does not have any updated information regarding its withdrawal liability for 2013. Should the Company actually withdraw from the Plan at a future date, a withdrawal liability, which could be higher (or lower) than $37,200, would be payable to the Plan. In first quarter 2013, the Company executed a new labor contract with its BC&T local union which included the Company’s commitment to continue participating in this Plan through third quarter 2017. The Company is currently unable to determine the ultimate outcome of the above discussed matter and therefore, is unable to determine the effects on its consolidated financial statements, but, the ultimate outcome could be material to its consolidated results of operations in one or more future periods.

2012 vs. 2011

Net product sales were $545,985 in 2012 compared to $528,369 in 2011, an increase of $17,616 or 3.3%. Net sales in 2012 benefited from effective marketing and selling programs, including back-to-school and pre-Halloween programs, as well as from higher price realization needed to recover some of the rising commodity and other input costs experienced in recent years. Higher price realization generally reflects increases in product sales list prices, net of trade promotions, and the effects of any product size or weight changes.

Product cost of goods sold were $365,573 in 2012 compared to $365,225 in 2011, an increase of $348 or 0.1%. Product cost of goods sold includes $1,034 and $44 in certain deferred compensation expenses in 2012 and 2011, respectively. These deferred compensation expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Adjusting for the aforementioned, product cost of goods sold decreased from $365,181 in 2011 to $364,539 in 2012, a decrease of $642 or 0.2%. As a percent of net product sales, these adjusted costs decreased from 69.1% in 2011 to 66.8% in 2012, a decrease of 2.3% as a percent of net product sales. The favorable decrease in these costs as a percentage of sales primarily reflects higher price realization which was needed to restore a portion of our margins due to higher commodity and other input costs in recent years. Although we experienced decreases in costs for some ingredients in 2012 compared to 2011, our unit costs for packaging materials, freight and delivery, wages and benefits, and plant operations continued to increase further in 2012 compared

6

to 2011. We have made progress toward restoring margins to their historical levels before the increases in commodity costs in recent years, but margins remain below historical levels prior to these increases in commodity and other input costs. Restoring these margins and coping with the effects of some ongoing high commodity costs continue to be part of our long-term challenge.

Selling, marketing and administrative expenses were $113,842 in 2012 compared to $108,276 in 2011, an increase of $5,566 or 5.1%. Selling, marketing and administrative expenses include $3,582 and $15, of certain deferred compensation expenses in 2012 and 2011, respectively. These deferred compensation expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Adjusting for the aforementioned, selling, marketing and administrative expenses increased from $108,291 in 2011 to $110,260 in 2012, an increase of $1,969 or 1.8%. As a percent of net product sales, these adjusted expenses decreased slightly from 20.5% of net product sales in 2011 to 20.2% of net product sales in 2012. Selling, marketing and administrative expenses include $45,072 and $45,850 of freight, delivery and warehousing expenses in 2012 and 2011, respectively.

These expenses decreased from 8.7% of net product sales in 2011 to 8.3% of net product sales in 2012, principally reflecting the effects of higher price realization.

Earnings from operations were $69,479 in 2012 compared to $57,966 in 2011, an increase of $11,513. Earnings from operations include $4,616 and $29 in certain deferred compensation expenses in 2012 and 2011, respectively. As discussed above, these deferred compensation expenses relate to changes in deferred compensation liabilities resulting from corresponding changes in the market value of trading securities and related investment income that hedge these liabilities. Adjusting for these deferred compensation expenses, earnings from operations were $74,095 and $57,995 in 2012 and 2011, respectively, an increase of $16,100 or 27.8%. This increase in earnings from operations principally reflects the benefits of increased sales, including higher price realization, as well as some decreases in ingredient costs in 2012 compared to 2011 and on-going cost control programs.

Management believes the comparisons presented in the preceding paragraphs after adjusting for changes in deferred compensation are more reflective of the underlying operations of the Company.

Other income, net was $4,685 in 2012 compared to $2,946 in 2011, an increase of $1,739. Other income, net reflects aggregate net gains and investment income of $4,616 and $29 in 2012 and 2011, respectively, on trading securities. These trading securities were offset by a like amount of expense in aggregate product cost of goods sold and selling, marketing, and administrative expenses in the respective years as discussed above. Other income, net also includes foreign exchange gains of $442 and $2,098 in 2012 and 2011, respectively.

Other income, net includes the results of the Company’s 50% share of two Spanish companies which are accounted for using the equity method. These equity method losses were $1,019 and $194 for 2012 and 2011, respectively. In addition, a pre-tax impairment charge of $850 was recorded in 2012 to write-down the Company’s carrying value to estimated fair value. Management estimated fair value principally using discounted cash flow and market comparable analyses.

The consolidated effective tax rate was 29.9% and 27.9% in 2012 and 2011, respectively. At December 31, 2012, the Company’s deferred tax assets include $13,791 of income tax benefits relating to foreign subsidiary tax loss carry-forwards which expire in 2014 through 2031 ($13,376 of benefits expire between 2022 and 2031). The aforementioned reflects the utilization of approximately $3,000 of these carry-forwards benefits in 2012; none of these carry-forward benefits were utilized in 2011. The Company has concluded that it is more-likely-than-not that it would realize the deferred tax assets relating to such tax operating loss carry-forwards because it is expected that sufficient levels of taxable income will be generated during the carry-forward periods.

Net earnings were $52,004 in 2012 compared to $43,938 in 2011, and earnings per share were $0.89 and $0.74 in 2012 and 2011, respectively, an increase of $0.15 or 20.3%. Earnings per share benefited from the reduction in average shares outstanding resulting from purchases of the Company’s common stock in the open market by the Company. Average shares outstanding decreased from 59,606 in 2011 to 58,742 in 2012.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities were $109,809, $101,919 and $50,390 in 2013, 2012 and 2011, respectively. The $7,890 increase in cash flows from operating activities from 2012 to 2013 primarily reflects the 2013 increase in net earnings, and changes in inventories and prepaid expenses and other assets in the respective years. The increase in cash flows from 2011 to 2012 primarily reflects the 2012 increase in net earnings, decreases in inventories, accounts receivable and prepaid expenses and other assets.

7

During fourth quarter 2013, the Company contributed $15,000 to a VEBA trust, managed and controlled by the Company, to fund the estimated future costs of certain employee health, welfare and other benefits. The Company is using these funds, as well as investment income in this VEBA trust, to pay the actual cost of such benefits through 2017. At December 31, 2013, the VEBA trust held $13,991 of aggregate cash, cash equivalents and investments. This asset value is included in prepaid expenses and long-term other assets in the Company’s Consolidated Statement of Financial Position.

During fourth quarter 2013, the Company amended its post-retirement health and life insurance benefits plan provided to corporate office and management employees. These plan changes resulted in a negative plan amendment, as defined by accounting guidance, and a $10,425 reduction in the Company’s benefit obligation as of December 31, 2013. The plan changes generally limited future annual cost increases in health benefits to 3%, restricted this benefit to current employees with long-term service with the Company, required retirees to pay the full cost of life insurance, and eliminated these benefits for future employees effective April 1, 2014.

Cash flows from investing activities reflect capital expenditures of $15,752, $8,886, and $16,351 in 2013, 2012 and 2011, respectively.

The increase from 2012 to 2013 principally reflects the timing of expenditures relating to plant manufacturing projects as well as approximately $1,800 relating to computer system software and implementation. Capital expenditures in 2011 include $3,025 relating to the purchase of warehouse space and land planned for future use.

The Company had no bank borrowings or repayments in 2011, 2012, or 2013, and had no outstanding bank borrowings as of December 31, 2012 or 2013. Nonetheless, the Company would consider bank borrowing or other financing in the event that a business acquisition is completed.

Financing activities include Company common stock purchases and retirements of $23,143, $23,803, and $18,190 in 2013, 2012 and 2011, respectively. Cash dividends of $14,282, $52,431 (includes a special one-time dividend of $29,138 in 2012), and $18,407 were paid in 2013, 2012 and 2011, respectively. The fourth quarter 2012 included a special $0.50 per share cash dividend as well as an accelerated payment of the regular quarterly dividend of $0.08 per share which has historically been paid during the first week in January. Both were in response to the uncertainty surrounding the future federal tax treatment of dividends at that time after giving consideration to the Company’s cash and investment position.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Preparation of the Company’s financial statements involves judgments and estimates 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. The Company bases its estimates on historical experience and other assumptions, as discussed herein, that it believes are reasonable. If actual amounts are ultimately different from previous estimates, the revisions are included in the Company’s results of operations for the period in which the actual amounts become known. The Company’s significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements.

Following is a summary and discussion of the more significant accounting policies which management believes to have a significant impact on the Company’s operating results, financial position, cash flows and footnote disclosure.

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 based on a customer purchase order, and collectability is reasonably assured. The accounting for promotional costs is discussed under “Customer incentive programs, advertising and marketing” below.

Provisions for bad debts are recorded as selling, marketing and administrative expenses. Write-offs of bad debts did not exceed 0.1% of net product sales in each of 2013, 2012 and 2011, and accordingly, have not been significant to the Company’s financial position or results of operations.

Intangible assets

The Company’s intangible assets consist primarily of goodwill and acquired trademarks. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. In accordance with accounting guidance, goodwill and other indefinite-lived assets are not amortized, but are instead subjected to annual testing for impairment unless certain triggering events or circumstances are noted. The Company performs its annual impairment testing as of December 31. The Company may

8

utilize third-party professional valuation firms to assist in the determination of valuation of certain trademarks.

With respect to impairment testing of goodwill, the first step compares the reporting unit’s estimated fair value with its carrying value. We estimate a reporting unit’s fair value using projected discounted cash flows. If the carrying value of a reporting unit’s net assets exceeds its fair value, the second step is applied to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is considered impaired and reduced to its implied fair value.

We test non-amortizable intangible assets, trademarks, for impairment by comparing the fair value of each trademark with its carrying value. We determine fair value of trademarks using discounted cash flows and estimates of royalty rates. If the carrying value exceeds fair value, the trademark is considered impaired and is reduced to fair value.

The cash flow projections discussed above requires us to make assumptions and estimates regarding our future plans, including sales projections and profit margins, market based discount rates, competitive factors, and economic conditions; and our actual results and conditions may differ over time. A change in the assumptions relating to the impairment analysis of goodwill and trademarks, including but not limited to a reduction in projected cash flows, the use of a different discount rate to discount future cash flows or a different royalty rate applied to the Company’s trademarks, could cause 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.

Split dollar officer life insurance

The Company provides split dollar life insurance benefits to certain executive officers and records an asset principally equal to the cumulative premiums paid. The Company will fully recover these premiums in future years under the terms of the plan. The Company retains a collateral assignment of the cash surrender values and policy death benefits payable to insure recovery of these premiums.

Valuation of long-lived assets

Long-lived assets, primarily property, plant and equipment are reviewed for impairment as events or changes in business circumstances occur indicating that the carrying value of the asset may not be recoverable. The estimated cash flows produced by assets or asset groups, are compared to the asset carrying value to determine whether impairment exists. Such estimates involve considerable management judgment and are based upon assumptions about expected future operating performance. As a result, actual cash flows could differ from management’s estimates due to changes in business conditions, operating performance, and economic and competitive conditions.

Income taxes

Deferred income taxes are recognized for future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. The Company records valuation allowances in situations where the realization of deferred tax assets, including those relating to net operating tax losses, is not more-likely-than-not; and the Company adjusts and releases such valuation allowances when realization becomes more-likely-than-not as defined by accounting guidance. The Company periodically reviews assumptions and estimates of the Company’s probable tax obligations and effects on its liability for uncertain tax positions, using informed judgment which may include the use of third-party consultants, advisors and legal counsel, and historical experience.

Valuation of investments

Investments, primarily municipal bonds, mutual funds and equity method investments are reviewed for impairment at each reporting period by comparing the carrying value or amortized cost to the fair market value. The Company may utilize third-party professional valuation firms as necessary to assist in the determination of the value of investments that utilize Level 3 inputs as defined by guidance. In the event that an investment security’s fair value is below carrying value or amortized cost, the Company will record an other-than-temporary impairment or a temporary impairment based on accounting guidance.

Other matters

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

9

and operational services, 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, 2013, all of which are generally normal and recurring in nature, are summarized in the chart on page 12, which is incorporated by reference herein.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2013, the FASB issued ASU 2013-11, which requires presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 provides explicit guidance on presentation in financial statements. The amendment is effective for reporting periods beginning in first quarter 2014. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard is effective for fiscal years beginning in first quarter 2014; however, early adoption is permitted. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

MARKET RISKS

The Company is exposed to market risks related to commodity prices, interest rates, investments in marketable securities, equity price and foreign exchange.

The Company’s ability to forecast the direction and scope of changes to its major input costs is impacted by significant volatility in crude oil, sugar, corn, soybean and edible oils, cocoa and dairy products markets. The prices of these commodities are influenced by changes in global demand, changes in weather and crop yields, including the effects of climate change, changes in governments’ farm policies, including mandates for ethanol and bio-fuels, environmental matters, and fluctuations in the U.S. dollar relative to dollar-denominated commodities in world markets. The Company believes that its competitors face the same or similar challenges.

In order to address the impact of rising input and other costs, the Company periodically reviews each item in its product portfolio to ascertain if price realization adjustments or other actions should be taken. These reviews include an evaluation of the risk factors relating to market place acceptance of such changes and their potential effect on future sales volumes. In addition, the estimated cost of packaging modifications associated with weight changes is evaluated. The Company also maintains ongoing cost reduction and productivity improvement programs under which cost savings initiatives are encouraged and progress monitored. The Company is not able to accurately predict the outcome of these cost savings initiatives and their effects on its future results.

Commodity future and foreign currency forward contracts

Commodity price risks relate to ingredients, primarily sugar, cocoa, chocolate, corn syrup, dextrose, soybean and edible oils, milk, whey and gum base ingredients. The Company believes its competitors face similar risks, and the industry has historically adjusted prices to compensate for adverse fluctuations in commodity costs. The Company, as well as competitors in the confectionery industry, has taken actions, including higher price realization to mitigate rising input costs for ingredients, energy, freight and delivery. Although management seeks to substantially recover cost increases over the long-term, there is risk that higher price realization cannot be fully passed on to customers and, to the extent they are passed on, they could adversely affect customer and consumer acceptance and resulting sales volume.

The Company utilizes commodity futures contracts and commodity options contracts as well as annual supply agreements to hedge and plan for anticipated purchases of certain ingredients, including sugar, in order to mitigate commodity cost fluctuation. The Company also may purchase forward foreign exchange contracts to hedge its costs of manufacturing certain products in Canada for sale and distribution in the United States, and periodically does so for purchases of equipment or raw materials from foreign suppliers. Such commodity futures, commodity options and currency forward contracts are cash flow hedges and are effective as hedges as defined by accounting guidance. The unrealized gains and losses on such contracts are deferred as a component of accumulated other comprehensive loss and are recognized as a component of product cost of goods sold when the related inventory is sold.

The potential change in fair value of commodity and foreign currency derivative instruments held by the Company at December 31, 2013, assuming a 10% change in the

10

underlying contract price, was $4,012. The analysis only includes commodity and foreign currency derivative instruments and, therefore, does not consider the offsetting effect of changes in the price of the underlying commodity or foreign currency. This amount is not significant compared with the net earnings and shareholders’ equity of the Company.

Interest rates

Interest rate risks primarily relate to the Company’s investments in tax exempt marketable securities with maturities or auction dates of generally up to three years.

The majority of the Company’s investments, which are classified as available for sale, have historically been held until they mature, which limits the Company’s exposure to interest rate fluctuations. The accompanying chart summarizes the maturities of the Company’s investments in debt securities at December 31, 2013.

Less than 1 year	$	34,362
1 – 2 years	39,738
2 – 3 years	43,377
Over 3 years	1,153
Total	$	118,630

The Company’s outstanding debt at December 31, 2013 and 2012 was $7,500 in an industrial revenue bond in which interest rates reset each week based on the current market rate. Therefore, the Company does not believe that it has significant interest rate risk with respect to its interest bearing debt.

Investment in marketable securities

As stated above, the Company invests primarily in tax exempt marketable securities with maturities or auction dates generally up to three years. The Company utilizes professional money managers and maintains investment policy guidelines which emphasize quality and liquidity in order to minimize the potential loss exposures that could result in the event of a default or other adverse event, including failed auctions. The Company continues to monitor these investments and markets, as well as its investment policies, however, the financial markets could experience unanticipated or unprecedented events as it did beginning in 2008, and future outcomes may be less predictable than in the past.

Equity price

Equity price risk relates to the Company’s investments in mutual funds which are principally used to fund and hedge the Company’s deferred compensation liabilities. At December 31, 2013, the Company has investments in mutual funds, classified as trading securities, of $63,215. Any change in the fair value of these trading securities is completely offset by a corresponding change in the respective hedged deferred compensation liability.

Foreign currency

Foreign currency risk principally relates to the Company’s foreign operations in Canada and Mexico, as well as periodic purchase commitments of machinery and equipment from foreign sources.

Certain of the Company’s Canadian manufacturing costs, including local payroll and plant operations, and a portion of its packaging and ingredients are sourced in Canadian dollars. The Company may purchase Canadian forward contracts to receive Canadian dollars at a specified date in the future and uses its Canadian dollar collections on Canadian sales as a partial hedge of its overall Canadian manufacturing obligations sourced in Canadian dollars. The Company also periodically purchases and holds Canadian dollars to facilitate the risk management of these currency changes.

From time to time, the Company may use foreign exchange forward contracts and derivative instruments to mitigate its exposure to foreign exchange risks, as well as those related to firm commitments to purchase equipment from foreign vendors. See Note 10, Fair Value Measurements, for outstanding foreign exchange forward contracts as of December 31, 2013.

RISK FACTORS

The Company’s operations and financial results are subject to a number of risks and uncertainties that could adversely affect the Company’s operating results and financial condition. Significant risk factors, without limitation, that could impact the Company, 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 commodities and ingredients, including the effects adverse weather and climate change, and the ability to recover cost increases through product sales price increases; (iii) inherent risks in the marketplace, including uncertainties about trade and consumer acceptance of product pricing changes and seasonal events such as Halloween; (iv) the effect of acquisitions on the Company’s results of operations and financial condition; (v) the effect of changes in foreign currencies on the Company’s foreign subsidiaries operating results, and the effect of the fluctuation of the Canadian dollar on products manufactured in Canada and marketed and sold in the United States in U.S. dollars; (vi) the Company’s reliance on third party vendors for various goods and services, including commodities used for ingredients that are primarily grown or sourced from foreign locations; (vii) the Company’s ability to successfully implement new production processes and manufacturing

11

automation, and new computer software systems; (viii) the effect of changes in assumptions, including discount rates, sales growth and profit margins, which could affect the Company’s impairment testing and analysis of its goodwill and trademarks; (ix) changes in the confectionery marketplace including actions taken by major retailers and customers; (x) customer, consumer and competitor response to marketing programs and price and product weight adjustments, and new products; (xi) dependence on significant customers, including the volume and timing of their purchases, availability of shelf space, and competitive products; (xii) increases in energy costs, including freight and delivery, that cannot be passed along to customers through increased price realization due to competitive reasons; (xiii) any significant labor stoppages, strikes or production interruptions; (xiv) changes in governmental laws or regulations that affect ingredients used in products, or taxes, tariffs or other government restrictions on products sold; (xv) the adverse effects should the Company either voluntarily or involuntarily recall its product(s) from the marketplace; (xvi) the risk that the market value of Company’s investments could decline including being classified as “other-than-temporary” as defined; (xvii) the Company’s dependence on its enterprise resource planning computer system to manage its supply chain and customer deliveries, and the risk that the Company’s information technology systems fail to perform adequately or the Company is unable to protect such information technology systems against data corruption, cyber-based attacks or network security breaches; (xviii) the potential adverse effects on the Company as to changes to improve the funding status of the Bakery and Confectionery Union and Industry Pension Plan, a multi-employer plan which covers certain Company union employees; (xix) and the potential effects of current and future macroeconomic conditions and geopolitical events.

