UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

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

For the quarterly period ended ~~September 30, 2017~~March 31, 2020

☐

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

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

For the transition period from to

COMMISSION FILE NUMBER 1-1361

Tootsie Roll Industries, Inc.

(Exact Name of Registrant as Specified in its Charter)


~~VIRGINIA~~Virginia		22-1318955
(State of Incorporation)		(I.R.S. Employer Identification No.)


7401 South Cicero Avenue, Chicago, Illinois		60629
(Address of Principal Executive Offices)		(Zip Code)

773-838-3400

(Registrant’s Telephone Number, Including Area Code)

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 ☒ No ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐◻

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date ~~(September 30, 2017)~~(March 31, 2020).


Class		Outstanding

Common Stock, ~~$.69 4/~~$0.69-4/9 par value		~~38,046,216~~39,769,401
Class B Common Stock, ~~$.69 4/~~$0.69-4/9 par value		~~24,917,501~~27,037,401

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


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $0.69-4/9 per share	TR	New York Stock Exchange

Table of Contents

TOOTSIE ROLL INDUSTRIES, INC.

~~September 30, 2017~~MARCH 31, 2020

INDEX

~~INDEX~~


		Page No.

Part I —	Financial Information

Item 1.	Financial Statements꞉

	Condensed Consolidated Statements of Financial Position	3-4

	Condensed Consolidated Statements of Earnings and Retained Earnings	5


	Condensed Consolidated Statements of Comprehensive Earnings	6


	Condensed Consolidated Statements of Cash Flows	7


	Notes to Condensed Consolidated Financial Statements	~~8-14~~8-15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~14-18~~16-21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19 21

Item 4.	Controls and Procedures	19 21

Part II —	Other Information

Item 2.1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19 24

Item 6.	Exhibits	20 25

Signatures		20 25

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. See “Forward-Looking Statements” under Part I — Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands) (Unaudited)

September 30, 2017

December 31, 2016

September 30, 2016

ASSETS

CURRENT ASSETS:

Cash & cash equivalents

$
49,512

$
119,145

$
94,239
Restricted cash

400

382

409
Investments

74,272

67,513

27,905
Trade accounts receivable, less allowances of $3,225, $1,884 & $3,274

95,341

42,964

81,718
Other receivables

6,405

3,299

1,552
Inventories:

Finished goods & work-in-process

41,273

34,631

36,173
Raw material & supplies

26,767

22,900

28,613
Prepaid expenses

2,489

7,146

5,077
Deferred income taxes

-

1,320

3,149
Total current assets

296,459

299,300

278,835

PROPERTY, PLANT & EQUIPMENT, at cost:

Land

22,222

22,081

22,155
Buildings

116,555

116,398

114,473
Machinery & equipment

369,753

369,802

355,059
Construction in progress

14,328

3,546

17,511

522,858

511,827

509,198
Less-accumulated depreciation

344,809

330,922

326,609
Net property, plant and equipment

178,049

180,905

182,589

OTHER ASSETS:

Goodwill

73,237

73,237

73,237
Trademarks

175,024

175,024

175,024
Investments

193,991

164,665

189,956
Split dollar officer life insurance

26,042

26,042

26,042
Prepaid expenses and other assets

34

602

1,526
Deferred income taxes

-

326

275
Total other assets

468,328

439,896

466,060
Total assets

$
942,836

$
920,101

$
927,484



	March 31, 2020		December 31, 2019		March 31, 2019

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	139,067	$	138,960	$	77,670
Restricted cash		373		380		380
Investments		77,510		100,444		81,986
Accounts receivable trade, less allowances of $1,887, $1,949 and $1,696		36,006		45,044		43,868
Other receivables		3,446		3,418		3,282
Inventories:
Finished goods and work-in-process		46,683		35,909		40,004
Raw materials and supplies		24,974		23,179		25,675
Prepaid expenses		6,231		5,996		7,111
Total current assets		334,290		353,330		279,976

PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		21,627		21,740		21,727
Buildings		122,598		122,843		121,788
Machinery and equipment		414,526		416,625		401,375
Construction in progress		7,669		4,427		7,349
Operating lease right-of-use assets		1,388		1,580		1,370
		567,808		567,215		553,609
Less - accumulated depreciation		381,850		378,760		366,601
Net property, plant and equipment		185,958		188,455		187,008

