Company: TR
Filing Date: 2025-05-09
Form Type: 10-Q
Source: 0001558370-25-007150
Chunk: 11

Company: TOOTSIE ROLL INDUSTRIES INC
Filing Date: 2025-05-09
Form: 10-Q
Item: Part I, Item 2
Chunk 11
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. First quarter 2025 product cost of goods sold and gross profit margins benefited from higher price realization, improvements in plant manufacturing operating efficiencies, and certain cost reductions.

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In response to increases in input costs in recent years, many companies in the consumer products industry have increased selling prices. We have implemented price increases as well during these periods with the objective of improving sales price realization in order to recover our margin declines. Although we made progress in restoring our margins in first quarter 2025, cocoa and chocolate markets continue at significantly elevated levels compared to historical prices in past years. As a result, we expect to incur even higher cocoa and chocolate costs during the balance of 2025 and into 2026 as many of our older supply contracts expire and new contracts at higher costs become effective. Although the Company continues to monitor its input costs, we are mindful of the effects and limits when passing on the above-discussed higher input costs to our customers as well as the final consumers of our products.

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The Company uses the Last-In-First-Out (LIFO) method of accounting for inventory and costs of goods sold which generally results in lower current net earnings during such periods of increasing costs and higher inflation. As a result, the above-discussed higher cocoa and chocolate costs will have an increasingly adverse effect on our gross profit margins as this year progresses. Although the Company continues to monitor its input costs, we are mindful of the effects and limits when passing on the above-discussed higher input costs to our customers as well as to the final consumers of our products.

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Selling, marketing and administrative expenses were $29,390 in first quarter 2025 compared to $38,918 in first quarter 2024. Selling, marketing and administrative expenses include $(3,459) and $6,925 of certain deferred compensation (credits) expenses in first quarter 2025 and 2024, respectively. As discussed above, these 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. Excluding the adjustment for deferred compensation (credits) expenses, selling, marketing and administrative expenses increased from $31,993 in first quarter 2024 to $32,849 in first quarter 2025, an increase of $856 or 2.7%. As a percentage of net product sales, adjusted selling, marketing and administrative expenses increased from 21.1% in first quarter 2024 to 22.4% in first quarter 202