Forward-looking statements

This discussion and certain other sections contain forward-looking statements that are based largely on the Company’s current expectations and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “anticipated,” “believe,” “expect,” “intend,” “estimate,” “project,” and other words of similar meaning in connection with a discussion of future operating or financial performance and are subject to certain factors, risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in the forward-looking statements. Such factors, risks, trends and uncertainties which in some instances are beyond the Company’s control, include the overall competitive environment in the Company’s industry, changes in assumptions and judgments discussed above under the heading “Significant Accounting Policies and Estimates”, and factors identified and referred to above under the heading “Risk Factors.”

The risk factors identified and referred to above are believed to be significant factors, but not necessarily all of the significant factors that could cause actual results to differ from those expressed in any forward-looking statement. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made only as of the date of this report. The Company undertakes no obligation to update such forward-looking statements.

Open Contractual Commitments as of December 31, 2013

Payable in	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
Commodity hedges	$	5,922	$	5,922	$	—	$	—	$	—
Foreign currency hedges	34,244		20,084		14,160		—		—
Purchase obligations	9,833		9,833		—		—		—
Interest bearing debt	7,500		—		—		—		7,500
Operating leases	2,407		1,058		1,296		53		—
Total	$	59,906	$	36,897	$	15,456	$	53	$	7,500

Note: Commodity hedges and foreign currency hedges reflect the amounts at which the Company will settle the related contracts. The above amounts exclude deferred income tax liabilities of $54,939, liabilities for uncertain tax positions of $7,167, postretirement health care and life insurance benefits of $9,176 and deferred compensation and other liabilities of $69,520 because the timing of payments relating to these items cannot be reasonably determined.

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CONSOLIDATED STATEMENTS OF

Earnings and Retained Earnings

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

	For the year ended December 31,
	2013			2012			2011
Net product sales	$	539,627		$	545,985		$	528,369
Rental and royalty revenue	3,756			3,885			4,136
Total revenue	543,383			549,870			532,505
Product cost of goods sold	350,960			365,573			365,225
Rental and royalty cost	937			976			1,038
Total costs	351,897			366,549			366,263
Product gross margin	188,667			180,412			163,144
Rental and royalty gross margin	2,819			2,909			3,098
Total gross margin	191,486			183,321			166,242
Selling, marketing and administrative expenses	119,133			113,842			108,276
Earnings from operations	72,353			69,479			57,966
Other income, net	12,130			4,685			2,946
Earnings before income taxes	84,483			74,164			60,912
Provision for income taxes	23,634			22,160			16,974
Net earnings	$	60,849		$	52,004		$	43,938
Net earnings per share	$	1.02		$	0.86		$	0.72
Average number of shares outstanding	59,634			60,484			61,347
Retained earnings at beginning of period	$	80,210		$	114,269		$	135,866
Net earnings	60,849			52,004			43,938
Cash dividends	(18,922		)	(47,729		)	(18,360		)
Stock dividends	(49,028		)	(38,334		)	(47,175		)
Retained earnings at end of period	$	73,109		$	80,210		$	114,269

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

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CONSOLIDATED STATEMENTS OF

Comprehensive Earnings

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

	For the year ended December 31,
	2013			2012			2011
Net earnings	$	60,849		$	52,004		$	43,938
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(102		)	1,303			(2,496		)
Pension and postretirement reclassification adjustment:
Unrealized gains (losses) for the period on postretirement and pension benefits	20,037			1,066			(3,593		)
Less: reclassification adjustment for losses to net earnings	671			1,036			501
Unrealized gains (losses) on postretirement and pension benefits	20,708			2,102			(3,092		)
Investments:
Unrealized gains (losses) for the period on investments	1,091			1,980			1,030
Less: reclassification adjustment for (gains) losses to net earnings	(2,430		)	—			—
Unrealized gains (losses) on investments	(1,339		)	1,980			1,030
Derivatives:
Unrealized gains (losses) for the period on derivatives	(2,107		)	(339		)	(397		)
Less: reclassification adjustment for (gains) losses to net earnings	1,446			(243		)	(7,531		)
Unrealized gains (losses) on derivatives	(661		)	(582		)	(7,928		)
Total other comprehensive income (loss), before tax	18,606			4,803			(12,486		)
Income tax benefit (expense) related to items of other comprehensive income	(6,797		)	(1,297		)	3,746
Comprehensive earnings	$	72,658		$	55,510		$	35,198

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CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES	(in thousands)

Assets

	December 31,
	2013		2012
CURRENT ASSETS:
Cash and cash equivalents	$	88,283	$	63,862
Investments	33,572		18,746
Accounts receivable trade, less allowances of $2,042 and $2,142	40,721		42,108
Other receivables	4,616		5,528
Inventories:
Finished goods and work-in-process	37,012		37,046
Raw materials and supplies	24,844		25,337
Prepaid expenses	5,581		4,148
Deferred income taxes	5,482		466
Total current assets	240,111		197,241
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land	21,683		21,687
Buildings	111,044		108,391
Machinery and equipment	340,405		331,110
Construction in progress	3,403		2,539
	476,535		463,727
Less—Accumulated depreciation	279,619		262,437
Net property, plant and equipment	196,916		201,290
OTHER ASSETS:
Goodwill	73,237		73,237
Trademarks	175,024		175,024
Investments	148,532		126,812
Split dollar officer life insurance	40,296		66,911
Prepaid expenses	10,260		—
Deferred income taxes	4,033		6,222
Total other assets	451,382		448,206
Total assets	$	888,409	$	846,737

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

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(in thousands except per share data)

Liabilities and Shareholders’ Equity

	December 31,
	2013			2012
CURRENT LIABILITIES:
Accounts payable	$	9,153		$	8,942
Dividends payable	4,742			—
Accrued liabilities	45,580			45,150
Postretirement health care and life insurance benefits	319			555
Income taxes payable	327			6,118
Total current liabilities	60,121			60,765
NONCURRENT LIABILITES:
Deferred income taxes	54,939			38,748
Postretirement health care and life insurance benefits	8,857			26,826
Industrial development bonds	7,500			7,500
Liability for uncertain tax positions	7,167			7,866
Deferred compensation and other liabilities	69,520			55,217
Total noncurrent liabilities	147,983			136,157
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value— 120,000 shares authorized—  37,011 and 36,649, respectively, issued	25,702			25,450
Class B common stock, $.69-4/9 par value— 40,000 shares authorized—  22,256 and 21,627, respectively, issued	15,455			15,018
Capital in excess of par value	572,669			547,576
Retained earnings, per accompanying statement	73,109			80,210
Accumulated other comprehensive loss	(4,638		)	(16,447		)
Treasury stock (at cost)— 76 shares and 73 shares, respectively	(1,992		)	(1,992		)
Total shareholders’ equity	680,305			649,815
Total liabilities and shareholders’ equity	$	888,409		$	846,737

16

CONSOLIDATED STATEMENTS OF
Cash Flows
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES	(in thousands)

	For the year ended December 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	60,849		$	52,004		$	43,938
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	20,050			19,925			19,229
Impairment of equity method investment	975			850			—
Loss from equity method investment	967			1,019			194
Amortization of marketable security premiums	3,035			1,770			1,267
Changes in operating assets and liabilities:
Accounts receivable	1,330			272			(5,448		)
Other receivables	253			(2,720		)	3,963
Inventories	503			9,588			(15,631		)
Prepaid expenses and other assets	14,922			11,295			5,106
Accounts payable and accrued liabilities	418			199			84
Income taxes payable and deferred	68			1,369			(5,772		)
Postretirement health care and life insurance benefits	2,861			2,829			2,022
Deferred compensation and other liabilities	3,592			3,018			2,146
Other	(14		)	501			(708		)
Net cash provided by operating activities	109,809			101,919			50,390
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(15,752		)	(8,886		)	(16,351		)
Net purchases of trading securities	(5,500		)	(2,994		)	(3,234		)
Purchase of available for sale securities	(66,324		)	(39,016		)	(39,252		)
Sale and maturity of available for sale securities	39,613			10,461			7,680
Net cash used in investing activities	(47,963		)	(40,435		)	(51,157		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired	(23,143		)	(23,803		)	(18,190		)
Dividends paid in cash	(14,282		)	(52,431		)	(18,407		)
Net cash used in financing activities	(37,425		)	(76,234		)	(36,597		)
Increase (decrease) in cash and cash equivalents	24,421			(14,750		)	(37,364		)
Cash and cash equivalents at beginning of year	63,862			78,612			115,976
Cash and cash equivalents at end of year	$	88,283		$	63,862		$	78,612
Supplemental cash flow information:
Income taxes paid	$	24,225		$	21,312		$	16,906
Interest paid	$	21		$	31		$	38
Stock dividend issued	$	48,925		$	38,236		$	47,053

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

17

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 sales 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.

Revenue recognition:

Products are sold to customers based on accepted purchase orders which include quantity, sales price and other relevant terms of sale. Revenue, net of applicable provisions for discounts, returns, allowances and certain advertising and promotional costs, is recognized when products are delivered to customers and collectability is reasonably assured. Shipping and handling costs of $45,367, $45,072, and $45,850 in 2013, 2012 and 2011, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured.

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 three years. The Company classifies debt and equity securities as either available for sale or trading. Available for sale securities are not actively traded by the Company and are carried at fair value. The Company follows current fair value measurement guidance and 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 or other-than-temporarily impaired. Trading securities relate to deferred compensation arrangements and are carried at fair value with gains or losses included in other income, net. The Company invests in trading securities to economically hedge changes in its deferred compensation liabilities.

The Company regularly reviews its investments to determine whether a decline in fair value below the cost basis is other-than-temporary. If the decline in fair value is judged to be other-than-temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in other income, net. Further information regarding the fair value of the Company’s investments is included in Note 10 to the Consolidated Financial Statements.

Derivative instruments and hedging activities:

Authoritative guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of derivative instruments and related gains and losses, and disclosures about credit-risk-related contingent features in derivative agreements.

From time to time, the Company enters into commodity futures, commodity options contracts and foreign currency forward contracts. Commodity futures and options are intended and are effective as hedges of market price risks associated with the anticipated purchase of certain raw materials (primarily sugar). Foreign currency forward contracts are intended and are effective as hedges of the Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers denominated in a foreign currency. The Company does not engage in trading or other speculative use of derivative instruments. Further information regarding derivative instruments and hedging activities is included in Note 11 to the Consolidated Financial Statements.

Inventories:

Inventories are stated at cost, not to exceed market. The cost of substantially all of the Company’s inventories ($58,038 and $58,439 at December 31, 2013 and 2012, respectively) has been determined by the last-in, first-out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $20,926 and $26,130 at December 31, 2013 and 2012, respectively. The cost of certain foreign inventories ($3,818 and $3,944 at December 31, 2013 and 2012, respectively) has been determined by the first-in, first-out (FIFO) method. Rebates, discounts and other cash consideration received from vendors 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 $20,050, $19,925 and $19,229 in 2013, 2012 and 2011, respectively.

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 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 of long-lived assets were recorded by the Company during 2013, 2012 and 2011.

Postretirement health care and life insurance benefits:

The Company provides certain postretirement health care and life insurance benefits to corporate office and management employees. The cost of these postretirement benefits is accrued during employees’ working careers. See Note 7 for changes to these benefits and the resulting effects of the negative amendment, as defined by guidance. The Company also provides split dollar life benefits to certain executive officers. The Company records an asset equal to the cumulative insurance premiums paid that will be recovered upon the death of covered employees or earlier under the terms of the plan. No premiums were paid in 2013, 2012 and 2011. Certain split dollar agreements were terminated during 2012 which resulted in the full repayment to the Company of all of the cumulative premiums previously paid on these policies. During 2013 and 2012, the Company received $26,477 and $7,298, respectively, of such repayments which were recorded as a reduction in the carrying value of Split Dollar Officer Life Insurance.

18

Goodwill and indefinite-lived intangible assets:

In accordance with authoritative guidance, goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually unless certain interim triggering events or circumstances require more frequent testing. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. Management believes that all assumptions used for the impairment tests are consistent with those utilized by market participants performing similar valuations The Company has completed its annual impairment testing of its goodwill and trademarks at December 31 of each of the years presented. No impairments of intangibles were recorded in 2013 and 2012.

With respect to impairment testing of goodwill, the first step compares the reporting unit’s estimated fair value with its carrying value. Projected discounted cash flows are used to determine the fair value of the reporting unit. If the carrying value of a reporting unit’s net assets exceeds its fair value, the second step is applied to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is considered impaired and reduced to its implied fair value. Non-amortizable intangible assets, trademarks, are tested for impairment by comparing the fair value of each trademark with its carrying value. The fair value of trademarks is determined using discounted cash flows and estimates of royalty rates. If the carrying value exceeds fair value, the trademark is considered impaired and is reduced to fair value.

Income taxes:

Deferred income taxes are recorded and recognized for future tax effects of temporary differences between financial and income tax reporting. The Company records valuation allowances in situations where the realization of deferred tax assets is not more-likely-than-not. 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 reinvested in the foreign subsidiary.

Foreign currency translation:

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 remeasurements are recorded as a charge or credit to other income, net in the statement of earnings. Where the foreign local currency is used as the functional currency, translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss).

Equity method investment:

The Company’s 50% interest in two foreign companies is accounted for using the equity method. The Company records an increase in its investment to the extent of its share of earnings, and reduces its investment to the extent of losses and dividends received. No dividends were paid in 2013, 2012 and 2011.

As of December 31, 2013 and 2012, management determined that the carrying value of its equity method investment was impaired as a result of accumulated losses from operations and review of future expectations. The Company recorded a pre-tax impairment charge of $975 and $850 in 2013 and 2012, respectively. The fair value was assessed primarily using the discounted cash flow method and liquidation valuation. The key inputs to this method include projections of future cash flows, determinations of appropriate discount rates, and other assumptions of the equity method investee which are considered reasonable and inherent in the discounted cash flow analysis. The Company’s carrying value of this investment at December 31, 2013 is not significant.

Comprehensive earnings:

Comprehensive earnings includes net earnings, foreign currency translation adjustments and unrealized gains/losses on commodity and/or foreign currency hedging contracts, available for sale securities and certain postretirement benefit obligations.

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.

Use of estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, allowances and incentives, product liabilities, assets recorded at fair value, income taxes, depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual results may or may not differ from those estimates.

Recent accounting pronouncements:

In July 2013, the FASB issued ASU 2013-11, which requires presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 provides explicit guidance on presentation in financial statements. The amendment is effective for reporting periods beginning after December 15, 2013. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

        In March 2013, the FASB issued ASU 2013-05, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard is effective for fiscal years beginning after December 15, 2013; however, early adoption is permitted. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

NOTE 2—ACCRUED LIABILITIES:

Accrued liabilities are comprised of the following:

	December 31,
	2013		2012
Compensation	$	9,445	$	8,948
Other employee benefits	7,825		7,121
Taxes, other than income	2,776		2,618
Advertising and promotions	19,133		21,431
Other	6,401		5,032
	$	45,580	$	45,150

19

NOTE 3—INDUSTRIAL DEVELOPMENT BONDS:

Industrial development bonds are due in 2027. The average floating interest rate, which is reset weekly, was 0.2% and 0.3% in 2013 and 2012, respectively. See Note 10 to the Consolidated Financial Statements for fair value disclosures.

NOTE 4—INCOME TAXES:

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

	2013		2012		2011
Domestic	$	73,362	$	64,173	$	56,651
Foreign	11,121		9,991		4,261
	$	84,483	$	74,164	$	60,912

The provision for income taxes is comprised of the following:

	2013		2012			2011
Current:
Federal	$	16,192	$	24,312		$	15,568
Foreign	219		231			559
State	891		1,914			863
	17,302		26,457			16,990
Deferred:
Federal	4,286		(6,857		)	(1,230		)
Foreign	1,823		1,710			1,221
State	223		850			(7		)
	6,332		(4,297		)	(16		)
	$	23,634	$	22,160		$	16,974

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

	December 31,
	2013			2012
Deferred tax assets:
Accrued customer promotions	$	3,156		$	3,971
Deferred compensation	25,103			19,485
Postretirement benefits	3,847			8,127
Other accrued expenses	6,158			7,749
Foreign subsidiary tax loss carry forward	12,512			13,791
Tax credit carry forward	1,243			1,066
Realized capital losses	581			1,366
Unrealized capital loss	—			5,848
	52,600			61,403
Valuation allowance	(957		)	(2,040		)
Total deferred tax assets	$	51,643		$	59,363
Deferred tax liabilities:
Depreciation	$	33,129		$	33,858
Deductible goodwill and trademarks	42,073			42,450
Accrued export company commissions	5,391			5,117
Employee benefit plans	5,100			876
Inventory reserves	1,646			256
Prepaid insurance	785			697
Unrealized capital loss	709			—
Deferred gain on sale of real estate	8,234			8,169
Total deferred tax liabilities	$	97,067		$	91,423
Net deferred tax liability	$	45,424		$	32,060

At December 31, 2013, the Company has provided a valuation allowance relating to $581 of capital loss carry forwards which begin to expire in 2014.

At December 31, 2013, the Company has recognized $376 of benefits related to foreign subsidiary tax credit carry forwards. The carry forward credits expire in 2017. A valuation allowance has been established for the carry forward losses to reduce the future income tax benefits to amounts expected to be realized. The Company has also recognized $867 of benefits related to state tax credit carry forwards. The state credit carry forward begins to expire in 2017.

At December 31, 2013, the tax benefits of foreign subsidiary tax loss carry forwards expiring by year are as follows: $350 in 2026, $612 in 2027, $6,290 in 2028, $4,476 in 2029, and $784 in 2031.

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

	2013		2012		2011
U.S. statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net	1.0		1.1		1.2
Exempt municipal bond interest	(0.4	)	(0.5	)	(0.5	)
Foreign tax rates	(2.0	)	(1.6	)	(0.4	)
Qualified domestic production activities deduction	(2.2	)	(3.1	)	(2.5	)
Tax credits receivable	(0.9	)	(0.9	)	(0.4	)
Adjustment of deferred tax balances	(1.1	)	(0.5	)	(1.7	)
Reserve for uncertain tax benefits	(0.7	)	(0.3	)	(0.6	)
Other, net	(0.7	)	0.7		(2.2	)
Effective income tax rate	28.0	%	29.9	%	27.9	%

The Company has not provided for U.S. federal or foreign withholding taxes on $10,988 and $8,868 of foreign subsidiaries’ undistributed earnings as of December 31, 2013 and December 31, 2012, respectively, because such earnings are considered to be permanently reinvested. The Company estimates that the federal income tax liability on such remittances would approximate 30%. This foreign subsidiary holds $11,674 and $9,857 of cash and short term investments as of December 31, 2013 and 2012, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes on the Consolidated Statements of Earnings, Comprehensive Earnings and Retained Earnings.