OTHER ASSETS:
Goodwill		73,237		73,237		73,237
Trademarks		175,024		175,024		175,024
Investments		153,287		153,031		187,218
Split dollar officer life insurance		26,042		26,042		26,042
Prepaid expenses and other assets		7,555		8,056		11,469
Deferred income taxes		534		689		530
Total other assets		435,679		436,079		473,520
Total assets	$	955,927	$	977,864	$	940,504

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

Table of Contents

(in thousands except per share data) (Unaudited)

September 30, 2017

December 31, 2016

September 30, 2016

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$
14,037

$
10,320

$
13,366
Bank loans

404

336

164
Dividends payable

5,667

5,573

5,578
Accrued liabilities

50,552

46,300

52,354
Postretirement health care

513

513

448
Income taxes payable

7,636

-

3,955
Deferred income taxes

-

519

666
Total current liabilities

78,809

63,561

76,531

NONCURRENT LIABILITIES:

Deferred income taxes

44,316

46,060

49,276
Bank loans

-

230

283
Postretirement health care

11,941

11,615

11,283
Industrial development bonds

7,500

7,500

7,500
Liability for uncertain tax positions

4,811

5,185

4,939
Deferred compensation and other liabilities

80,936

74,412

72,119
Total noncurrent liabilities

149,504

145,002

145,400

TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:

Common stock, $.69-4/9 par value- 120,000 shares authorized; 38,046, 37,701 & 37,775, respectively, issued

26,421

26,181

26,232
Class B common stock, $.69-4/9 par value- 40,000 shares authorized; 24,918, 24,221 & 24,226, respectively, issued

17,304

16,820

16,824
Capital in excess of par value

660,779

646,768

649,514
Retained earnings

30,890

43,833

31,557
Accumulated other comprehensive loss

(18,921)

(20,246)

(16,805)
Treasury stock (at cost)- 85, 83 & 83 shares, respectively

(1,992)

(1,992)

(1,992)
Total Tootsie Roll Industries, Inc. shareholders’ equity

714,481

711,364

705,330
Noncontrolling interests

42

174

223
Total equity

714,523

711,538

705,553
Total liabilities and shareholders’ equity

$
942,836

$
920,101

$
927,484



	March 31, 2020		December 31, 2019		March 31, 2019

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	15,991	$	12,720	$	13,520
Bank loans		781		747		755
Dividends payable		160		5,861		176
Accrued liabilities		38,424		41,611		37,302
Postretirement health care benefits		598		598		580
Operating lease liabilities		1,063		1,062		716
Deferred compensation		16,751		16,945		-
Income taxes payable		3,418		-		-
Total current liabilities		77,186		79,544		53,049

NONCURRENT LIABILITIES:
Deferred income taxes		45,755		47,295		44,553
Postretirement health care benefits		13,206		13,145		11,954
Industrial development bonds		7,500		7,500		7,500
Liability for uncertain tax positions		3,697		4,240		3,901
Operating lease liabilities		325		518		654
Deferred compensation and other liabilities		56,737		65,973		74,233
Total noncurrent liabilities		127,220		138,671		142,795

TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value - 120,000 shares authorized; 39,769, 38,836 and 39,418, respectively, issued		27,617		26,969		27,374
Class B common stock, $.69-4/9 par value - 40,000 shares authorized; 27,037, 26,287 and 26,342, respectively, issued		18,776		18,254		18,293
Capital in excess of par value		729,673		696,059		719,212
Retained earnings		3,197		40,809		2,459
Accumulated other comprehensive loss		(25,539)		(20,245)		(20,518)
Treasury stock (at cost) - 93, 90 and 90 shares, respectively		(1,992)		(1,992)		(1,992)
Total Tootsie Roll Industries, Inc. shareholders’ equity		751,732		759,854		744,828
Noncontrolling interests		(211)		(205)		(168)
Total equity		751,521		759,649		744,660
Total liabilities and shareholders’ equity	$	955,927	$	977,864	$	940,504

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

Table of Contents

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

EARNINGS AND RETAINED EARNINGS

(in thousands except per share amounts) (Unaudited)



