Company: TR
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0001104659-25-108351
Chunk: 15

Company: TOOTSIE ROLL INDUSTRIES INC
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 3
Chunk 15
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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The Company is exposed to various market risks, including fluctuations in and sufficient availability of sugar, corn syrup, edible oils, including palm oils, cocoa, chocolate, dextrose, milk and whey, gum-base input ingredients, packaging, and fuel costs principally relating to freight and delivery fuel surcharges. The Company generally enters into annual supply contracts and hedges certain commodities (primarily sugar) to control and plan for such cost changes. The Company has experienced significant increases in its ingredient and packaging costs in recent years, and cocoa and chocolate costs continue at elevated levels compared to longer-term historical prices. The Company has entered into longer-range supply contracts for its cocoa and chocolate needs in 2025 and much of 2026 in order to help ensure supply and reduce the risk of further increases in these ingredients. However, these extended cocoa and chocolate supply contracts are at significantly higher costs than in recent years. The cocoa market is experiencing unprecedented volatility and highs, and remains a risk for the intermediate term and possibly for a longer term. In addition, the current temporary tariffs, as well as the permanent tariffs, as discussed above in Item 2, MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, adds to the market risks of certain ingredients, packaging materials and supplies, and will likely have some adverse impact on these costs.

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The Company is exposed to exchange rate fluctuations in the Canadian dollar which is the currency used for a portion of the raw material and packaging material costs and all labor, benefits and local plant operating costs at its Canadian plants. The Company generally enters into Canadian dollar forward contracts to hedge the Canadian currency risk. The Company is exposed to exchange rate fluctuations in Mexico, Canada, and Spain where its subsidiaries sell products in their local currencies. The Company invests principally in corporate bonds (available for sale securities) with an average maturity of three to five years, to manage its interest rate risk. While the Company generally holds these investments to maturity, the Company would sell prior to maturity if it was considered beneficial to do so for tax-planning strategies, credit quality, improved yield opportunities in consultation with its investment advisors, or if the Company required the funds to finance a significant reinvestment in the Company, including an acquisition.

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The Company believes that the above discussed policies and programs limit the Company’s exposure to significant interest rate fluctuations. Other than the cocoa and chocolate market and tariffs as discussed above