At December 31, 2013 and 2012, the Company had unrecognized tax benefits of $6,010 and $6,677, respectively. Included in this balance is $3,539 and $4,306, respectively, of unrecognized tax benefits that, if recognized, would favorably affect the annual effective income tax rate. As of December 31, 2013 and 2012, $1,157 and $1,189, respectively, of interest and penalties were included in the liability for uncertain tax positions.

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

	2013			2012			2011
Unrecognized tax benefits at January 1	$	6,677		$	6,804		$	8,138
Increases in tax positions for the current year	1,163			727			320
Reductions in tax positions for lapse of statute of limitations	(867		)	(854		)	(668		)
Reductions in tax positions relating to settlements with taxing authorities	(140		)	—			—
Reductions in tax positions for effective settlements	(823		)	—			(986		)
Unrecognized tax benefits at December 31	$	6,010		$	6,677		$	6,804

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. The Company remains subject to examination by U.S. federal and state and foreign tax authorities for the years 2010 through 2012. With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2009 and prior.

20

The Company had been subject to a federal examination of tax years 2009 and 2010. The examination was closed during the fourth quarter of 2013 with the Company agreeing to an assessment which it considered immaterial. The Company’s Canadian subsidiary is currently subject to examination by the Canada Revenue Agency for tax years 2005 and 2007. The Company is unable to determine the outcome of the examination at this time. In addition, the Company is currently subject to various state tax examinations. Although the Company is unable to determine the ultimate outcome of the ongoing examinations, the Company believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

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

	Class B															Capital in Excess
	Common Stock					Common Stock					Treasury Stock					of Par
	Shares		Amount			Shares		Amount			Shares		Amount			Value
	(000’s)					(000’s)					(000’s)
Balance at January 1, 2011	36,057		$	25,040		20,466		$	14,212		(69	)	$	(1,992	)	$	505,495
Issuance of 3% stock dividend	1,077		748			612		426			(2	)	—			45,880
Conversion of Class B common shares to common shares	53		37			(53	)	(37		)	—		—			—
Purchase and retirement of common shares	(708	)	(492		)	—		—			—		—			(17,698		)
Balance at December 31, 2011	36,479		25,333			21,025		14,601			(71	)	(1,992		)	533,677
Issuance of 3% stock dividend	1,085		753			631		437			(2	)	—			37,046
Conversion of Class B common shares to common shares	29		20			(29	)	(20		)	—		—			—
Purchase and retirement of common shares	(944	)	(656		)	—		—			—		—			(23,147		)
Balance at December 31, 2012	36,649		25,450			21,627		15,018			(73	)	(1,992		)	547,576
Issuance of 3% stock dividend	1,095		761			648		450			(3	)	—			47,714
Conversion of Class B common shares to common shares	19		13			(19	)	(13		)	—		—			—
Purchase and retirement of common shares	(752	)	(522		)	—		—			—		—			(22,621		)
Balance at December 31, 2013	37,011		$	25,702		22,256		$	15,455		(76	)	$	(1,992	)	$	572,669

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 Company Common Stock purchase program, the Company’s board of directors periodically authorizes a dollar amount for such share purchases.

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

Year	Total Number of Shares Purchased (000’s)	Average Price Paid Per Share
2013	752	$	30.73
2012	944	$	25.16
2011	708	$	25.64

NOTE 6—OTHER INCOME, NET:

Other income, net is comprised of the following:

	2013			2012			2011
Interest and dividend income	$	1,445		$	1,369		$	1,087
Gains on trading securities relating to deferred compensation plans	10,588			4,616			29
Interest expense	(92		)	(137		)	(121		)
Impairment of equity investment	(975		)	(850		)	—
Equity method investment loss	(967		)	(1,019		)	(194		)
Foreign exchange gains (losses)	(790		)	442			2,098
Capital gains (losses)	2,576			(59		)	(227		)
Miscellaneous, net	345			323			274
	$	12,130		$	4,685		$	2,946

NOTE 7—EMPLOYEE BENEFIT PLANS:

Pension plans:

The Company sponsors defined contribution pension plans covering certain non-union 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 2013, 2012 and 2011 approximated $4,437, $4,327 and $4,011, respectively. The Company also maintains certain profit sharing and retirement savings-investment plans. Company contributions in 2013, 2012 and 2011 to these plans were $1,121, $1,107 and $1,024, respectively.

The Company also contributes to multi-employer defined benefit pension plan for certain of its union employees under a collective bargaining agreement which is currently under negotiation, as follows:

Plan name: Bakery and Confectionery Union and Industry International Pension Fund

Employer Identification Number and plan number: 52-6118572, plan number 001

Funded Status as of the most recent year available: 66.86% funded as of January 1, 2012

The Company’s contributions to such plan: $2,231, $2,131 and $2,046 in 2013, 2012 and 2011, respectively

Plan status: Critical as of December 31, 2012

During 2012, the Company received notices from the Bakery and Confectionery Union and Industry International (BC&T) Pension Fund (Plan), a multi-employer defined benefit pension plan for certain Company union employees. Theses notices indicated that the Plan’s actuary certified that the Plan was in critical status, the “Red Zone”, as defined by the Pension Protection Act (PPA), and that a plan of rehabilitation was adopted by the Trustees of the Plan (Trustees) in fourth quarter 2012. The rehabilitation plan adopted requires that employer contributions include 5% compounded annual surcharges each year for an unspecified period of time beginning in January 2013 (in addition to a 5% interim surcharge initiated in June 2012) as well as certain plan benefit reductions. The Trustees will review the Plan’s progress each year and will consider if further adjustments, including employer surcharges or plan benefit modifications, are necessary to meet the objectives of the rehabilitation plan. Under the rehabilitation plan adopted, the Plan is projected to emerge from critical status sometime beyond a 30 year projection period. In the event that a plan does not have the financial resources to ultimately pay benefits at a level specified by law, then it must apply to the Pension Benefits Guaranty Corporation for government financial assistance. The Trustees have advised that neither the PPA nor regulatory guidance currently defines the rehabilitation standards for a plan that is not

21

designed to emerge from critical status within the prescribed 10-year rehabilitation period. Company contributions, including surcharges, to the Plan were $2,231, $2,131, and $2,046 in each of the years 2013, 2012 and 2011, respectively. Surcharges included in aforementioned amounts were $242 and $65 in 2013 and 2012, respectively.

The Company was advised by the Plan that if the Company had withdrawn from the Plan during 2012 its estimated withdrawal liability would have been $37,200; the Company does not have any updated information regarding its withdrawal liability for 2013. Should the Company actually withdraw from the Plan at a future date, a withdrawal liability, which could be higher (or lower) than $37,200, would be payable to the Plan. In first quarter 2013, the Company executed a new labor contract with its BC&T local union which included the Company’s commitment to continue participating in this Plan through third quarter 2017. The Company is currently unable to determine the ultimate outcome of the above discussed matter and therefore, is unable to determine the effects on its consolidated financial statements, but, the ultimate outcome could be material to its consolidated results of operations in one or more future periods.

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 economically 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, 2013 and 2012, these investments totaled $63,215 and $49,378, respectively. All gains and losses and related investment income in these investments, which are recorded in other income, net, are equally offset by corresponding increases and decreases in the Company’s deferred compensation liabilities.

Postretirement health care and life insurance benefit plans:

During fourth quarter 2013, the Company amended its post-retirement health and life insurance benefits plan provided to corporate office and management employees. These plan changes resulted in negative plan amendment, as defined by guidance, and a $10,425 reduction in the Company’s benefit obligation as of December 31, 2013. The plan changes generally limited future annual cost increases in health benefits to 3%, restricted this benefit to current employees with long-term service with the Company, required retirees to pay the full cost of life insurance, and eliminated these benefits for future employees effective April 1, 2014. Changes in the accumulated postretirement benefit obligation during 2013 include actuarial gains of $9,734 which reflect gains from demographic experience, favorable claim experience and an increase in the discount rate. The discount rates utilized to determine the accumulated postretirement benefit obligation as of December 31, 2013 and 2012 were 4.69% and 3.91%, respectively.

Amounts recognized in accumulated other comprehensive loss (pre-tax) at December 31, 2013 are as follows:

Prior service credit	$	(10,801	)
Net actuarial loss	(3,956		)
Net amount recognized in accumulated other comprehensive (gain) loss	$	(14,757	)

The estimated actuarial loss (gain) and prior service credit (gain) to be amortized from accumulated other comprehensive loss (gain) into net periodic benefit cost during 2014 are $(452) and $(1,352), respectively.

The changes in the accumulated postretirement benefit obligation at December 31, 2013 and 2012 consist of the following:

	December 31
	2013			2012
Benefit obligation, beginning of year	$	27,381		$	26,108
Service cost	1,036			1,034
Interest cost	1,060			1,113
Plan amendments	(10,425		)	—
Actuarial (gain)/loss	(9,734		)	(520		)
Benefits paid	(142		)	(354		)
Benefit obligation, end of year	$	9,176		$	27,381

Net periodic postretirement benefit cost included the following components:

	2013		2012		2011
Service cost—benefits attributed to service during the period	$	1,036	$	1,034	$	831
Interest cost on the accumulated postretirement benefit obligation	1,060		1,113		1,117
Net amortization	671		1,036		501
Net periodic postretirement benefit cost	$	2,767	$	3,183	$	2,449

The Company estimates future benefit payments will be $319, $340, $388, $433 and $470 in 2014 through 2018, respectively, and a total of $2,927 in 2019 through 2023. As a result of the plan changes, the Company will no longer qualify for the Medicare Part D retiree drugs subsidy.

NOTE 8—COMMITMENTS:

Rental expense aggregated $793, $967 and $1,042 in 2013, 2012 and 2011, 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 and other countries worldwide.

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

	2013		2012		2011
Net product sales:
United States	$	495,082	$	499,660	$	487,185
Canada and Other	44,545		46,325		41,184
	$	539,627	$	545,985	$	528,369
Long-lived assets:
United States	$	160,099	$	161,504	$	170,173
Canada and Other	36,817		39,786		41,989
	$	196,916	$	201,290	$	212,162

22

Sales revenues from Wal-Mart Stores, Inc. aggregated approximately 23.8%, 23.5%, and 23.5% of net product sales during the years ended December 31, 2013, 2012 and 2011, respectively. Some of the aforementioned sales to Wal-Mart are sold to McLane Company, a large national grocery wholesaler, which services and delivers certain of the Company products to Wal-Mart and other retailers in the U.S.A. Net product sales revenues from McLane, which includes these Wal-Mart sales as well as sales and deliveries to other Company customers, were 15.1% in 2013; such revenues from McLane were less than 10% in 2012 and 2011.

NOTE 10—FAIR VALUE MEASUREMENTS:

Current accounting guidance defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Guidance requires disclosure of the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date. Guidance establishes a three-level valuation hierarchy based upon the transparency of inputs utilized in the measurement and valuation of financial assets or liabilities as of the measurement date. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed in the table below.

As of December 31, 2013 and 2012, the Company held certain financial assets that are required to be measured at fair value on a recurring basis. These included derivative hedging instruments related to the foreign currency forward contracts and purchase of certain raw materials, investments in trading securities and available for sale securities. The Company’s available for sale and trading securities principally consist of municipal bonds and mutual funds that are publicly traded.

The following tables present information about the Company’s financial assets and liabilities measured at fair value as of December 31, 2013 and 2012, and indicate the fair value hierarchy and the valuation techniques utilized by the Company to determine such fair value:

	Estimated Fair Value December 31, 2013
	Total			Input Levels Used
	Fair Value			Level 1			Level 2			Level 3
Cash and equivalents	$	88,283		$	88,283		$	—		$	—
Available for sale securities	118,647			—			118,647			—
Foreign currency forward contracts	(684		)	—			(684		)	—
Commodity futures contracts, net	(130		)	(130		)	—			—
Trading securities	63,215			63,215			—			—
Total assets measured at fair value	$	269,331		$	151,368		$	117,963		$	—

	Estimated Fair Value December 31, 2012
	Total			Input Levels Used
	Fair Value			Level 1			Level 2		Level 3
Cash and equivalents	$	63,862		$	63,862		$	—	$	—
Auction rate security	9,485			—			—		9,485
Available for sale securities, excluding the auction rate security	84,568			—			84,568		—
Commodity futures contracts	(112		)	(112		)	—		—
Trading securities	49,378			49,378			—		—
Total assets measured at fair value	$	207,181		$	113,128		$	84,568	$	9,485

Available for sale securities which utilize Level 2 inputs consist primarily of municipal bonds, which are valued based on quoted market prices or alternative pricing sources with reasonable levels of price transparency.

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

	December 31, 2013
	Amortized		Fair		Unrealized					Realized
Available for Sale:	Cost		Value		Gains		Losses			Losses
Municipal bonds	$	75,488	$	75,622	$	134	$	—		$	—
Corporate bonds	37,258		37,214		—		(44		)	—
Certificates of deposit	5,796		5,794				(2		)
Mutual funds	20		17		—		(3		)	—
	$	118,562	$	118,647	$	134	$	(49	)	$	—

	December 31, 2012
	Amortized		Fair		Unrealized					Realized
Available for Sale:	Cost		Value		Gains		Losses			Losses
Auction rate security	$	8,410	$	9,485	$	1,075	$	—		$	—
Municipal bonds	65,745		66,002		257		—			—
Corporate bonds	14,614		14,744		130
Certificates of deposit	3,840		3,805				(35		)
Mutual funds	20		17		—		(3		)	—
	$	92,629	$	94,053	$	1,462	$	(38	)	$	—

        During the fourth quarter 2013, the Company sold its investment in Jefferson County Alabama Sewer Revenue Refunding Warrants for $10,840. This was an auction rate security (ARS) originally purchased for $13,550 in 2008 with an insurance-backed AAA rating. Because the Company recorded an other-than-temporary pre-tax impairment of $5,140 in 2008 on this ARS investment which resulted in a carrying value of $8,410 at that time, a net gain of $2,430 was recorded on this sale in fourth quarter 2013. Since recording this initial impairment in 2008, the Company has carried this ARS investment at its estimated fair value utilizing a valuation model with Level 3 inputs, as defined by guidance, and resulting changes in the market value since the original impairment charge in 2008 have been recorded as changes to accumulated other comprehensive income (loss) each year.

The following table presents additional information about the Company’s auction rate security (Jefferson County Alabama Sewer Revenue Refunding Warrants) measured at fair value on a recurring basis using Level 3 inputs at December 31, 2013 and 2012:

	2013			2012
Balance at January 1	$	9,485		$	7,453
Unrealized gain recognized in accumulated other comprehensive loss	1,355			2,032
Settlement of security	(10,840		)	—
Balance at December 31	$	—		$	9,485

The fair value of the Company’s industrial revenue development bonds at December 31, 2013 and 2012 were valued using Level 2 inputs which approximates the carrying value of $7,500 for both periods. Interest rates on these bonds reset weekly based on current market conditions.

NOTE 11—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

From time to time, the Company uses derivative instruments, including foreign currency forward contracts, commodity futures contracts and commodity option contracts, to manage

23

its exposures to foreign exchange and commodity prices. Commodity futures contracts and most commodity option contracts are intended and effective as hedges of market price risks associated with the anticipated purchase of certain raw materials (primarily sugar). Foreign currency forward contracts are intended and effective as hedges of the Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers denominated in a foreign currency. The Company does not engage in trading or other speculative use of derivative instruments.

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Consolidated Statements of Financial Position. Derivative assets are recorded in other receivables and derivative liabilities are recorded in accrued liabilities. The Company uses either hedge accounting or mark-to-market accounting for its derivative instruments. Derivatives that qualify for hedge accounting are designated as cash flow hedges by formally documenting the hedge relationships, including identification of the hedging instruments, the hedged items and other critical terms, as well as the Company’s risk management objectives and strategies for undertaking the hedge transaction.

Changes in the fair value of the Company’s cash flow hedges are recorded in accumulated other comprehensive loss, net of tax, 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 loss for commodity derivatives are expected to be reclassified to cost of goods sold. Substantially all amounts reported in accumulated other comprehensive loss for foreign currency derivatives are expected to be reclassified to other income, net.

The following table summarizes the Company’s outstanding derivative contracts and their effects on its Consolidated Statements of Financial Position at December 31, 2013 and 2012:

	December 31, 2013
	Notional Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	34,244	$	—	$	(684	)
Commodity futures contracts	5,601		41		(191		)
Total derivatives designated as hedging instruments:			41		(875		)
Derivatives not designated as hedging instruments:
Commodity futures contracts	321		20		—
Total derivatives not designated as hedging instruments:			20		—
Total derivatives			$	61	$	(875	)

	December 31, 2012
	Notional Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Commodity futures contracts	$	7,868	$	127	$	(301	)
Total derivatives designated as hedging instruments:			127		(301		)
Derivatives not designated as hedging instruments
Commodity futures contracts	627		62		—
Total derivatives not designated as hedging instruments:			62		—
Total derivatives			$	189	$	(301	)

The effects of derivative instruments on the Company’s Consolidated Statement of Earnings, Comprehensive Earnings and Retained Earnings for years ended December 31, 2013 and 2012 are as follows:

	For Year Ended December 31, 2013
	Gain (Loss) Recognized in OCI			Gain (Loss) Reclassified from Accumulated OCI into Earnings			Gain (Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings
Foreign currency forward contracts	$	(1,144	)	$	(460	)	$	—
Commodity futures contracts	(963		)	(986		)	—
Total	$	(2,107	)	$	(1,446	)	$	—

	For Year Ended December 31, 2012
	Gain (Loss) Recognized in OCI			Gain (Loss) Reclassified from Accumulated OCI into Earnings			Gain (Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings
Foreign currency forward contracts	$	222		$	427		$	—
Commodity futures contracts	(526		)	(149		)	—
Commodity option contracts	(35		)	(35		)	—
Total	$	(339	)	$	243		$	—

For the years ended December 31, 2013 and 2012, the Company recognized a gain (loss) of $(42) and $62 in earnings, respectively, related to mark-to-market accounting for certain commodity futures contracts.