	Year to Date Ended
	March 31, 2020		March 31, 2019

Net product sales	$	102,803	$	101,019
Rental and royalty revenue		958		958
Total revenue		103,761		101,977
Product cost of goods sold		66,443		64,856
Rental and royalty cost		302		255
Total costs		66,745		65,111
Product gross margin		36,360		36,163
Rental and royalty gross margin		656		703
Total gross margin		37,016		36,866
Selling, marketing and administrative expenses		16,272		31,108
Earnings from operations		20,744		5,758
Other income (loss), net		(5,494)		6,017
Earnings before income taxes		15,250		11,775
Provision for income taxes		3,274		2,864
Net earnings	��	11,976		8,911
Less: net earnings (loss) attributable to noncontrolling interests		(6)		(44)
Net earnings attributable to Tootsie Roll Industries, Inc.	$	11,982	$	8,955

Net earnings attributable to Tootsie Roll Industries, Inc. per share	$	0.18	$	0.13
Dividends per share *	$	0.09	$	0.09

Average number of shares outstanding		66,875		67,814

Retained earnings at beginning of period	$	40,809	$	33,767
Net earnings attributable to Tootsie Roll Industries, Inc.		11,982		8,955
Cash dividends		(5,841)		(5,757)
Stock dividends		(43,753)		(34,506)
Retained earnings at end of period	$	3,197	$	2,459

Quarter Ended

Year to Date Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Net product sales

$
182,173

$
185,473

$
390,495

$
393,094
Rental and royalty revenue

842

884

2,771

2,827
Total revenue

183,015

186,357

393,266

395,921

Product cost of goods sold

114,848

114,748

245,523

245,581
Rental and royalty cost

240

235

757

782
Total costs

115,088

114,983

246,280

246,363

Product gross margin

67,325

70,725

144,972

147,513
Rental and royalty gross margin

602

649

2,014

2,045
Total gross margin

67,927

71,374

146,986

149,558
Selling, marketing and administrative expenses

33,095

32,101

86,122

81,772
Earnings from operations

34,832

39,273

60,864

67,786
Other income (loss), net

4,121

1,943

8,565

4,147
Earnings before income taxes

38,953

41,216

69,429

71,933
Provision for income taxes

12,066

12,619

20,681

22,406
Net earnings

26,887

28,597

48,748

49,527
Less: Net earnings (loss) attributable to noncontrolling interests

(46)

(40)

(131)

(142)
Net earnings attributable to Tootsie Roll Industries, Inc.

$
26,933

$
28,637

$
48,879

$
49,669

Net earnings attributable to Tootsie Roll Industries, Inc. per share

$
0.43

$
0.45

$
0.77

$
0.77
Dividends per share *

$
0.09

$
0.09

$
0.27

$
0.27

Average number of shares outstanding

62,986

64,021

63,286

64,205

Retained earnings at beginning of period

$
9,615

$
8,491

$
43,833

$
52,349
Net earnings attributable to Tootsie Roll Industries, Inc.

26,933

28,637

48,879

49,669
Cash dividends

(5,658)

(5,571)

(16,898)

(16,645)
Stock dividends

-

-

(44,924)

(53,816)
Retained earnings at end of period

$
30,890

$
31,557

$
30,890

$
31,557

*Does not include 3% stock dividend to shareholders of record on 3/~~7/17~~3/20 and 3/~~8/16.~~5/19.

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

Table of Contents

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS

(in thousands except per share amounts) (Unaudited)



	Quarter Ended
	March 31, 2020		March 31, 2019

Net earnings	$	11,976	$	8,911

Other comprehensive income (loss), before tax:
Foreign currency translation adjustments		(3,674)		391

Pension and postretirement reclassification adjustments:
Unrealized gains (losses) for the period on postretirement and pension benefits		-		-
Less: reclassification adjustment for (gains) losses to net earnings		(338)		(381)
Unrealized gains (losses) on postretirement and pension benefits		(338)		(381)

Investments:
Unrealized gains (losses) for the period on investments		(1,091)		1,467
Less: reclassification adjustment for (gains) losses to net earnings		-		-
Unrealized gains (losses) on investments		(1,091)		1,467

Derivatives:
Unrealized gains (losses) for the period on derivatives		(961)		550
Less: reclassification adjustment for (gains) losses to net earnings		253		96
Unrealized gains (losses) on derivatives		(708)		646