24

NOTE 12—COMPREHENSIVE EARNINGS (LOSS):

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

	Foreign			Unrealized Gain (Loss) on									Accumulated
	Currency Translation Adjustment			Investments			Derivatives			Postretirement and Pension Benefits			Other Comprehensive Earnings (Loss)
Balance at January 1, 2011	$	(12,236	)	$	(999	)	$	5,252		$	(3,230	)	$	(11,213	)
Unrealized gains (losses)	(2,496		)	1,030			(397		)	(3,593		)	(5,456		)
(Gains) losses reclassified to net earnings	—			—			(7,531		)	501			(7,030		)
Tax effects	46			(382		)	2,933			1,149			3,746
Net of tax amount	(2,450		)	648			(4,995		)	(1,943		)	(8,740		)
Balance at December 31, 2011	(14,686		)	(351		)	257			(5,173		)	(19,953		)
Unrealized gains (losses)	1,303			1,980			(339		)	1,066			4,010
(Gains) losses reclassified to net earnings	—			—			(243		)	1,036			793
Tax effects	(23		)	(721		)	214			(767		)	(1,297		)
Net of tax amount	1,280			1,259			(368		)	1,335			3,506

	Foreign			Unrealized Gain (Loss) on									Accumulated
	Currency Translation Adjustment			Investments			Derivatives			Postretirement and Pension Benefits			Other Comprehensive Earnings (Loss)
Balance at December 31, 2012	$	(13,406	)	$	908		$	(111	)	$	(3,838	)	$	(16,447	)
Unrealized gains (losses)	(102		)	1,091			(2,107		)	20,037			18,919
(Gains) losses reclassified to net earnings	—			(2,430		)	1,446			671			(313		)
Tax effects	(19		)	485			240			(7,503		)	(6,797		)
Net of tax amount	(121		)	(854		)	(421		)	13,205			11,809
Balance at December 31, 2013	$	(13,527	)	$	54		$	(532	)	$	9,367		$	(4,638	)

NOTE 13—GOODWILL AND INTANGIBLE ASSETS:

All of the Company’s intangible indefinite-lived assets are trademarks.

The changes in the carrying amount of trademarks for 2013 and 2012 were as follows:

	2013			2012
Original cost	$	193,767		$	193,767
Accumulated impairment losses as of January 1	(18,743		)	(18,743		)
Balance at January 1	$	175,024		$	175,024
Current year impairment losses	—			—
Balance at December 31	$	175,024		$	175,024
Accumulated impairment losses as of December 31	$	(18,743	)	$	(18,743	)

The fair value of indefinite-lived intangible assets was primarily assessed using the present value of estimated future cash flows and relief-from-royalty method.

The Company has no accumulated impairment losses of goodwill.

25

Report of Independent Registered Public Accounting Firm

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

In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of earnings, comprehensive earnings and retained earnings, and of cash flows present fairly, in all material respects, the financial position of Tootsie Roll Industries, Inc. and its subsidiaries at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting on page 27 of the 2013 Annual Report to Shareholders. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide 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.

Chicago, IL
February 28, 2014

26

Performance Graph

The following performance graph compares the cumulative total shareholder return on the Company’s Common Stock for a five-year period (December 31, 2008 to December 31, 2013) with the cumulative total return of Standard & Poor’s 500 Stock Index (“S&P 500”) and the Dow Jones Industry Food Index (“Peer Group,” which includes the Company), assuming (i) $100 invested on December 31 of the first year of the chart in each of the Company’s Common Stock, S&P 500 and the Dow Jones Industry Food Index and (ii) the reinvestment of dividends.

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, 2013 as required by SEC Rule 13a-15(c). In making this assessment, we used the criteria established in Internal Control—Integrated Framework (1992) 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, 2013.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page 26.

Tootsie Roll Industries, Inc.

Chicago, Illinois
February 28, 2014

27

Quarterly Financial Data (Unaudited)

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

	(Thousands of dollars except per share data)
	First		Second		Third		Fourth		Year
2013
Net product sales	$	110,279	$	101,988	$	191,807	$	135,553	$	539,627
Product gross margin	38,110		35,016		65,974		49,567		188,667
Net earnings	9,069		8,369		26,043		17,368		60,849
Net earnings per share	0.15		0.14		0.44		0.29		1.02
2012
Net product sales	$	109,763	$	108,156	$	200,274	$	127,792	$	545,985
Product gross margin	34,858		35,298		64,422		45,834		180,412
Net earnings	8,774		7,511		22,923		12,796		52,004
Net earnings per share	0.14		0.12		0.38		0.21		0.86

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

2013-2012 QUARTERLY SUMMARY OF TOOTSIE ROLL INDUSTRIES, INC. STOCK PRICES AND DIVIDENDS PER SHARE

STOCK PRICES*

	2013				2012
	High		Low		High		Low
1st Qtr	$	30.00	$	26.09	$	24.67	$	22.29
2nd Qtr	$	32.81	$	29.30	$	23.86	$	21.70
3rd Qtr	$	35.12	$	29.50	$	27.08	$	23.85
4th Qtr	$	33.40	$	29.36	$	28.60	$	25.62

*NYSE - Closing Price

Estimated Number of shareholders at February 2014:
Common Stock	17,000
Class B Common Stock	4,500

DIVIDENDS DECLARED

	2013		2012
1st Qtr	$	.08	$	.08
2nd Qtr	$	.08	$	.08
3rd Qtr	$	.08	$	.08
4th Qtr	$	.08	$	.58

NOTE: In addition to the above cash dividends, a 3% stock dividend was issued on April 5, 2013 and April 5, 2012. Cash dividends are restated to reflect 3% stock dividends. The fourth quarter 2012 includes a $0.50 special dividend.

28

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 4)	2013			2012			2011			2010			2009
Sales and Earnings Data (2)(3)
Net product sales	$	539,627		$	545,985		$	528,369		$	517,149		$	495,592
Product gross margin	188,667			180,412			163,144			167,815			175,817
Interest expense	92			137			121			142			243
Provision for income taxes	23,634			22,160			16,974			20,005			9,892
Net earnings	60,849			52,004			43,938			53,063			53,157
% of net product sales	11.3		%	9.5		%	8.3		%	10.3		%	10.7		%
% of shareholders’ equity	8.9		%	8.0		%	6.6		%	8.0		%	8.1		%
Per Common Share Data (1)(3)
Net earnings	$	1.02		$	0.86		$	0.72		$	0.85		$	0.85
Cash dividends declared	0.32			0.82			0.32			0.32			0.32
Stock dividends	3		%	3		%	3		%	3		%	3		%
Additional Financial Data (1)(2)(3)
Working capital	$	179,990		$	136,476		$	153,272		$	176,662		$	154,409
Net cash provided by operating activities	109,809			101,919			50,390			82,805			76,994
Net cash provided by (used in) investing activities	(47,963		)	(40,435		)	(51,157		)	(16,808		)	(16,364		)
Net cash used in financing activities	(37,425		)	(76,234		)	(36,597		)	(41,011		)	(38,548		)
Property, plant & equipment additions	15,752			8,886			16,351			12,813			20,831
Net property, plant & equipment	196,916			201,290			212,162			215,492			220,721
Total assets	888,409			846,737			857,856			857,959			836,844
Long-term debt	7,500			7,500			7,500			7,500			7,500
Shareholders’ equity	680,305			649,815			665,935			667,408			654,244
Average shares outstanding	59,634			60,484			61,347			62,139			62,880

(1)Per Common share data and average shares outstanding adjusted for annual 3% stock dividends.

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

(3)The 2009 data included the release of tax valuation allowances, charges related to the impairment of an equity method investment and impairment charges related to certain trademarks.

29

Corporate Profile

Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of confectionery products for 117 years. Our products are primarily sold under the familiar brand names: Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child’s Play, Charms, Blow Pop, Blue Razz, Cella’s chocolate covered cherries, Tootsie Dots, Tootsie Crows, Junior Mints, Junior Caramels, Charleston Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff cotton candy, Dubble Bubble, Razzles, Cry Baby, Nik-L-Nip and EI Bubble.

Board of Directors

Melvin J. Gordon(1)	Chairman of the Board and Chief Executive Officer
Ellen R. Gordon(1)	President and Chief Operating Officer
Richard P. Bergeman(2)(3)	Retired Senior Vice President, Bestfoods
Lana Jane Lewis-Brent(2)(3)	President, Paul Brent Designer, Inc., an art publishing, design and licensing company
Barre A. Seibert(2)(3)	Retired First Vice President, Washington Mutual Bank

(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 & Assistant Secretary
Richard F. Berezewski	Controller

Offices, Plants

Executive Offices	7401 S. Cicero Ave.
	Chicago, Illinois 60629
	www.tootsie.com
Plants/Warehouses	Illinois
	Tennessee
	Massachusetts
	Pennsylvania
	Wisconsin
	Ontario, Canada
	Mexico City, Mexico
Foreign Sales Offices	Mexico City, Mexico
	Ontario, Canada

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	American Stock Transfer and Trust Company Operations Center 6201 15th Avenue Brooklyn, NY 11219 1-800-710-0932 www.amstock.com
Independent Registered Public Accounting Firm	PricewaterhouseCoopers LLP One North Wacker Chicago, IL 60606
General Counsel	Becker Ross, LLP 317 Madison Avenue New York, NY 10017
Annual Meeting	May 5, 2014 Mutual Building, Room 1200 909 East Main Street Richmond, VA 23219

   Printed on recycled paper.           

30

EX-21

EXHIBIT 21

LIST OF SUBSIDIARIES OF THE COMPANY

NAME	JURISDICTION OF INCORPORATION
Andes Candies, LP	Illinois
Andes Manufacturing LLC	Illinois
Andes Services LLC	Illinois
C. 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 LLC	Illinois
Concord (GP) Inc.	Ontario
Concord Canada Holdings ULC	Nova Scotia
Concord Confections Holdings USA, Inc.	Delaware
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
JT Company, Inc.	Delaware
Sweets Company of New York, Inc.	New York
Tootsie Roll Industries, LLC	Illinois
Tootsie Roll of Canada, ULC	Alberta
Tootsie Roll Central Europe, Ltd.	Delaware
The Tootsie Roll Company, Inc.	Illinois
Tootsie Roll Management, Inc.	Illinois
Tootsie Roll Mfg., LLC	Illinois
Tootsie Rolls - Latin America, Inc.	Delaware
Tootsie Roll Worldwide, Ltd.	Illinois
The Sweets Mix Company, Inc.	Illinois
TRI de Latinoamerica S.A. de C.V.	Mexico
TRI Captive Insurance Company, Inc.	Nevada
TRI Finance, Inc.	Delaware
TRI International, Inc.	Illinois
TRI-Mass, Inc.	Massachusetts
TRI Sales Co.	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: February 28, 2014
	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: February 28, 2014
	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, 2013 (the Form 10-K) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended 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:	February 28, 2014	/s/ Melvin J. Gordon
		Melvin J. Gordon
		Chairman and Chief Executive Officer
Dated:	February 28, 2014	/s/ G. Howard Ember, Jr.
		G. Howard Ember, Jr.
		Vice President/Finance and Chief Financial Officer

XML

INCOME TAXES: (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
INCOME TAXES:
Tax benefits of foreign subsidiary tax loss carry forwards expiring in 2026	$ 350
Tax benefits of foreign subsidiary tax loss carry forwards expiring in 2027	612
Tax benefits of foreign subsidiary tax loss carry forwards expiring in 2028	6,290
Tax benefits of foreign subsidiary tax loss carry forwards expiring in 2029	4,476
Tax benefits of foreign subsidiary tax loss carry forwards expiring in Year 2031	784
Effective income tax rate differs from the statutory rate
U.S. statutory rate (as a percent)	35.00%	35.00%	35.00%
State income taxes, net (as a percent)	1.00%	1.10%	1.20%
Exempt municipal bond interest (as a percent)	(0.40%)	(0.50%)	(0.50%)
Foreign tax rates (as a percent)	(2.00%)	(1.60%)	(0.40%)
Qualified domestic production activities deduction (as a percent)	(2.20%)	(3.10%)	(2.50%)
Tax credits receivable (as a percent)	(0.90%)	(0.90%)	(0.40%)
Adjustment of deferred tax balances (as a percent)	(1.10%)	(0.50%)	(1.70%)
Reserve for uncertain tax benefits (as a percent)	(0.70%)	(0.30%)	(0.60%)
Other, net (as a percent)	(0.70%)	0.70%	(2.20%)
Effective income tax rate (as a percent)	28.00%	29.90%	27.90%
Foreign subsidiaries' undistributed earnings	10,988	8,868
Estimated federal income tax liability on foreign subsidiaries' undistributed earnings (as a percent)	30.00%
Cash and short term investments held by foreign subsidiary	11,674	9,857
Portion of unrecognized tax benefits that, if recognized, would favorably affect annual effective income tax rate	3,539	4,306
Interest and penalties included in liability for uncertain tax positions	1,157	1,189
Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits
Unrecognized tax benefits at the beginning of the period	6,677	6,804	8,138
Increases in tax positions for the current year	1,163	727	320
Reductions in tax positions for lapse of statute of limitations	(867)	(854)	(668)
Reductions in tax positions relating to settlements with taxing authorities	(140)
Reductions in tax positions for effective settlements	(823)		(986)
Unrecognized tax benefits at the end of the period	$ 6,010	$ 6,677	$ 6,804

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Description
Balance at beginning of year	$ 4,182	$ 3,921	$ 2,217
Additions (reductions) charged (credited) to expense	8,658	10,320	11,325
Deductions	9,841	10,059	9,621
Balance at End of Year	2,999	4,182	3,921
Reserve for bad debts
Description
Balance at beginning of year	1,462	998	1,121
Additions (reductions) charged (credited) to expense	16	511	(186)
Deductions	80	47	(63)
Balance at End of Year	1,398	1,462	998
Reserve for cash discounts
Description
Balance at beginning of year	680	733	410
Additions (reductions) charged (credited) to expense	9,725	9,959	10,007
Deductions	9,761	10,012	9,684
Balance at End of Year	644	680	733
Deferred tax asset valuation
Description
Balance at beginning of year	2,040	2,190	686
Additions (reductions) charged (credited) to expense	(1,083)	(150)	1,504
Balance at End of Year	$ 957	$ 2,040	$ 2,190

XML

FAIR VALUE MEASUREMENTS: (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Available for Sale:
Amortized Cost	$ 118,562	$ 92,629
Fair Value	118,647	94,053
Unrealized Gains	134	1,462
Unrealized Losses	(49)	(38)
Auction rate securities	118,647	94,053
Auction rate security
Available for Sale:
Amortized Cost		8,410
Fair Value		9,485
Unrealized Gains		1,075
Auction rate securities		9,485
Municipal bonds
Available for Sale:
Amortized Cost	75,488	65,745
Fair Value	75,622	66,002
Unrealized Gains	134	257
Auction rate securities	75,622	66,002
Corporate bonds
Available for Sale:
Amortized Cost	37,258	14,614
Fair Value	37,214	14,744
Unrealized Gains		130
Unrealized Losses	(44)
Auction rate securities	37,214	14,744
Certificates of deposit
Available for Sale:
Amortized Cost	5,796	3,840
Fair Value	5,794	3,805
Unrealized Losses	(2)	(35)
Auction rate securities	5,794	3,805
Mutual funds
Available for Sale:
Amortized Cost	20	20
Fair Value	17	17
Unrealized Losses	(3)	(3)
Auction rate securities	$ 17	$ 17

XML

SEGMENT AND GEOGRAPHIC INFORMATION: (Details 2) (Net product sales, Major customer)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Wal-Mart
Concentration of Risk
Revenues from a major customer (as a percent)	23.80%	23.50%	23.50%
McLane
Concentration of Risk
Revenues from a major customer (as a percent)	15.10%
McLane | Maximum
Concentration of Risk
Revenues from a major customer (as a percent)		10.00%	10.00%

XML

SIGNIFICANT ACCOUNTING POLICIES: (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, plant and equipment:
Depreciation expense	$ 20,050	$ 19,925	$ 19,229
Carrying value of long-lived assets:
Impairment charges of long-lived assets	$ 0	$ 0	$ 0
Buildings | Minimum
Property, plant and equipment:
Useful lives	20 years
Buildings | Maximum
Property, plant and equipment:
Useful lives	35 years
Machinery and equipment | Minimum
Property, plant and equipment:
Useful lives	5 years
Machinery and equipment | Maximum
Property, plant and equipment:
Useful lives	20 years

XML

OTHER INCOME, NET: (Tables)

12 Months Ended

Dec. 31, 2013

OTHER INCOME, NET:

Schedule of other income, net

	2013			2012			2011
Interest and dividend income	$	1,445		$	1,369		$	1,087
Gains on trading securities relating to deferred compensation plans	10,588			4,616			29
Interest expense	(92		)	(137		)	(121		)
Impairment of equity investment	(975		)	(850		)	—
Equity method investment loss	(967		)	(1,019		)	(194		)
Foreign exchange gains (losses)	(790		)	442			2,098
Capital gains (losses)	2,576			(59		)	(227		)
Miscellaneous, net	345			323			274
	$	12,130		$	4,685		$	2,946

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Derivative contracts
Assets	$ 61	$ 189
Liabilities	(875)	(301)
Derivatives designated as hedging instruments:
Derivative contracts
Assets	41	127
Liabilities	(875)	(301)
Derivatives designated as hedging instruments: | Foreign currency forward contracts
Derivative contracts
Notional Amounts	34,244
Liabilities	(684)
Derivatives designated as hedging instruments: | Commodity futures contracts
Derivative contracts
Notional Amounts	5,601	7,868
Assets	41	127
Liabilities	(191)	(301)
Derivatives not designated as hedging instruments:
Derivative contracts
Assets	20	62
Derivatives not designated as hedging instruments: | Commodity futures contracts
Derivative contracts
Notional Amounts	321	627
Assets	$ 20	$ 62

XML

EMPLOYEE BENEFIT PLANS: (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended				1 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012 item	Dec. 31, 2011	Jan. 02, 2012	Jun. 30, 2012 Multi-employer defined benefit pension plan	Dec. 31, 2013 Multi-employer defined benefit pension plan	Dec. 31, 2013 Multi-employer defined benefit pension plan Minimum
Pension plans
Credited service period	1 year
Pension expense	$ 4,437	$ 4,327	$ 4,011
Employer contributions to profit sharing and retirement savings-investment plan	1,121	1,107	1,024
Percentage of funded status				66.86%
Employer contributions to multi-employer defined benefit pension plans	2,231	2,131	2,046
Surcharges included in the employer contributions to multi-employer defined benefit pension plans	242	65
Pension Plans
Percentage of compounded annual surcharge each year						5.00%
Percentage of interim surcharge					5.00%
Projection period beyond which plan is projected to emerge from critical status, under the Rehabilitant Plan						30 years
Rehabilitation period							10 years
Estimated liability upon withdrawal from plan in current year						37,200
Deferred compensation
Number of deferred compensation plans		3
Trading securities	$ 63,215	$ 49,378

XML

INDUSTRIAL DEVELOPMENT BONDS: (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
INDUSTRIAL DEVELOPMENT BONDS:
Industrial development bonds, average floating interest rate (as a percent)	0.20%	0.30%

XML

COMPREHENSIVE EARNINGS (LOSS): (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accumulated other comprehensive earnings (loss)
Balance at the beginning of the period	$ (16,447)	$ (19,953)	$ (11,213)
Unrealized gains (losses)	18,919	4,010	(5,456)
(Gains) losses reclassified to net earnings	(313)	793	(7,030)
Tax effects	(6,797)	(1,297)	3,746
Net of tax amount	11,809	3,506	(8,740)
Balance at the end of the period	(4,638)	(16,447)	(19,953)
Foreign Currency Translation Adjustment
Accumulated other comprehensive earnings (loss)
Balance at the beginning of the period	(13,406)	(14,686)	(12,236)
Unrealized gains (losses)	(102)	1,303	(2,496)
Tax effects	(19)	(23)	46
Net of tax amount	(121)	1,280	(2,450)
Balance at the end of the period	(13,527)	(13,406)	(14,686)
Investments
Accumulated other comprehensive earnings (loss)
Balance at the beginning of the period	908	(351)	(999)
Unrealized gains (losses)	1,091	1,980	1,030
(Gains) losses reclassified to net earnings	(2,430)
Tax effects	485	(721)	(382)
Net of tax amount	(854)	1,259	648
Balance at the end of the period	54	908	(351)
Derivatives
Accumulated other comprehensive earnings (loss)
Balance at the beginning of the period	(111)	257	5,252
Unrealized gains (losses)	(2,107)	(339)	(397)
(Gains) losses reclassified to net earnings	1,446	(243)	(7,531)
Tax effects	240	214	2,933
Net of tax amount	(421)	(368)	(4,995)
Balance at the end of the period	(532)	(111)	257
Postretirement and Pension Benefits
Accumulated other comprehensive earnings (loss)
Balance at the beginning of the period	(3,838)	(5,173)	(3,230)
Unrealized gains (losses)	20,037	1,066	(3,593)
(Gains) losses reclassified to net earnings	671	1,036	501
Tax effects	(7,503)	(767)	1,149
Net of tax amount	13,205	1,335	(1,943)
Balance at the end of the period	$ 9,367	$ (3,838)	$ (5,173)

XML

FAIR VALUE MEASUREMENTS: (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fair value measurements
Available for sale securities	$ 118,647	$ 94,053
Trading securities	63,215	49,378
Fair value measured on a recurring basis | Estimated Fair Value
Fair value measurements
Cash and equivalents	88,283	63,862
Available for sale securities	118,647
Auction rate security		9,485
Available for sale securities, excluding the auction rate security		84,568
Trading securities	63,215	49,378
Total assets measured at fair value	269,331	207,181
Fair value measured on a recurring basis | Estimated Fair Value | Foreign currency forward contracts
Fair value measurements
Derivative instruments, net	(684)
Fair value measured on a recurring basis | Estimated Fair Value | Commodity futures contracts
Fair value measurements
Derivative instruments, net	(130)	(112)
Fair value measured on a recurring basis | Level 1
Fair value measurements
Cash and equivalents	88,283	63,862
Trading securities	63,215	49,378
Total assets measured at fair value	151,368	113,128
Fair value measured on a recurring basis | Level 1 | Commodity futures contracts
Fair value measurements
Derivative instruments, net	(130)	(112)
Fair value measured on a recurring basis | Level 2
Fair value measurements
Available for sale securities	118,647
Available for sale securities, excluding the auction rate security		84,568
Total assets measured at fair value	117,963	84,568
Fair value measured on a recurring basis | Level 2 | Foreign currency forward contracts
Fair value measurements
Derivative instruments, net	(684)
Fair value measured on a recurring basis | Level 3
Fair value measurements
Auction rate security		9,485
Total assets measured at fair value		$ 9,485

XML

INDUSTRIAL DEVELOPMENT BONDS:

12 Months Ended

Dec. 31, 2013

INDUSTRIAL DEVELOPMENT BONDS:

INDUSTRIAL DEVELOPMENT BONDS:

NOTE 3—INDUSTRIAL DEVELOPMENT BONDS:

Industrial development bonds are due in 2027. The average floating interest rate, which is reset weekly, was 0.2% and 0.3% in 2013 and 2012, respectively. See Note 10 to the Consolidated Financial Statements for fair value disclosures.

XML

EMPLOYEE BENEFIT PLANS: (Details 2) (Postretirement benefit plans, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Postretirement benefit plans
Postretirement benefit plan disclosure
Reduction in benefit obligation due to plan amendment	$ 10,425
Future annual cost increases in health benefits (as a percent)	3.00%
Discount rate used in determining the accumulated postretirement benefit obligation (as a percent)	4.69%	3.91%
Amounts recognized in accumulated other comprehensive loss (pre-tax)
Prior service credit	(10,801)
Net actuarial loss	(3,956)
Net amount recognized in accumulated other comprehensive (gain) loss	(14,757)
Estimated amount to be amortized from accumulated other comprehensive loss (gain) into net periodic benefit cost during next fiscal year
Actuarial loss (gain)	(452)
Prior service credit (gain)	(1,352)
Changes in the accumulated postretirement benefit obligation
Benefit obligation, beginning of the period	27,381	26,108
Service cost	1,036	1,034	831
Interest cost	1,060	1,113	1,117
Plan amendments	(10,425)
Actuarial (gain)/loss	(9,734)	(520)
Benefits paid	(142)	(354)
Benefit obligation, end of the period	9,176	27,381	26,108
Net periodic postretirement benefit cost
Service cost benefits attributed to service during the period	1,036	1,034	831
Interest cost on the accumulated postretirement benefit obligation	1,060	1,113	1,117
Net amortization	671	1,036	501
Net periodic postretirement benefit cost	2,767	3,183	2,449
Estimated future benefit payments
2014	319
2015	340
2016	388
2017	433
2018	470
2019 through 2023	$ 2,927

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: (Tables)

12 Months Ended

Dec. 31, 2013

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

Summary of the Company's outstanding derivative contracts and their effects on the Consolidated Statements of Financial Position

	December 31, 2013
	Notional Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	34,244	$	—	$	(684	)
Commodity futures contracts	5,601		41		(191		)
Total derivatives designated as hedging instruments:			41		(875		)
Derivatives not designated as hedging instruments:
Commodity futures contracts	321		20		—
Total derivatives not designated as hedging instruments:			20		—
Total derivatives			$	61	$	(875	)

	December 31, 2012
	Notional Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Commodity futures contracts	$	7,868	$	127	$	(301	)
Total derivatives designated as hedging instruments:			127		(301		)
Derivatives not designated as hedging instruments
Commodity futures contracts	627		62		—
Total derivatives not designated as hedging instruments:			62		—
Total derivatives			$	189	$	(301	)

Effects of derivative instruments on the Consolidated Statement of Earnings, Comprehensive Earnings and Retained Earnings

	For Year Ended December 31, 2013
	Gain (Loss) Recognized in OCI			Gain (Loss) Reclassified from Accumulated OCI into Earnings			Gain (Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings
Foreign currency forward contracts	$	(1,144	)	$	(460	)	$	—
Commodity futures contracts	(963		)	(986		)	—
Total	$	(2,107	)	$	(1,446	)	$	—

	For Year Ended December 31, 2012
	Gain (Loss) Recognized in OCI			Gain (Loss) Reclassified from Accumulated OCI into Earnings			Gain (Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings
Foreign currency forward contracts	$	222		$	427		$	—
Commodity futures contracts	(526		)	(149		)	—
Commodity option contracts	(35		)	(35		)	—
Total	$	(339	)	$	243		$	—

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FAIR VALUE MEASUREMENTS: (Tables)

12 Months Ended

Dec. 31, 2013

FAIR VALUE MEASUREMENTS:

Schedule of financial assets and liabilities measured at fair value

	Estimated Fair Value December 31, 2013
	Total			Input Levels Used
	Fair Value			Level 1			Level 2			Level 3
Cash and equivalents	$	88,283		$	88,283		$	—		$	—
Available for sale securities	118,647			—			118,647			—
Foreign currency forward contracts	(684		)	—			(684		)	—
Commodity futures contracts, net	(130		)	(130		)	—			—
Trading securities	63,215			63,215			—			—
Total assets measured at fair value	$	269,331		$	151,368		$	117,963		$	—

	Estimated Fair Value December 31, 2012
	Total			Input Levels Used
	Fair Value			Level 1			Level 2		Level 3
Cash and equivalents	$	63,862		$	63,862		$	—	$	—
Auction rate security	9,485			—			—		9,485
Available for sale securities, excluding the auction rate security	84,568			—			84,568		—
Commodity futures contracts	(112		)	(112		)	—		—
Trading securities	49,378			49,378			—		—
Total assets measured at fair value	$	207,181		$	113,128		$	84,568	$	9,485

Summary of the aggregate fair value, gross unrealized gains, gross unrealized losses, realized losses and amortized cost basis of investment portfolio by major security type

	December 31, 2013
	Amortized		Fair		Unrealized					Realized
Available for Sale:	Cost		Value		Gains		Losses			Losses
Municipal bonds	$	75,488	$	75,622	$	134	$	—		$	—
Corporate bonds	37,258		37,214		—		(44		)	—
Certificates of deposit	5,796		5,794				(2		)
Mutual funds	20		17		—		(3		)	—
	$	118,562	$	118,647	$	134	$	(49	)	$	—

	December 31, 2012
	Amortized		Fair		Unrealized					Realized
Available for Sale:	Cost		Value		Gains		Losses			Losses
Auction rate security	$	8,410	$	9,485	$	1,075	$	—		$	—
Municipal bonds	65,745		66,002		257		—			—
Corporate bonds	14,614		14,744		130
Certificates of deposit	3,840		3,805				(35		)
Mutual funds	20		17		—		(3		)	—
	$	92,629	$	94,053	$	1,462	$	(38	)	$	—

Schedule of financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

	2013			2012
Balance at January 1	$	9,485		$	7,453
Unrealized gain recognized in accumulated other comprehensive loss	1,355			2,032
Settlement of security	(10,840		)	—
Balance at December 31	$	—		$	9,485

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COMMITMENTS: (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
COMMITMENTS:
Rental expense	$ 793	$ 967	$ 1,042

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COMPREHENSIVE EARNINGS (LOSS): (Tables)

12 Months Ended

Dec. 31, 2013

COMPREHENSIVE EARNINGS (LOSS):

Schedule of accumulated other comprehensive earnings (loss):

	Foreign			Unrealized Gain (Loss) on									Accumulated
	Currency Translation Adjustment			Investments			Derivatives			Postretirement and Pension Benefits			Other Comprehensive Earnings (Loss)
Balance at January 1, 2011	$	(12,236	)	$	(999	)	$	5,252		$	(3,230	)	$	(11,213	)
Unrealized gains (losses)	(2,496		)	1,030			(397		)	(3,593		)	(5,456		)
(Gains) losses reclassified to net earnings	—			—			(7,531		)	501			(7,030		)
Tax effects	46			(382		)	2,933			1,149			3,746
Net of tax amount	(2,450		)	648			(4,995		)	(1,943		)	(8,740		)
Balance at December 31, 2011	(14,686		)	(351		)	257			(5,173		)	(19,953		)
Unrealized gains (losses)	1,303			1,980			(339		)	1,066			4,010
(Gains) losses reclassified to net earnings	—			—			(243		)	1,036			793
Tax effects	(23		)	(721		)	214			(767		)	(1,297		)
Net of tax amount	1,280			1,259			(368		)	1,335			3,506

	Foreign			Unrealized Gain (Loss) on									Accumulated
	Currency Translation Adjustment			Investments			Derivatives			Postretirement and Pension Benefits			Other Comprehensive Earnings (Loss)
Balance at December 31, 2012	$	(13,406	)	$	908		$	(111	)	$	(3,838	)	$	(16,447	)
Unrealized gains (losses)	(102		)	1,091			(2,107		)	20,037			18,919
(Gains) losses reclassified to net earnings	—			(2,430		)	1,446			671			(313		)
Tax effects	(19		)	485			240			(7,503		)	(6,797		)
Net of tax amount	(121		)	(854		)	(421		)	13,205			11,809
Balance at December 31, 2013	$	(13,527	)	$	54		$	(532	)	$	9,367		$	(4,638	)

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GOODWILL AND INTANGIBLE ASSETS: (Tables)

12 Months Ended

Dec. 31, 2013

GOODWILL AND INTANGIBLE ASSETS:

Schedule of changes in carrying amount of trademarks

	2013			2012
Original cost	$	193,767		$	193,767
Accumulated impairment losses as of January 1	(18,743		)	(18,743		)
Balance at January 1	$	175,024		$	175,024
Current year impairment losses	—			—
Balance at December 31	$	175,024		$	175,024
Accumulated impairment losses as of December 31	$	(18,743	)	$	(18,743	)

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ACCRUED LIABILITIES:

12 Months Ended

Dec. 31, 2013

ACCRUED LIABILITIES:

ACCRUED LIABILITIES:

NOTE 2—ACCRUED LIABILITIES:

Accrued liabilities are comprised of the following:

	December 31,
	2013		2012
Compensation	$	9,445	$	8,948
Other employee benefits	7,825		7,121
Taxes, other than income	2,776		2,618
Advertising and promotions	19,133		21,431
Other	6,401		5,032
	$	45,580	$	45,150

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SIGNIFICANT ACCOUNTING POLICIES: (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenue recognition:
Shipping and handling costs	$ 45,367	$ 45,072	$ 45,850
Cash and cash equivalents:
Maximum original maturity period of temporary cash investments classified as cash equivalents	3 months
Investments:
Marketable securities, maximum maturity period	3 years
Inventories:
Inventories at cost, last-in, first-out (LIFO) method	58,038	58,439
Excess of current cost over LIFO cost of inventories	20,926	26,130
Foreign inventories at cost, first-in, first-out (FIFO) method	$ 3,818	$ 3,944

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SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE: (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Changes in share capital and capital in excess of par value
Balance at the beginning of the period (in shares)	(73)
Stock dividend rate (as a percent)	3.00%	3.00%	3.00%
Balance at the end of the period (in shares)	(76)	(73)
Total Number of Shares Purchased	752	944	708
Average Price Paid Per Share (in dollars per share)	$ 30.73	$ 25.16	$ 25.64
Common Stock
Changes in share capital and capital in excess of par value
Balance at the beginning of the period	$ 25,450	$ 25,333	$ 25,040
Balance at the beginning of the period (in shares)	36,649	36,479	36,057
Issuance of 3% stock dividend	761	753	748
Issuance of 3% stock dividend (in shares)	1,095	1,085	1,077
Conversion of Class B common shares to common shares	13	20	37
Conversion of Class B common shares to common shares (in shares)	19	29	53
Purchase and retirement of common shares	(522)	(656)	(492)
Purchase and retirement of common shares (in shares)	(752)	(944)	(708)
Balance at the end of the period	25,702	25,450	25,333
Balance at the end of the period (in shares)	37,011	36,649	36,479
Class B Common Stock
Changes in share capital and capital in excess of par value
Balance at the beginning of the period	15,018	14,601	14,212
Balance at the beginning of the period (in shares)	21,627	21,025	20,466
Issuance of 3% stock dividend	450	437	426
Issuance of 3% stock dividend (in shares)	648	631	612
Conversion of Class B common shares to common shares	(13)	(20)	(37)
Conversion of Class B common shares to common shares (in shares)	(19)	(29)	(53)
Balance at the end of the period	15,455	15,018	14,601
Balance at the end of the period (in shares)	22,256	21,627	21,025
Treasury Stock
Changes in share capital and capital in excess of par value
Balance at the beginning of the period	(1,992)	(1,992)	(1,992)
Balance at the beginning of the period (in shares)	(73)	(71)	(69)
Issuance of 3% stock dividend (in shares)	(3)	(2)	(2)
Balance at the end of the period	(1,992)	(1,992)	(1,992)
Balance at the end of the period (in shares)	(76)	(73)	(71)
Capital in Excess of Par Value
Changes in share capital and capital in excess of par value
Balance at the beginning of the period	547,576	533,677	505,495
Issuance of 3% stock dividend	47,714	37,046	45,880
Purchase and retirement of common shares	(22,621)	(23,147)	(17,698)
Balance at the end of the period	$ 572,669	$ 547,576	$ 533,677

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GOODWILL AND INTANGIBLE ASSETS: (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Changes in carrying amount of trademarks
Original cost	$ 193,767	$ 193,767
Accumulated impairment losses of goodwill	0
Trademarks
Changes in carrying amount of trademarks
Accumulated impairment losses, balance at the beginning of the period	(18,743)	(18,743)	(18,743)
Carrying amount, balance at the beginning of the period	175,024	175,024	175,024
Carrying amount, balance at the end of the period	175,024	175,024	175,024
Accumulated impairment losses, balance at the end of the period	$ (18,743)	$ (18,743)	$ (18,743)

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CONSOLIDATED STATEMENTS OF Earnings and Retained Earnings (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CONSOLIDATED STATEMENTS OF Earnings and Retained Earnings
Net product sales	$ 539,627	$ 545,985	$ 528,369
Rental and royalty revenue	3,756	3,885	4,136
Total revenue	543,383	549,870	532,505
Product cost of goods sold	350,960	365,573	365,225
Rental and royalty cost	937	976	1,038
Total costs	351,897	366,549	366,263
Product gross margin	188,667	180,412	163,144
Rental and royalty gross margin	2,819	2,909	3,098
Total gross margin	191,486	183,321	166,242
Selling, marketing and administrative expenses	119,133	113,842	108,276
Earnings from operations	72,353	69,479	57,966
Other income, net	12,130	4,685	2,946
Earnings before income taxes	84,483	74,164	60,912
Provision for income taxes	23,634	22,160	16,974
Net earnings	60,849	52,004	43,938
Net earnings per share (in dollars per share)	$ 1.02	$ 0.86	$ 0.72
Average number of shares outstanding (in shares)	59,634	60,484	61,347
Retained earnings at beginning of period	80,210	114,269	135,866
Net earnings	60,849	52,004	43,938
Cash dividends	(18,922)	(47,729)	(18,360)
Stock dividends	(49,028)	(38,334)	(47,175)
Retained earnings at end of period	$ 73,109	$ 80,210	$ 114,269

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SEGMENT AND GEOGRAPHIC INFORMATION: (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
SEGMENT AND GEOGRAPHIC INFORMATION
Net product sales:	$ 539,627	$ 545,985	$ 528,369
Long-lived assets:	196,916	201,290	212,162
United States
SEGMENT AND GEOGRAPHIC INFORMATION
Net product sales:	495,082	499,660	487,185
Long-lived assets:	160,099	161,504	170,173
Canada and Other
SEGMENT AND GEOGRAPHIC INFORMATION
Net product sales:	44,545	46,325	41,184
Long-lived assets:	$ 36,817	$ 39,786	$ 41,989

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CONSOLIDATED STATEMENTS OF Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$ 60,849	$ 52,004	$ 43,938
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	20,050	19,925	19,229
Impairment of equity method investment	975	850
Loss from equity method investment	967	1,019	194
Amortization of marketable security premiums	3,035	1,770	1,267
Changes in operating assets and liabilities:
Accounts receivable	1,330	272	(5,448)
Other receivables	253	(2,720)	3,963
Inventories	503	9,588	(15,631)
Prepaid expenses and other assets	14,922	11,295	5,106
Accounts payable and accrued liabilities	418	199	84
Income taxes payable and deferred	68	1,369	(5,772)
Postretirement health care and life insurance benefits	2,861	2,829	2,022
Deferred compensation and other liabilities	3,592	3,018	2,146
Other	(14)	501	(708)
Net cash provided by operating activities	109,809	101,919	50,390
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(15,752)	(8,886)	(16,351)
Net purchases of trading securities	(5,500)	(2,994)	(3,234)
Purchase of available for sale securities	(66,324)	(39,016)	(39,252)
Sale and maturity of available for sale securities	39,613	10,461	7,680
Net cash used in investing activities	(47,963)	(40,435)	(51,157)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired	(23,143)	(23,803)	(18,190)
Dividends paid in cash	(14,282)	(52,431)	(18,407)
Net cash used in financing activities	(37,425)	(76,234)	(36,597)
Increase (decrease) in cash and cash equivalents	24,421	(14,750)	(37,364)
Cash and cash equivalents at beginning of year	63,862	78,612	115,976
Cash and cash equivalents at end of year	88,283	63,862	78,612
Supplemental cash flow information:
Income taxes paid	24,225	21,312	16,906
Interest paid	21	31	38
Stock dividend issued	$ 48,925	$ 38,236	$ 47,053