Total other comprehensive income (loss), before tax		(5,811)		2,123
Income tax benefit (expense) related to items of other comprehensive income		517		(419)
Total comprehensive earnings		6,682		10,615
Comprehensive earnings (loss) attributable to noncontrolling interests		(6)		(44)
Total comprehensive earnings attributable to Tootsie Roll Industries, Inc.	$	6,688	$	10,659

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

Quarter Ended

Year to Date Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Net earnings

$
26,887

$
28,597

$
48,748

$
49,527

Other comprehensive income (loss), before tax:

Foreign currency translation adjustments

(216)

(906)

2,875

(2,337)

Pension and postretirement reclassification adjustments:

Unrealized gains (losses) for the period on postretirement and pension benefits

4

-

95

-
Less: reclassification adjustment for (gains) losses to net earnings

(366)

(411)

(1,097)

(1,232)
Unrealized gains (losses) on postretirement and pension benefits

(362)

(411)

(1,002)

(1,232)

Investments:

Unrealized gains (losses) for the period on investments

121

(289)

500

710
Less: reclassification adjustment for (gains) losses to net earnings

-

-

-

4
Unrealized gains (losses) on investments

121

(289)

500

714

Derivatives:

Unrealized gains (losses) for the period on derivatives

19

1,288

(1,735)

4,411
Less: reclassification adjustment for (gains) losses to net earnings

28

(337)

(109)

646
Unrealized gains (losses) on derivatives

47

951

(1,844)

5,057

Total other comprehensive income (loss), before tax

(410)

(655)

529

2,202
Income tax benefit (expense) related to items of other comprehensive income

70

(91)

796

(1,643)
Total comprehensive earnings

26,547

27,851

50,073

50,086
Comprehensive earnings (loss) attributable to noncontrolling interests

(46)

(40)

(131)

(142)
Total comprehensive earnings attributable to Tootsie Roll Industries, Inc.

$
26,593

$
27,891

$
50,204

$
50,228

Table of Contents

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (Unaudited)



	Year to Date Ended
	March 31, 2020		March 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	11,976	$	8,911
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation		4,647		4,666
Deferred income taxes		(1,013)		149
Amortization of marketable security premiums		217		353
Changes in operating assets and liabilities:
Accounts receivable		8,205		5,927
Other receivables		(197)		(267)
Inventories		(13,676)		(11,100)
Prepaid expenses and other assets		172		983
Accounts payable and accrued liabilities		1,422		(2,770)
Income taxes payable		2,983		2,930
Postretirement health care benefits		(276)		(150)
Deferred compensation and other liabilities		121		924
Net cash provided by operating activities		14,581		10,556
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(3,737)		(4,683)
Purchases of trading securities		(2,287)		(2,360)
Sales of trading securities		380		362
Purchase of available for sale securities		(21,312)		(20,919)
Sale and maturity of available for sale securities		35,217		5,379
Net cash from (used in) investing activities		8,261		(22,221)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired		(8,809)		(10,519)
Dividends paid in cash		(11,703)		(11,530)
Proceeds from bank loans		928		941
Repayment of bank loans		(880)		(544)
Net cash used in financing activities		(20,464)		(21,652)
Effect of exchange rate changes on cash		(2,278)		80
Increase (Decrease) in cash and cash equivalents		100		(33,237)
Cash, cash equivalents and restricted cash at beginning of year		139,340		111,287
Cash, cash equivalents and restricted cash at end of quarter	$	139,440	$	78,050
Supplemental cash flow information:
Income taxes paid/(received), net	$	794	$	(20)
Interest paid	$	23	$	31
Stock dividend issued	$	63,402	$	70,557

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

Table of Contents

TOOTSIE ROLL INDUSTRIES, INC.