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SIGNIFICANT ACCOUNTING POLICIES: (Details 4)	12 Months Ended
	Dec. 31, 2013 item
Common Stock
Earnings per share:
Voting right per share (in votes per share)	1
Class B Common Stock
Earnings per share:
Voting right per share (in votes per share)	10

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ACCRUED LIABILITIES: (Tables)

12 Months Ended

Dec. 31, 2013

ACCRUED LIABILITIES:

Schedule of accrued liabilities

	December 31,
	2013		2012
Compensation	$	9,445	$	8,948
Other employee benefits	7,825		7,121
Taxes, other than income	2,776		2,618
Advertising and promotions	19,133		21,431
Other	6,401		5,032
	$	45,580	$	45,150

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ACCRUED LIABILITIES: (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
ACCRUED LIABILITIES:
Compensation	$ 9,445	$ 8,948
Other employee benefits	7,825	7,121
Taxes, other than income	2,776	2,618
Advertising and promotions	19,133	21,431
Other	6,401	5,032
Total accrued liabilities	$ 45,580	$ 45,150

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SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE: (Tables)

12 Months Ended

Dec. 31, 2013

SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:

Schedule of changes in share capital and capital in excess of par value

	Class B															Capital in Excess
	Common Stock					Common Stock					Treasury Stock					of Par
	Shares		Amount			Shares		Amount			Shares		Amount			Value
	(000’s)					(000’s)					(000’s)
Balance at January 1, 2011	36,057		$	25,040		20,466		$	14,212		(69	)	$	(1,992	)	$	505,495
Issuance of 3% stock dividend	1,077		748			612		426			(2	)	—			45,880
Conversion of Class B common shares to common shares	53		37			(53	)	(37		)	—		—			—
Purchase and retirement of common shares	(708	)	(492		)	—		—			—		—			(17,698		)
Balance at December 31, 2011	36,479		25,333			21,025		14,601			(71	)	(1,992		)	533,677
Issuance of 3% stock dividend	1,085		753			631		437			(2	)	—			37,046
Conversion of Class B common shares to common shares	29		20			(29	)	(20		)	—		—			—
Purchase and retirement of common shares	(944	)	(656		)	—		—			—		—			(23,147		)
Balance at December 31, 2012	36,649		25,450			21,627		15,018			(73	)	(1,992		)	547,576
Issuance of 3% stock dividend	1,095		761			648		450			(3	)	—			47,714
Conversion of Class B common shares to common shares	19		13			(19	)	(13		)	—		—			—
Purchase and retirement of common shares	(752	)	(522		)	—		—			—		—			(22,621		)
Balance at December 31, 2013	37,011		$	25,702		22,256		$	15,455		(76	)	$	(1,992	)	$	572,669

Schedule of shares purchased and retired

Year	Total Number of Shares Purchased (000’s)	Average Price Paid Per Share
2013	752	$	30.73
2012	944	$	25.16
2011	708	$	25.64

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SIGNIFICANT ACCOUNTING POLICIES:

12 Months Ended

Dec. 31, 2013

SIGNIFICANT ACCOUNTING POLICIES:

SIGNIFICANT ACCOUNTING POLICIES:

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 sales 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.

Revenue recognition:

Products are sold to customers based on accepted purchase orders which include quantity, sales price and other relevant terms of sale. Revenue, net of applicable provisions for discounts, returns, allowances and certain advertising and promotional costs, is recognized when products are delivered to customers and collectability is reasonably assured. Shipping and handling costs of $45,367, $45,072, and $45,850 in 2013, 2012 and 2011, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured.

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 three years. The Company classifies debt and equity securities as either available for sale or trading. Available for sale securities are not actively traded by the Company and are carried at fair value. The Company follows current fair value measurement guidance and 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 or other-than-temporarily impaired. Trading securities relate to deferred compensation arrangements and are carried at fair value with gains or losses included in other income, net. The Company invests in trading securities to economically hedge changes in its deferred compensation liabilities.

The Company regularly reviews its investments to determine whether a decline in fair value below the cost basis is other-than-temporary. If the decline in fair value is judged to be other-than-temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in other income, net. Further information regarding the fair value of the Company’s investments is included in Note 10 to the Consolidated Financial Statements.

Derivative instruments and hedging activities:

Authoritative guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of derivative instruments and related gains and losses, and disclosures about credit-risk-related contingent features in derivative agreements.

From time to time, the Company enters into commodity futures, commodity options contracts and foreign currency forward contracts. Commodity futures and options are intended and are effective as hedges of market price risks associated with the anticipated purchase of certain raw materials (primarily sugar). Foreign currency forward contracts are intended and are effective as hedges of the Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers denominated in a foreign currency. The Company does not engage in trading or other speculative use of derivative instruments. Further information regarding derivative instruments and hedging activities is included in Note 11 to the Consolidated Financial Statements.

Inventories:

Inventories are stated at cost, not to exceed market. The cost of substantially all of the Company’s inventories ($58,038 and $58,439 at December 31, 2013 and 2012, respectively) has been determined by the last-in, first-out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $20,926 and $26,130 at December 31, 2013 and 2012, respectively. The cost of certain foreign inventories ($3,818 and $3,944 at December 31, 2013 and 2012, respectively) has been determined by the first-in, first-out (FIFO) method. Rebates, discounts and other cash consideration received from vendors 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 $20,050, $19,925 and $19,229 in 2013, 2012 and 2011, respectively.

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 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 of long-lived assets were recorded by the Company during 2013, 2012 and 2011.

Postretirement health care and life insurance benefits:

The Company provides certain postretirement health care and life insurance benefits to corporate office and management employees. The cost of these postretirement benefits is accrued during employees’ working careers. See Note 7 for changes to these benefits and the resulting effects of the negative amendment, as defined by guidance. The Company also provides split dollar life benefits to certain executive officers. The Company records an asset equal to the cumulative insurance premiums paid that will be recovered upon the death of covered employees or earlier under the terms of the plan. No premiums were paid in 2013, 2012 and 2011. Certain split dollar agreements were terminated during 2012 which resulted in the full repayment to the Company of all of the cumulative premiums previously paid on these policies. During 2013 and 2012, the Company received $26,477 and $7,298, respectively, of such repayments which were recorded as a reduction in the carrying value of Split Dollar Officer Life Insurance.

Goodwill and indefinite-lived intangible assets:

In accordance with authoritative guidance, goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually unless certain interim triggering events or circumstances require more frequent testing. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. Management believes that all assumptions used for the impairment tests are consistent with those utilized by market participants performing similar valuations The Company has completed its annual impairment testing of its goodwill and trademarks at December 31 of each of the years presented. No impairments of intangibles were recorded in 2013 and 2012.

With respect to impairment testing of goodwill, the first step compares the reporting unit’s estimated fair value with its carrying value. Projected discounted cash flows are used to determine the fair value of the reporting unit. If the carrying value of a reporting unit’s net assets exceeds its fair value, the second step is applied to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is considered impaired and reduced to its implied fair value. Non-amortizable intangible assets, trademarks, are tested for impairment by comparing the fair value of each trademark with its carrying value. The fair value of trademarks is determined using discounted cash flows and estimates of royalty rates. If the carrying value exceeds fair value, the trademark is considered impaired and is reduced to fair value.

Income taxes:

Deferred income taxes are recorded and recognized for future tax effects of temporary differences between financial and income tax reporting. The Company records valuation allowances in situations where the realization of deferred tax assets is not more-likely-than-not. 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 reinvested in the foreign subsidiary.

Foreign currency translation:

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 remeasurements are recorded as a charge or credit to other income, net in the statement of earnings. Where the foreign local currency is used as the functional currency, translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss).

Equity method investment:

The Company’s 50% interest in two foreign companies is accounted for using the equity method. The Company records an increase in its investment to the extent of its share of earnings, and reduces its investment to the extent of losses and dividends received. No dividends were paid in 2013, 2012 and 2011.

As of December 31, 2013 and 2012, management determined that the carrying value of its equity method investment was impaired as a result of accumulated losses from operations and review of future expectations. The Company recorded a pre-tax impairment charge of $975 and $850 in 2013 and 2012, respectively. The fair value was assessed primarily using the discounted cash flow method and liquidation valuation. The key inputs to this method include projections of future cash flows, determinations of appropriate discount rates, and other assumptions of the equity method investee which are considered reasonable and inherent in the discounted cash flow analysis. The Company’s carrying value of this investment at December 31, 2013 is not significant.

Comprehensive earnings:

Comprehensive earnings includes net earnings, foreign currency translation adjustments and unrealized gains/losses on commodity and/or foreign currency hedging contracts, available for sale securities and certain postretirement benefit obligations.

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.

Use of estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, allowances and incentives, product liabilities, assets recorded at fair value, income taxes, depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual results may or may not differ from those estimates.

Recent accounting pronouncements:

In July 2013, the FASB issued ASU 2013-11, which requires presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 provides explicit guidance on presentation in financial statements. The amendment is effective for reporting periods beginning after December 15, 2013. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

        In March 2013, the FASB issued ASU 2013-05, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard is effective for fiscal years beginning after December 15, 2013; however, early adoption is permitted. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

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CONSOLIDATED STATEMENTS OF Comprehensive Earnings (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CONSOLIDATED STATEMENTS OF Comprehensive Earnings
Net earnings	$ 60,849	$ 52,004	$ 43,938
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(102)	1,303	(2,496)
Pension and postretirement reclassification adjustment:
Unrealized gains (losses) for the period on postretirement and pension benefits	20,037	1,066	(3,593)
Less: reclassification adjustment for losses to net earnings	671	1,036	501
Unrealized gains (losses) on postretirement and pension benefits	20,708	2,102	(3,092)
Investments:
Unrealized gains (losses) for the period on investments	1,091	1,980	1,030
Less: reclassification adjustment for (gains) losses to net earnings	(2,430)
Unrealized gains (losses) on investments	(1,339)	1,980	1,030
Derivatives:
Unrealized gains (losses) for the period on derivatives	(2,107)	(339)	(397)
Less: reclassification adjustment for (gains) losses to net earnings	1,446	(243)	(7,531)
Unrealized gains (losses) on derivatives	(661)	(582)	(7,928)
Total other comprehensive income (loss), before tax	18,606	4,803	(12,486)
Income tax benefit (expense) related to items of other comprehensive income	(6,797)	(1,297)	3,746
Comprehensive earnings	$ 72,658	$ 55,510	$ 35,198

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

12 Months Ended

Dec. 31, 2013

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

NOTE 11—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

From time to time, the Company uses derivative instruments, including foreign currency forward contracts, commodity futures contracts and commodity option contracts, to manage its exposures to foreign exchange and commodity prices. Commodity futures contracts and most commodity option contracts are intended and effective as hedges of market price risks associated with the anticipated purchase of certain raw materials (primarily sugar). Foreign currency forward contracts are intended and effective as hedges of the Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers denominated in a foreign currency. The Company does not engage in trading or other speculative use of derivative instruments.

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Consolidated Statements of Financial Position. Derivative assets are recorded in other receivables and derivative liabilities are recorded in accrued liabilities. The Company uses either hedge accounting or mark-to-market accounting for its derivative instruments. Derivatives that qualify for hedge accounting are designated as cash flow hedges by formally documenting the hedge relationships, including identification of the hedging instruments, the hedged items and other critical terms, as well as the Company’s risk management objectives and strategies for undertaking the hedge transaction.

Changes in the fair value of the Company’s cash flow hedges are recorded in accumulated other comprehensive loss, net of tax, 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 loss for commodity derivatives are expected to be reclassified to cost of goods sold. Substantially all amounts reported in accumulated other comprehensive loss for foreign currency derivatives are expected to be reclassified to other income, net.

The following table summarizes the Company’s outstanding derivative contracts and their effects on its Consolidated Statements of Financial Position at December 31, 2013 and 2012:

	December 31, 2013
	Notional Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	34,244	$	—	$	(684	)
Commodity futures contracts	5,601		41		(191		)
Total derivatives designated as hedging instruments:			41		(875		)
Derivatives not designated as hedging instruments:
Commodity futures contracts	321		20		—
Total derivatives not designated as hedging instruments:			20		—
Total derivatives			$	61	$	(875	)

	December 31, 2012
	Notional Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Commodity futures contracts	$	7,868	$	127	$	(301	)
Total derivatives designated as hedging instruments:			127		(301		)
Derivatives not designated as hedging instruments
Commodity futures contracts	627		62		—
Total derivatives not designated as hedging instruments:			62		—
Total derivatives			$	189	$	(301	)

The effects of derivative instruments on the Company’s Consolidated Statement of Earnings, Comprehensive Earnings and Retained Earnings for years ended December 31, 2013 and 2012 are as follows:

	For Year Ended December 31, 2013
	Gain (Loss) Recognized in OCI			Gain (Loss) Reclassified from Accumulated OCI into Earnings			Gain (Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings
Foreign currency forward contracts	$	(1,144	)	$	(460	)	$	—
Commodity futures contracts	(963		)	(986		)	—
Total	$	(2,107	)	$	(1,446	)	$	—

	For Year Ended December 31, 2012
	Gain (Loss) Recognized in OCI			Gain (Loss) Reclassified from Accumulated OCI into Earnings			Gain (Loss) on Amount Excluded from Effectiveness Testing Recognized in Earnings
Foreign currency forward contracts	$	222		$	427		$	—
Commodity futures contracts	(526		)	(149		)	—
Commodity option contracts	(35		)	(35		)	—
Total	$	(339	)	$	243		$	—

For the years ended December 31, 2013 and 2012, the Company recognized a gain (loss) of $(42) and $62 in earnings, respectively, related to mark-to-market accounting for certain commodity futures contracts.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Jun. 28, 2013	Feb. 14, 2014 Common Stock	Feb. 14, 2014 Class B Common Stock
Entity Registrant Name	TOOTSIE ROLL INDUSTRIES INC
Entity Central Index Key	0000098677
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		$ 718,457,000
Entity Common Stock, Shares Outstanding			36,790,243	22,253,125
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

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COMPREHENSIVE EARNINGS (LOSS):

12 Months Ended

Dec. 31, 2013

COMPREHENSIVE EARNINGS (LOSS):

COMPREHENSIVE EARNINGS (LOSS):

NOTE 12—COMPREHENSIVE EARNINGS (LOSS):

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

	Foreign			Unrealized Gain (Loss) on									Accumulated
	Currency Translation Adjustment			Investments			Derivatives			Postretirement and Pension Benefits			Other Comprehensive Earnings (Loss)
Balance at January 1, 2011	$	(12,236	)	$	(999	)	$	5,252		$	(3,230	)	$	(11,213	)
Unrealized gains (losses)	(2,496		)	1,030			(397		)	(3,593		)	(5,456		)
(Gains) losses reclassified to net earnings	—			—			(7,531		)	501			(7,030		)
Tax effects	46			(382		)	2,933			1,149			3,746
Net of tax amount	(2,450		)	648			(4,995		)	(1,943		)	(8,740		)
Balance at December 31, 2011	(14,686		)	(351		)	257			(5,173		)	(19,953		)
Unrealized gains (losses)	1,303			1,980			(339		)	1,066			4,010
(Gains) losses reclassified to net earnings	—			—			(243		)	1,036			793
Tax effects	(23		)	(721		)	214			(767		)	(1,297		)
Net of tax amount	1,280			1,259			(368		)	1,335			3,506

	Foreign			Unrealized Gain (Loss) on									Accumulated
	Currency Translation Adjustment			Investments			Derivatives			Postretirement and Pension Benefits			Other Comprehensive Earnings (Loss)
Balance at December 31, 2012	$	(13,406	)	$	908		$	(111	)	$	(3,838	)	$	(16,447	)
Unrealized gains (losses)	(102		)	1,091			(2,107		)	20,037			18,919
(Gains) losses reclassified to net earnings	—			(2,430		)	1,446			671			(313		)
Tax effects	(19		)	485			240			(7,503		)	(6,797		)
Net of tax amount	(121		)	(854		)	(421		)	13,205			11,809
Balance at December 31, 2013	$	(13,527	)	$	54		$	(532	)	$	9,367		$	(4,638	)

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CONSOLIDATED STATEMENTS OF Financial Position (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 88,283	$ 63,862
Investments	33,572	18,746
Accounts receivable trade, less allowances of $2,042 and $2,142	40,721	42,108
Other receivables	4,616	5,528
Inventories:
Finished goods and work-in-process	37,012	37,046
Raw materials and supplies	24,844	25,337
Prepaid expenses	5,581	4,148
Deferred income taxes	5,482	466
Total current assets	240,111	197,241
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land	21,683	21,687
Buildings	111,044	108,391
Machinery and equipment	340,405	331,110
Construction in progress	3,403	2,539
Property, plant and equipment, gross	476,535	463,727
Less-Accumulated depreciation	279,619	262,437
Net property, plant and equipment	196,916	201,290
OTHER ASSETS:
Goodwill	73,237	73,237
Trademarks	175,024	175,024
Investments	148,532	126,812
Split dollar officer life insurance	40,296	66,911
Prepaid expenses	10,260
Deferred income taxes	4,033	6,222
Total other assets	451,382	448,206
Total assets	888,409	846,737
CURRENT LIABILITIES:
Accounts payable	9,153	8,942
Dividends payable	4,742
Accrued liabilities	45,580	45,150
Postretirement health care and life insurance benefits	319	555
Income taxes payable	327	6,118
Total current liabilities	60,121	60,765
NONCURRENT LIABILITES:
Deferred income taxes	54,939	38,748
Postretirement health care and life insurance benefits	8,857	26,826
Industrial development bonds	7,500	7,500
Liability for uncertain tax positions	7,167	7,866
Deferred compensation and other liabilities	69,520	55,217
Total noncurrent liabilities	147,983	136,157
SHAREHOLDERS' EQUITY:
Capital in excess of par value	572,669	547,576
Retained earnings, per accompanying statement	73,109	80,210
Accumulated other comprehensive loss	(4,638)	(16,447)
Treasury stock (at cost)-76 shares and 73 shares, respectively	(1,992)	(1,992)
Total shareholders' equity	680,305	649,815
Total liabilities and shareholders' equity	888,409	846,737
Common stock
SHAREHOLDERS' EQUITY:
Common stock	25,702	25,450
Class B common stock
SHAREHOLDERS' EQUITY:
Common stock	$ 15,455	$ 15,018

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OTHER INCOME, NET:

12 Months Ended

Dec. 31, 2013

OTHER INCOME, NET:

OTHER INCOME, NET:

NOTE 6—OTHER INCOME, NET:

Other income, net is comprised of the following:

	2013			2012			2011
Interest and dividend income	$	1,445		$	1,369		$	1,087
Gains on trading securities relating to deferred compensation plans	10,588			4,616			29
Interest expense	(92		)	(137		)	(121		)
Impairment of equity investment	(975		)	(850		)	—
Equity method investment loss	(967		)	(1,019		)	(194		)
Foreign exchange gains (losses)	(790		)	442			2,098
Capital gains (losses)	2,576			(59		)	(227		)
Miscellaneous, net	345			323			274
	$	12,130		$	4,685		$	2,946

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SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:

12 Months Ended

Dec. 31, 2013

SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:

SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:

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

	Class B															Capital in Excess
	Common Stock					Common Stock					Treasury Stock					of Par
	Shares		Amount			Shares		Amount			Shares		Amount			Value
	(000’s)					(000’s)					(000’s)
Balance at January 1, 2011	36,057		$	25,040		20,466		$	14,212		(69	)	$	(1,992	)	$	505,495
Issuance of 3% stock dividend	1,077		748			612		426			(2	)	—			45,880
Conversion of Class B common shares to common shares	53		37			(53	)	(37		)	—		—			—
Purchase and retirement of common shares	(708	)	(492		)	—		—			—		—			(17,698		)
Balance at December 31, 2011	36,479		25,333			21,025		14,601			(71	)	(1,992		)	533,677
Issuance of 3% stock dividend	1,085		753			631		437			(2	)	—			37,046
Conversion of Class B common shares to common shares	29		20			(29	)	(20		)	—		—			—
Purchase and retirement of common shares	(944	)	(656		)	—		—			—		—			(23,147		)
Balance at December 31, 2012	36,649		25,450			21,627		15,018			(73	)	(1,992		)	547,576
Issuance of 3% stock dividend	1,095		761			648		450			(3	)	—			47,714
Conversion of Class B common shares to common shares	19		13			(19	)	(13		)	—		—			—
Purchase and retirement of common shares	(752	)	(522		)	—		—			—		—			(22,621		)
Balance at December 31, 2013	37,011		$	25,702		22,256		$	15,455		(76	)	$	(1,992	)	$	572,669

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 Company Common Stock purchase program, the Company’s board of directors periodically authorizes a dollar amount for such share purchases.

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

Year	Total Number of Shares Purchased (000’s)	Average Price Paid Per Share
2013	752	$	30.73
2012	944	$	25.16
2011	708	$	25.64

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INCOME TAXES: (Tables)

12 Months Ended

Dec. 31, 2013

INCOME TAXES:

Schedule of domestic and foreign components of pretax income

	2013		2012		2011
Domestic	$	73,362	$	64,173	$	56,651
Foreign	11,121		9,991		4,261
	$	84,483	$	74,164	$	60,912

Schedule of components of provision of income taxes

	2013		2012			2011
Current:
Federal	$	16,192	$	24,312		$	15,568
Foreign	219		231			559
State	891		1,914			863
	17,302		26,457			16,990
Deferred:
Federal	4,286		(6,857		)	(1,230		)
Foreign	1,823		1,710			1,221
State	223		850			(7		)
	6,332		(4,297		)	(16		)
	$	23,634	$	22,160		$	16,974

Schedule of Significant components of net deferred tax liability

	December 31,
	2013			2012
Deferred tax assets:
Accrued customer promotions	$	3,156		$	3,971
Deferred compensation	25,103			19,485
Postretirement benefits	3,847			8,127
Other accrued expenses	6,158			7,749
Foreign subsidiary tax loss carry forward	12,512			13,791
Tax credit carry forward	1,243			1,066
Realized capital losses	581			1,366
Unrealized capital loss	—			5,848
	52,600			61,403
Valuation allowance	(957		)	(2,040		)
Total deferred tax assets	$	51,643		$	59,363
Deferred tax liabilities:
Depreciation	$	33,129		$	33,858
Deductible goodwill and trademarks	42,073			42,450
Accrued export company commissions	5,391			5,117
Employee benefit plans	5,100			876
Inventory reserves	1,646			256
Prepaid insurance	785			697
Unrealized capital loss	709			—
Deferred gain on sale of real estate	8,234			8,169
Total deferred tax liabilities	$	97,067		$	91,423
Net deferred tax liability	$	45,424		$	32,060

Schedule of reconciliation of statutory and effective income tax rate

	2013		2012		2011
U.S. statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net	1.0		1.1		1.2
Exempt municipal bond interest	(0.4	)	(0.5	)	(0.5	)
Foreign tax rates	(2.0	)	(1.6	)	(0.4	)
Qualified domestic production activities deduction	(2.2	)	(3.1	)	(2.5	)
Tax credits receivable	(0.9	)	(0.9	)	(0.4	)
Adjustment of deferred tax balances	(1.1	)	(0.5	)	(1.7	)
Reserve for uncertain tax benefits	(0.7	)	(0.3	)	(0.6	)
Other, net	(0.7	)	0.7		(2.2	)
Effective income tax rate	28.0	%	29.9	%	27.9	%

Schedule of reconciliation of beginning and ending balances of total amounts of unrecognized tax benefits

	2013			2012			2011
Unrecognized tax benefits at January 1	$	6,677		$	6,804		$	8,138
Increases in tax positions for the current year	1,163			727			320
Reductions in tax positions for lapse of statute of limitations	(867		)	(854		)	(668		)
Reductions in tax positions relating to settlements with taxing authorities	(140		)	—			—
Reductions in tax positions for effective settlements	(823		)	—			(986		)
Unrecognized tax benefits at December 31	$	6,010		$	6,677		$	6,804

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GOODWILL AND INTANGIBLE ASSETS:

12 Months Ended

Dec. 31, 2013

GOODWILL AND INTANGIBLE ASSETS:

GOODWILL AND INTANGIBLE ASSETS:

NOTE 13—GOODWILL AND INTANGIBLE ASSETS:

All of the Company’s intangible indefinite-lived assets are trademarks.

The changes in the carrying amount of trademarks for 2013 and 2012 were as follows:

	2013			2012
Original cost	$	193,767		$	193,767
Accumulated impairment losses as of January 1	(18,743		)	(18,743		)
Balance at January 1	$	175,024		$	175,024
Current year impairment losses	—			—
Balance at December 31	$	175,024		$	175,024
Accumulated impairment losses as of December 31	$	(18,743	)	$	(18,743	)

The fair value of indefinite-lived intangible assets was primarily assessed using the present value of estimated future cash flows and relief-from-royalty method.

The Company has no accumulated impairment losses of goodwill.

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SEGMENT AND GEOGRAPHIC INFORMATION:

12 Months Ended

Dec. 31, 2013

SEGMENT AND GEOGRAPHIC INFORMATION:

SEGMENT AND GEOGRAPHIC INFORMATION:

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 and other countries worldwide.

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

	2013		2012		2011
Net product sales:
United States	$	495,082	$	499,660	$	487,185
Canada and Other	44,545		46,325		41,184
	$	539,627	$	545,985	$	528,369
Long-lived assets:
United States	$	160,099	$	161,504	$	170,173
Canada and Other	36,817		39,786		41,989
	$	196,916	$	201,290	$	212,162

Sales revenues from Wal-Mart Stores, Inc. aggregated approximately 23.8%, 23.5%, and 23.5% of net product sales during the years ended December 31, 2013, 2012 and 2011, respectively. Some of the aforementioned sales to Wal-Mart are sold to McLane Company, a large national grocery wholesaler, which services and delivers certain of the Company products to Wal-Mart and other retailers in the U.S.A. Net product sales revenues from McLane, which includes these Wal-Mart sales as well as sales and deliveries to other Company customers, were 15.1% in 2013; such revenues from McLane were less than 10% in 2012 and 2011.

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EMPLOYEE BENEFIT PLANS:

12 Months Ended

Dec. 31, 2013

EMPLOYEE BENEFIT PLANS:

EMPLOYEE BENEFIT PLANS:

NOTE 7—EMPLOYEE BENEFIT PLANS:

Pension plans:

The Company sponsors defined contribution pension plans covering certain non-union 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 2013, 2012 and 2011 approximated $4,437, $4,327 and $4,011, respectively. The Company also maintains certain profit sharing and retirement savings-investment plans. Company contributions in 2013, 2012 and 2011 to these plans were $1,121, $1,107 and $1,024, respectively.

The Company also contributes to multi-employer defined benefit pension plan for certain of its union employees under a collective bargaining agreement which is currently under negotiation, as follows:

Plan name: Bakery and Confectionery Union and Industry International Pension Fund

Employer Identification Number and plan number: 52-6118572, plan number 001

Funded Status as of the most recent year available: 66.86% funded as of January 1, 2012

The Company’s contributions to such plan: $2,231, $2,131 and $2,046 in 2013, 2012 and 2011, respectively

Plan status: Critical as of December 31, 2012

During 2012, the Company received notices from the Bakery and Confectionery Union and Industry International (BC&T) Pension Fund (Plan), a multi-employer defined benefit pension plan for certain Company union employees. Theses notices indicated that the Plan’s actuary certified that the Plan was in critical status, the “Red Zone”, as defined by the Pension Protection Act (PPA), and that a plan of rehabilitation was adopted by the Trustees of the Plan (Trustees) in fourth quarter 2012. The rehabilitation plan adopted requires that employer contributions include 5% compounded annual surcharges each year for an unspecified period of time beginning in January 2013 (in addition to a 5% interim surcharge initiated in June 2012) as well as certain plan benefit reductions. The Trustees will review the Plan’s progress each year and will consider if further adjustments, including employer surcharges or plan benefit modifications, are necessary to meet the objectives of the rehabilitation plan. Under the rehabilitation plan adopted, the Plan is projected to emerge from critical status sometime beyond a 30 year projection period. In the event that a plan does not have the financial resources to ultimately pay benefits at a level specified by law, then it must apply to the Pension Benefits Guaranty Corporation for government financial assistance. The Trustees have advised that neither the PPA nor regulatory guidance currently defines the rehabilitation standards for a plan that is not designed to emerge from critical status within the prescribed 10-year rehabilitation period. Company contributions, including surcharges, to the Plan were $2,231, $2,131, and $2,046 in each of the years 2013, 2012 and 2011, respectively. Surcharges included in aforementioned amounts were $242 and $65 in 2013 and 2012, respectively.

The Company was advised by the Plan that if the Company had withdrawn from the Plan during 2012 its estimated withdrawal liability would have been $37,200; the Company does not have any updated information regarding its withdrawal liability for 2013. Should the Company actually withdraw from the Plan at a future date, a withdrawal liability, which could be higher (or lower) than $37,200, would be payable to the Plan. In first quarter 2013, the Company executed a new labor contract with its BC&T local union which included the Company’s commitment to continue participating in this Plan through third quarter 2017. The Company is currently unable to determine the ultimate outcome of the above discussed matter and therefore, is unable to determine the effects on its consolidated financial statements, but, the ultimate outcome could be material to its consolidated results of operations in one or more future periods.

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 economically 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, 2013 and 2012, these investments totaled $63,215 and $49,378, respectively. All gains and losses and related investment income in these investments, which are recorded in other income, net, are equally offset by corresponding increases and decreases in the Company’s deferred compensation liabilities.

Postretirement health care and life insurance benefit plans:

During fourth quarter 2013, the Company amended its post-retirement health and life insurance benefits plan provided to corporate office and management employees. These plan changes resulted in negative plan amendment, as defined by guidance, and a $10,425 reduction in the Company’s benefit obligation as of December 31, 2013. The plan changes generally limited future annual cost increases in health benefits to 3%, restricted this benefit to current employees with long-term service with the Company, required retirees to pay the full cost of life insurance, and eliminated these benefits for future employees effective April 1, 2014. Changes in the accumulated postretirement benefit obligation during 2013 include actuarial gains of $9,734 which reflect gains from demographic experience, favorable claim experience and an increase in the discount rate. The discount rates utilized to determine the accumulated postretirement benefit obligation as of December 31, 2013 and 2012 were 4.69% and 3.91%, respectively.

Amounts recognized in accumulated other comprehensive loss (pre-tax) at December 31, 2013 are as follows:

Prior service credit	$	(10,801	)
Net actuarial loss	(3,956		)
Net amount recognized in accumulated other comprehensive (gain) loss	$	(14,757	)

The estimated actuarial loss (gain) and prior service credit (gain) to be amortized from accumulated other comprehensive loss (gain) into net periodic benefit cost during 2014 are $(452) and $(1,352), respectively.

The changes in the accumulated postretirement benefit obligation at December 31, 2013 and 2012 consist of the following:

	December 31
	2013			2012
Benefit obligation, beginning of year	$	27,381		$	26,108
Service cost	1,036			1,034
Interest cost	1,060			1,113
Plan amendments	(10,425		)	—
Actuarial (gain)/loss	(9,734		)	(520		)
Benefits paid	(142		)	(354		)
Benefit obligation, end of year	$	9,176		$	27,381

Net periodic postretirement benefit cost included the following components:

	2013		2012		2011
Service cost—benefits attributed to service during the period	$	1,036	$	1,034	$	831
Interest cost on the accumulated postretirement benefit obligation	1,060		1,113		1,117
Net amortization	671		1,036		501
Net periodic postretirement benefit cost	$	2,767	$	3,183	$	2,449

The Company estimates future benefit payments will be $319, $340, $388, $433 and $470 in 2014 through 2018, respectively, and a total of $2,927 in 2019 through 2023. As a result of the plan changes, the Company will no longer qualify for the Medicare Part D retiree drugs subsidy.

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COMMITMENTS:

12 Months Ended

Dec. 31, 2013

COMMITMENTS:

COMMITMENTS:

NOTE 8—COMMITMENTS:

Rental expense aggregated $793, $967 and $1,042 in 2013, 2012 and 2011, respectively.

Future operating lease commitments are not significant.

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FAIR VALUE MEASUREMENTS:

12 Months Ended

Dec. 31, 2013

FAIR VALUE MEASUREMENTS:

FAIR VALUE MEASUREMENTS:

NOTE 10—FAIR VALUE MEASUREMENTS:

Current accounting guidance defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Guidance requires disclosure of the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date. Guidance establishes a three-level valuation hierarchy based upon the transparency of inputs utilized in the measurement and valuation of financial assets or liabilities as of the measurement date. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed in the table below.

As of December 31, 2013 and 2012, the Company held certain financial assets that are required to be measured at fair value on a recurring basis. These included derivative hedging instruments related to the foreign currency forward contracts and purchase of certain raw materials, investments in trading securities and available for sale securities. The Company’s available for sale and trading securities principally consist of municipal bonds and mutual funds that are publicly traded.

The following tables present information about the Company’s financial assets and liabilities measured at fair value as of December 31, 2013 and 2012, and indicate the fair value hierarchy and the valuation techniques utilized by the Company to determine such fair value:

	Estimated Fair Value December 31, 2013
	Total			Input Levels Used
	Fair Value			Level 1			Level 2			Level 3
Cash and equivalents	$	88,283		$	88,283		$	—		$	—
Available for sale securities	118,647			—			118,647			—
Foreign currency forward contracts	(684		)	—			(684		)	—
Commodity futures contracts, net	(130		)	(130		)	—			—
Trading securities	63,215			63,215			—			—
Total assets measured at fair value	$	269,331		$	151,368		$	117,963		$	—

	Estimated Fair Value December 31, 2012
	Total			Input Levels Used
	Fair Value			Level 1			Level 2		Level 3
Cash and equivalents	$	63,862		$	63,862		$	—	$	—
Auction rate security	9,485			—			—		9,485
Available for sale securities, excluding the auction rate security	84,568			—			84,568		—
Commodity futures contracts	(112		)	(112		)	—		—
Trading securities	49,378			49,378			—		—
Total assets measured at fair value	$	207,181		$	113,128		$	84,568	$	9,485

Available for sale securities which utilize Level 2 inputs consist primarily of municipal bonds, which are valued based on quoted market prices or alternative pricing sources with reasonable levels of price transparency.

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

	December 31, 2013
	Amortized		Fair		Unrealized					Realized
Available for Sale:	Cost		Value		Gains		Losses			Losses
Municipal bonds	$	75,488	$	75,622	$	134	$	—		$	—
Corporate bonds	37,258		37,214		—		(44		)	—
Certificates of deposit	5,796		5,794				(2		)
Mutual funds	20		17		—		(3		)	—
	$	118,562	$	118,647	$	134	$	(49	)	$	—

	December 31, 2012
	Amortized		Fair		Unrealized					Realized
Available for Sale:	Cost		Value		Gains		Losses			Losses
Auction rate security	$	8,410	$	9,485	$	1,075	$	—		$	—
Municipal bonds	65,745		66,002		257		—			—
Corporate bonds	14,614		14,744		130
Certificates of deposit	3,840		3,805				(35		)
Mutual funds	20		17		—		(3		)	—
	$	92,629	$	94,053	$	1,462	$	(38	)	$	—

        During the fourth quarter 2013, the Company sold its investment in Jefferson County Alabama Sewer Revenue Refunding Warrants for $10,840. This was an auction rate security (ARS) originally purchased for $13,550 in 2008 with an insurance-backed AAA rating. Because the Company recorded an other-than-temporary pre-tax impairment of $5,140 in 2008 on this ARS investment which resulted in a carrying value of $8,410 at that time, a net gain of $2,430 was recorded on this sale in fourth quarter 2013. Since recording this initial impairment in 2008, the Company has carried this ARS investment at its estimated fair value utilizing a valuation model with Level 3 inputs, as defined by guidance, and resulting changes in the market value since the original impairment charge in 2008 have been recorded as changes to accumulated other comprehensive income (loss) each year.

The following table presents additional information about the Company’s auction rate security (Jefferson County Alabama Sewer Revenue Refunding Warrants) measured at fair value on a recurring basis using Level 3 inputs at December 31, 2013 and 2012:

	2013			2012
Balance at January 1	$	9,485		$	7,453
Unrealized gain recognized in accumulated other comprehensive loss	1,355			2,032
Settlement of security	(10,840		)	—
Balance at December 31	$	—		$	9,485

The fair value of the Company’s industrial revenue development bonds at December 31, 2013 and 2012 were valued using Level 2 inputs which approximates the carrying value of $7,500 for both periods. Interest rates on these bonds reset weekly based on current market conditions.

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SIGNIFICANT ACCOUNTING POLICIES: (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012	Dec. 31, 2011
Postretirement health care and life insurance benefits:
Premium paid for split dollar life insurance agreements	$ 0	$ 0	$ 0
Amount received on termination of certain split dollar agreements	26,477	7,298
Goodwill and indefinite-lived intangible assets:
Impairments of intangibles	0	0
Equity method investment:
Equity method investment ownership interest percentage (as a percent)	50.00%
Number of foreign companies that are accounted for using equity method	2
Dividends paid by subsidiary	0	0	0
Pre-tax impairment charge	$ 975	$ 850

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Effect of derivative instruments on earnings
Gain (Loss) Recognized in OCI	$ (2,107)	$ (339)
Gain (Loss) Reclassified from Accumulated OCI into Earnings	60,849	52,004	43,938
Reclassified from Accumulated OCI into Earnings
Effect of derivative instruments on earnings
Gain (Loss) Reclassified from Accumulated OCI into Earnings	(1,446)	243
Foreign currency forward contracts
Effect of derivative instruments on earnings
Gain (Loss) Recognized in OCI	(1,144)	222
Foreign currency forward contracts | Reclassified from Accumulated OCI into Earnings
Effect of derivative instruments on earnings
Gain (Loss) Reclassified from Accumulated OCI into Earnings	(460)	427
Commodity futures contracts
Effect of derivative instruments on earnings
Gain (Loss) Recognized in OCI	(963)	(526)
Commodity futures contracts | Reclassified from Accumulated OCI into Earnings
Effect of derivative instruments on earnings
Gain (Loss) Reclassified from Accumulated OCI into Earnings	(986)	(149)
Commodity option contracts
Effect of derivative instruments on earnings
Gain (Loss) Recognized in OCI		(35)
Commodity option contracts | Reclassified from Accumulated OCI into Earnings
Effect of derivative instruments on earnings
Gain (Loss) Reclassified from Accumulated OCI into Earnings		(35)
Commodity option and future contracts
Effect of derivative instruments on earnings
Recognized earnings related to mark-to-market accounting	$ (42)	$ 62

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SIGNIFICANT ACCOUNTING POLICIES: (Policies)

12 Months Ended

Dec. 31, 2013

SIGNIFICANT ACCOUNTING POLICIES:

Basis of consolidation

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 sales 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.