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in thousands) (Unaudited)~~

Year to Date Ended

September 30, 2017

September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings

$
48,748

$
49,527
Adjustments to reconcile net earnings to net cash used in operating activities:

Depreciation and amortization

14,364

14,651
Deferred income taxes

153

23
Amortization of marketable security premiums

1,840

2,221
Changes in operating assets and liabilities:

Accounts receivable

(51,270)

(31,367)
Other receivables

(4,265)

2,622
Inventories

(10,018)

(2,826)
Prepaid expenses and other assets

3,313

3,678
Accounts payable and accrued liabilities

8,249

6,906
Income taxes payable

8,706

3
Postretirement health care benefits

(677)

(902)
Deferred compensation and other liabilities

(723)

2,496
Net cash from operating activities

18,420

47,032
CASH FLOWS FROM INVESTING ACTIVITIES:

Restricted cash

(17)

-
Capital expenditures

(11,699)

(13,067)
Purchases of trading securities

(3,387)

(3,064)
Sales of trading securities

3,544

645
Purchase of available for sale securities

(51,935)

(45,298)
Sale and maturity of available for sale securities

21,328

26,517
Net cash used in investing activities

(42,166)

(34,267)
CASH FLOWS FROM FINANCING ACTIVITIES:

Shares purchased and retired

(30,027)

(26,293)
Dividends paid in cash

(16,965)

(16,694)
Proceeds from bank loans

1,182

2,156
Repayment of bank loans

(1,345)

(2,339)
Net cash used in financing activities

(47,155)

(43,170)
Effect of exchange rate changes on cash

1,268

(1,501)
Decrease in cash and cash equivalents

(69,633)

(31,906)
Cash and cash equivalents at beginning of year

119,145

126,145
Cash and cash equivalents at end of quarter

$
49,512

$
94,239
Supplemental cash flow information:

Income taxes paid, net

$
12,360

$
22,622
Interest paid

$
49

$
19
Stock dividend issued

$
69,739

$
61,671

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

~~Table of Contents~~

~~TOOTSIE ROLL INDUSTRIES, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2020

(in thousands except per share amounts) (Unaudited)

Note 1 — Significant Accounting Policies

General Information

Foregoing data has been prepared from the unaudited financial records of Tootsie Roll Industries, Inc. (the Company) and in the opinion of ~~management~~Management all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the interim period have been reflected. Certain amounts previously reported have been reclassified to conform to the current year presentation. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Form 10-K for the year ended December 31, ~~2016~~2019 (the ~~“2016~~“2019 Form 10-K”).

Results of operations for the period ended ~~September 30, 2017~~March 31, 2020 are not necessarily indicative of results to be expected for the year to end December 31, ~~2017~~2020 because of the seasonal nature of the Company’s operations. Historically, the third quarter has been the Company’s largest sales quarter due to pre-Halloween sales.

~~Accounting Pronouncements~~Due to the adverse effects of the Covid-19 pandemic on the overall economy, the Company has experienced a significant decline in customer orders and sales in second quarter 2020, and expects this trend to adversely affect net earnings in second quarter 2020 and may affect the third and fourth quarters in 2020 as well. The effects of Covid-19 are unprecedented, and therefore the Company is unable to ascertain the effects on its sales and net earnings for the balance of 2020.

~~In May 2014,~~Revenue Recognition

The Company’s revenues, primarily net product sales, principally result from the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfersale of ~~promised~~ goods, ~~or services to customers in an amount that reflects~~reflect the consideration to which the ~~entity~~Company expects to be entitled generally based on customer purchase orders. The Company records revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") Topic 606 which became effective January, 1, 2018. Adjustments for estimated customer cash discounts upon payment, discounts for price adjustments, product returns, allowances, and certain advertising and promotional costs, including consumer coupons, are variable consideration and are recorded as a reduction of product sales revenue in the same period the related product sales are recorded. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. A net product sale is recorded when the Company delivers the product to the customer, or in certain instances, the customer picks up the goods at the Company’s distribution center, and thereby obtains control of such product. Amounts billed and due from our customers are classified as accounts receivable trade on the balance sheet and require payment on a short-term basis. Accounts receivable trade are unsecured. Shipping and handling costs of $10,672 and $11,032 in first quarter 2020 and 2019, respectively, are included in selling, marketing and administrative expenses. A minor amount of royalty income (less than 0.2% of our consolidated net sales) is also recognized from sales-based licensing arrangements, pursuant to which revenue is recognized as the third-party licensee sales occur. Rental income (less than 1% of our consolidated net sales) is not considered revenue from contracts from customers.