Revenue recognition

Revenue recognition:

Products are sold to customers based on accepted purchase orders which include quantity, sales price and other relevant terms of sale. Revenue, net of applicable provisions for discounts, returns, allowances and certain advertising and promotional costs, is recognized when products are delivered to customers and collectability is reasonably assured. Shipping and handling costs of $45,367, $45,072, and $45,850 in 2013, 2012 and 2011, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured.

Cash and cash equivalents

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:

Investments consist of various marketable securities with maturities of generally up to three years. The Company classifies debt and equity securities as either available for sale or trading. Available for sale securities are not actively traded by the Company and are carried at fair value. The Company follows current fair value measurement guidance and 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 or other-than-temporarily impaired. Trading securities relate to deferred compensation arrangements and are carried at fair value with gains or losses included in other income, net. The Company invests in trading securities to economically hedge changes in its deferred compensation liabilities.

The Company regularly reviews its investments to determine whether a decline in fair value below the cost basis is other-than-temporary. If the decline in fair value is judged to be other-than-temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in other income, net. Further information regarding the fair value of the Company’s investments is included in Note 10 to the Consolidated Financial Statements.

Derivative instruments and hedging activities

Derivative instruments and hedging activities:

Authoritative guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of derivative instruments and related gains and losses, and disclosures about credit-risk-related contingent features in derivative agreements.

From time to time, the Company enters into commodity futures, commodity options contracts and foreign currency forward contracts. Commodity futures and options are intended and are effective as hedges of market price risks associated with the anticipated purchase of certain raw materials (primarily sugar). Foreign currency forward contracts are intended and are effective as hedges of the Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers denominated in a foreign currency. The Company does not engage in trading or other speculative use of derivative instruments. Further information regarding derivative instruments and hedging activities is included in Note 11 to the Consolidated Financial Statements.

Inventories

Inventories:

Inventories are stated at cost, not to exceed market. The cost of substantially all of the Company’s inventories ($58,038 and $58,439 at December 31, 2013 and 2012, respectively) has been determined by the last-in, first-out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $20,926 and $26,130 at December 31, 2013 and 2012, respectively. The cost of certain foreign inventories ($3,818 and $3,944 at December 31, 2013 and 2012, respectively) has been determined by the first-in, first-out (FIFO) method. Rebates, discounts and other cash consideration received from vendors 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

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 $20,050, $19,925 and $19,229 in 2013, 2012 and 2011, respectively.

Carrying value of long-lived assets

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 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 of long-lived assets were recorded by the Company during 2013, 2012 and 2011.

Postretirement health care and life insurance benefits

Postretirement health care and life insurance benefits:

The Company provides certain postretirement health care and life insurance benefits to corporate office and management employees. The cost of these postretirement benefits is accrued during employees’ working careers. See Note 7 for changes to these benefits and the resulting effects of the negative amendment, as defined by guidance. The Company also provides split dollar life benefits to certain executive officers. The Company records an asset equal to the cumulative insurance premiums paid that will be recovered upon the death of covered employees or earlier under the terms of the plan. No premiums were paid in 2013, 2012 and 2011. Certain split dollar agreements were terminated during 2012 which resulted in the full repayment to the Company of all of the cumulative premiums previously paid on these policies. During 2013 and 2012, the Company received $26,477 and $7,298, respectively, of such repayments which were recorded as a reduction in the carrying value of Split Dollar Officer Life Insurance.

Goodwill and indefinite-lived intangible assets

Goodwill and indefinite-lived intangible assets:

In accordance with authoritative guidance, goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually unless certain interim triggering events or circumstances require more frequent testing. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. Management believes that all assumptions used for the impairment tests are consistent with those utilized by market participants performing similar valuations The Company has completed its annual impairment testing of its goodwill and trademarks at December 31 of each of the years presented. No impairments of intangibles were recorded in 2013 and 2012.

With respect to impairment testing of goodwill, the first step compares the reporting unit’s estimated fair value with its carrying value. Projected discounted cash flows are used to determine the fair value of the reporting unit. If the carrying value of a reporting unit’s net assets exceeds its fair value, the second step is applied to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is considered impaired and reduced to its implied fair value. Non-amortizable intangible assets, trademarks, are tested for impairment by comparing the fair value of each trademark with its carrying value. The fair value of trademarks is determined using discounted cash flows and estimates of royalty rates. If the carrying value exceeds fair value, the trademark is considered impaired and is reduced to fair value.

Income taxes

Income taxes:

Deferred income taxes are recorded and recognized for future tax effects of temporary differences between financial and income tax reporting. The Company records valuation allowances in situations where the realization of deferred tax assets is not more-likely-than-not. 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 reinvested in the foreign subsidiary.

Foreign currency translation

Foreign currency translation:

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 remeasurements are recorded as a charge or credit to other income, net in the statement of earnings. Where the foreign local currency is used as the functional currency, translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss).

Equity method investment

Equity method investment:

The Company’s 50% interest in two foreign companies is accounted for using the equity method. The Company records an increase in its investment to the extent of its share of earnings, and reduces its investment to the extent of losses and dividends received. No dividends were paid in 2013, 2012 and 2011.

As of December 31, 2013 and 2012, management determined that the carrying value of its equity method investment was impaired as a result of accumulated losses from operations and review of future expectations. The Company recorded a pre-tax impairment charge of $975 and $850 in 2013 and 2012, respectively. The fair value was assessed primarily using the discounted cash flow method and liquidation valuation. The key inputs to this method include projections of future cash flows, determinations of appropriate discount rates, and other assumptions of the equity method investee which are considered reasonable and inherent in the discounted cash flow analysis. The Company’s carrying value of this investment at December 31, 2013 is not significant.

Comprehensive earnings

Comprehensive earnings:

Comprehensive earnings includes net earnings, foreign currency translation adjustments and unrealized gains/losses on commodity and/or foreign currency hedging contracts, available for sale securities and certain postretirement benefit obligations.

Earnings per share

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.

Use of estimates

Use of estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, allowances and incentives, product liabilities, assets recorded at fair value, income taxes, depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual results may or may not differ from those estimates.

Recent accounting pronouncements

Recent accounting pronouncements:

In July 2013, the FASB issued ASU 2013-11, which requires presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 provides explicit guidance on presentation in financial statements. The amendment is effective for reporting periods beginning after December 15, 2013. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

        In March 2013, the FASB issued ASU 2013-05, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard is effective for fiscal years beginning after December 15, 2013; however, early adoption is permitted. The Company does not expect adoption of this ASU to significantly impact its consolidated financial statements.

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EMPLOYEE BENEFIT PLANS: (Tables)

12 Months Ended

Dec. 31, 2013

EMPLOYEE BENEFIT PLANS:

Schedule of amounts recognized in accumulated other comprehensive loss (pre-tax)

Prior service credit	$	(10,801	)
Net actuarial loss	(3,956		)
Net amount recognized in accumulated other comprehensive (gain) loss	$	(14,757	)

Schedule of changes in accumulated postretirement benefit obligation

	December 31
	2013			2012
Benefit obligation, beginning of year	$	27,381		$	26,108
Service cost	1,036			1,034
Interest cost	1,060			1,113
Plan amendments	(10,425		)	—
Actuarial (gain)/loss	(9,734		)	(520		)
Benefits paid	(142		)	(354		)
Benefit obligation, end of year	$	9,176		$	27,381

Schedule of net periodic postretirement benefit cost

	2013		2012		2011
Service cost—benefits attributed to service during the period	$	1,036	$	1,034	$	831
Interest cost on the accumulated postretirement benefit obligation	1,060		1,113		1,117
Net amortization	671		1,036		501
Net periodic postretirement benefit cost	$	2,767	$	3,183	$	2,449

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FAIR VALUE MEASUREMENTS: (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2008
Level 3 reconciliation
Industrial revenue development bonds, carrying amount, approximates fair value	$ 7,500	$ 7,500	$ 7,500
Cost Basis | Level 2
Level 3 reconciliation
Industrial revenue development bonds, carrying amount, approximates fair value	7,500	7,500	7,500
Estimated Fair Value | Level 2
Level 3 reconciliation
Industrial revenue development bonds, carrying amount, approximates fair value	7,500	7,500	7,500
Jefferson County Alabama Sewer Revenue Refunding Warrants | Auction rate security
Fair value on a recurring basis
Sale value of investment	10,840
Jefferson County Alabama Sewer Revenue Refunding Warrants | Auction rate security | Level 3
Fair value on a recurring basis
Other-than-temporary pre-tax impairment on investment				5,140
Carrying value of investment			9,485
Net gain of investment	2,430
Level 3 reconciliation
Balance at the beginning of the period		9,485	7,453
Unrealized gain in other comprehensive earnings		1,355	2,032
Settlement of security		(10,840)
Balance at the end of the period			9,485
Jefferson County Alabama Sewer Revenue Refunding Warrants | AAA rating | Auction rate security | Level 3
Fair value on a recurring basis
Purchase cost of investment				13,550
Carrying value of investment				8,410
Level 3 reconciliation
Balance at the end of the period				$ 8,410

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OTHER INCOME, NET: (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
OTHER INCOME, NET:
Interest and dividend income	$ 1,445	$ 1,369	$ 1,087
Gains on trading securities relating to deferred compensation plans	10,588	4,616	29
Interest expense	(92)	(137)	(121)
Impairment of equity investment	(975)	(850)
Equity method investment loss	(967)	(1,019)	(194)
Foreign exchange gains(losses)	(790)	442	2,098
Capital gains(losses)	2,576	(59)	(227)
Miscellaneous, net	345	323	274
Total other income, net	$ 12,130	$ 4,685	$ 2,946

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CONSOLIDATED STATEMENTS OF Financial Position (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accounts receivable trade, allowances	$ 2,042	$ 2,142
Treasury stock, shares	76	73
Common stock
Common stock, par value (in dollars per share)	$ 0.6944	$ 0.6944
Common stock, shares authorized	120,000	120,000
Common stock, shares issued	37,011	36,649
Class B common stock
Common stock, par value (in dollars per share)	$ 0.6944	$ 0.6944
Common stock, shares authorized	40,000	40,000
Common stock, shares issued	22,256	21,627

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INCOME TAXES:

12 Months Ended

Dec. 31, 2013

INCOME TAXES:

INCOME TAXES:

NOTE 4—INCOME TAXES:

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

	2013		2012		2011
Domestic	$	73,362	$	64,173	$	56,651
Foreign	11,121		9,991		4,261
	$	84,483	$	74,164	$	60,912

The provision for income taxes is comprised of the following:

	2013		2012			2011
Current:
Federal	$	16,192	$	24,312		$	15,568
Foreign	219		231			559
State	891		1,914			863
	17,302		26,457			16,990
Deferred:
Federal	4,286		(6,857		)	(1,230		)
Foreign	1,823		1,710			1,221
State	223		850			(7		)
	6,332		(4,297		)	(16		)
	$	23,634	$	22,160		$	16,974

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

	December 31,
	2013			2012
Deferred tax assets:
Accrued customer promotions	$	3,156		$	3,971
Deferred compensation	25,103			19,485
Postretirement benefits	3,847			8,127
Other accrued expenses	6,158			7,749
Foreign subsidiary tax loss carry forward	12,512			13,791
Tax credit carry forward	1,243			1,066
Realized capital losses	581			1,366
Unrealized capital loss	—			5,848
	52,600			61,403
Valuation allowance	(957		)	(2,040		)
Total deferred tax assets	$	51,643		$	59,363
Deferred tax liabilities:
Depreciation	$	33,129		$	33,858
Deductible goodwill and trademarks	42,073			42,450
Accrued export company commissions	5,391			5,117
Employee benefit plans	5,100			876
Inventory reserves	1,646			256
Prepaid insurance	785			697
Unrealized capital loss	709			—
Deferred gain on sale of real estate	8,234			8,169
Total deferred tax liabilities	$	97,067		$	91,423
Net deferred tax liability	$	45,424		$	32,060

At December 31, 2013, the Company has provided a valuation allowance relating to $581 of capital loss carry forwards which begin to expire in 2014.

At December 31, 2013, the Company has recognized $376 of benefits related to foreign subsidiary tax credit carry forwards. The carry forward credits expire in 2017. A valuation allowance has been established for the carry forward losses to reduce the future income tax benefits to amounts expected to be realized. The Company has also recognized $867 of benefits related to state tax credit carry forwards. The state credit carry forward begins to expire in 2017.

At December 31, 2013, the tax benefits of foreign subsidiary tax loss carry forwards expiring by year are as follows: $350 in 2026, $612 in 2027, $6,290 in 2028, $4,476 in 2029, and $784 in 2031.

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

	2013		2012		2011
U.S. statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net	1.0		1.1		1.2
Exempt municipal bond interest	(0.4	)	(0.5	)	(0.5	)
Foreign tax rates	(2.0	)	(1.6	)	(0.4	)
Qualified domestic production activities deduction	(2.2	)	(3.1	)	(2.5	)
Tax credits receivable	(0.9	)	(0.9	)	(0.4	)
Adjustment of deferred tax balances	(1.1	)	(0.5	)	(1.7	)
Reserve for uncertain tax benefits	(0.7	)	(0.3	)	(0.6	)
Other, net	(0.7	)	0.7		(2.2	)
Effective income tax rate	28.0	%	29.9	%	27.9	%

The Company has not provided for U.S. federal or foreign withholding taxes on $10,988 and $8,868 of foreign subsidiaries’ undistributed earnings as of December 31, 2013 and December 31, 2012, respectively, because such earnings are considered to be permanently reinvested. The Company estimates that the federal income tax liability on such remittances would approximate 30%. This foreign subsidiary holds $11,674 and $9,857 of cash and short term investments as of December 31, 2013 and 2012, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes on the Consolidated Statements of Earnings, Comprehensive Earnings and Retained Earnings.

At December 31, 2013 and 2012, the Company had unrecognized tax benefits of $6,010 and $6,677, respectively. Included in this balance is $3,539 and $4,306, respectively, of unrecognized tax benefits that, if recognized, would favorably affect the annual effective income tax rate. As of December 31, 2013 and 2012, $1,157 and $1,189, respectively, of interest and penalties were included in the liability for uncertain tax positions.

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

	2013			2012			2011
Unrecognized tax benefits at January 1	$	6,677		$	6,804		$	8,138
Increases in tax positions for the current year	1,163			727			320
Reductions in tax positions for lapse of statute of limitations	(867		)	(854		)	(668		)
Reductions in tax positions relating to settlements with taxing authorities	(140		)	—			—
Reductions in tax positions for effective settlements	(823		)	—			(986		)
Unrecognized tax benefits at December 31	$	6,010		$	6,677		$	6,804

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. The Company remains subject to examination by U.S. federal and state and foreign tax authorities for the years 2010 through 2012. With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2009 and prior.

The Company had been subject to a federal examination of tax years 2009 and 2010. The examination was closed during the fourth quarter of 2013 with the Company agreeing to an assessment which it considered immaterial. The Company’s Canadian subsidiary is currently subject to examination by the Canada Revenue Agency for tax years 2005 and 2007. The Company is unable to determine the outcome of the examination at this time. In addition, the Company is currently subject to various state tax examinations. Although the Company is unable to determine the ultimate outcome of the ongoing examinations, the Company believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

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SEGMENT AND GEOGRAPHIC INFORMATION: (Tables)

12 Months Ended

Dec. 31, 2013

SEGMENT AND GEOGRAPHIC INFORMATION:

Schedule of geographic data

	2013		2012		2011
Net product sales:
United States	$	495,082	$	499,660	$	487,185
Canada and Other	44,545		46,325		41,184
	$	539,627	$	545,985	$	528,369
Long-lived assets:
United States	$	160,099	$	161,504	$	170,173
Canada and Other	36,817		39,786		41,989
	$	196,916	$	201,290	$	212,162

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INCOME TAXES: (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Domestic and foreign components of pretax income
Domestic	$ 73,362	$ 64,173	$ 56,651
Foreign	11,121	9,991	4,261
Earnings before income taxes	84,483	74,164	60,912
Current:
Federal	16,192	24,312	15,568
Foreign	219	231	559
State	891	1,914	863
Total current	17,302	26,457	16,990
Deferred:
Federal	4,286	(6,857)	(1,230)
Foreign	1,823	1,710	1,221
State	223	850	(7)
Total deferred	6,332	(4,297)	(16)
Total provision for income taxes	23,634	22,160	16,974
Deferred tax assets:
Accrued customer promotions	3,156	3,971
Deferred compensation	25,103	19,485
Postretirement benefits	3,847	8,127
Other accrued expenses	6,158	7,749
Foreign subsidiary tax loss carry forward	12,512	13,791
Tax credit carry forward	1,243	1,066
Realized capital losses	581	1,366
Unrealized capital loss		5,848
Deferred tax assets, gross	52,600	61,403
Valuation allowance	(957)	(2,040)
Total deferred tax assets	51,643	59,363
Deferred tax liabilities:
Depreciation	33,129	33,858
Deductible goodwill and trademarks	42,073	42,450
Accrued export company commissions	5,391	5,117
Employee benefit plans	5,100	876
Inventory reserves	1,646	256
Prepaid insurance	785	697
Unrealized capital loss	709
Deferred gain on sale of real estate	8,234	8,169
Total deferred tax liabilities	97,067	91,423
Net deferred tax liability	45,424	32,060
Capital loss carryforwards	581
Benefits related to foreign subsidiary tax credit carryforwards	376
Benefits related to state tax credit carryforwards	$ 867

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2013

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS (in thousands)

DECEMBER 31, 2013, 2012 AND 2011

Description	Balance at beginning of year		Additions (reductions) charged (credited) to expense			Deductions(1)			Balance at End of Year
2013:
Reserve for bad debts	$	1,462	$	16		$	80		$	1,398
Reserve for cash discounts	680		9,725			9,761			644
Deferred tax asset valuation	2,040		(1,083		)	—			957
	$	4,182	$	8,658		$	9,841		$	2,999
2012:
Reserve for bad debts	$	998	$	511		$	47		$	1,462
Reserve for cash discounts	733		9,959			10,012			680
Deferred tax asset valuation	2,190		(150		)	—			2,040
	$	3,921	$	10,320		$	10,059		$	4,182
2011:
Reserve for bad debts	$	1,121	$	(186	)	$	(63	)	$	998
Reserve for cash discounts	410		10,007			9,684			733
Deferred tax asset valuation	686		1,504			—			2,190
	$	2,217	$	11,325		$	9,621		$	3,921

(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.