Leases

The Company identifies leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated period of time in exchange for ~~those goods~~consideration. The Company considers whether it can control the underlying asset and have the right to obtain substantially all of the economic benefits or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognizedoutputs from the ~~costs~~asset. Leases with terms greater than 12 months are classified as either operating or finance leases at the commencement date. For these leases, we capitalize the present value of the minimum lease payments over the lease term as a right-of-use asset with an offsetting lease liability. The discount rate used to ~~obtain~~calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the lease is

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generally not known or ~~fulfill~~determinable. The lease term includes any noncancelable period for which we have the right to use the asset. Currently, all capitalized leases are classified as operating leases and the Company records rental expense on a ~~contract. This standard~~straight-line basis over the term of the lease.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, (ASC Topic 326) which replaces the current incurred loss impairment method with a new method that reflects expected credit losses. Subsequent to the issuance of ASC Topic 326, the FASB clarified and amended guidance through several Accounting Standard Updates; hereinafter the collection of credit loss guidance is referred to as “ASC Topic 326”. Under this new guidance an entity would recognize an impairment allowance equal to its current estimate of credit losses on financial assets measured at amortized cost. The Company adopted ASU 2016-13 and related amendments (ASC Topic 326) on January 1, 2020. The adoption of this ASC did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements - Not Yet Adopted

In December 2019, the FASB issued ASU No. 2019-12 which is designed to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU No. 2019-12 is effective for fiscal years beginning after December 15, ~~2017,~~2020, including interim periods within ~~that reporting period. Although the Company is continuing its evaluation~~those fiscal years; this ASU allows for early adoption in any interim period after issuance of the new guidance, based upon the current status of the evaluation, the impact of adoption is not expected to be material to the consolidated financial statements. The Company will use the modified retrospective method of adoption in the first quarter of 2018.

In January 2016, the FASB issued ASU 2016-01 which modifies certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted.update. The Company is currently ~~evaluating the new guidance to determine~~assessing the impact ~~it may have on the consolidated financial statements.~~

~~In February 2016, the FASB issued~~this ASU 2016-02 which amends existing guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. This ASU also provides clarifications surrounding the presentation of the effects of leases in the income statement and statement of cash flows. This guidance will be effective for the Company on January 1, 2019. The Company is currently evaluating this new guidance to determine the impact it will have on its consolidated financial statements.

In ~~April 2016,~~March 2020, the FASB issued ASU ~~2016-10,~~2020-04 which ~~contains amendments~~provides optional guidance for a limited time to ease the ~~new revenue recognition standard on identifying performance obligations and~~potential burden in accounting for licenses of intellectual property. The amendments related to identifying performance obligations clarify when a promised good or service is separately identifiable and allows entities to disregard items that are immaterial in the context of a contract. The licensing implementation amendments clarify how an entity should evaluate the nature of its promise in granting a license of intellectual property, which will determine whether revenue is recognized over time or at a point in time. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not

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~~have any significant licenses of intellectual property and is currently evaluating this new guidance to determine the impact it will have on its consolidated financial statements.~~

In August 2016, the FASB issued ASU 2016-15, which includes amendments addressing eight specific cash flow issues with the objective of reducing the existing diversity in practice. The effective date of the amendments to the standard is for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating this new guidance to determine the impact it will have on its consolidated financial statements.

~~In March 2017, the FASB issued ASU 2017-07, which requires employers~~ ~~who offer defined benefit and postretirement benefit plans~~ to report the service cost component in the same line item as other compensation costs arising from services rendered by employees during the reporting period. The other components of net benefit costs will be presented in the income statement separately from the service cost and outside of a subtotal of income from operations. In addition, only the service cost component may be eligible for capitalization where applicable. This guidance is effective for annual periods beginning after December 15, 2017. The Company is currently evaluating this new guidance to determine the impact it will have on its consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, guidance that amends hedge accounting. Under the new guidance, more hedging strategies will be eligible for hedge accounting and the application of hedge accounting is simplified.reference rate reform. The new guidance ~~amends presentation~~provides optional expedients and ~~disclosure requirements,~~exceptions for applying U.S. GAAP to contracts, hedging relationships and ~~how effectiveness is assessed.~~other transactions affected by reference rate reform if certain criteria are met. The ~~guidance is~~amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective ~~for fiscal years beginning after~~immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December ~~15, 2018, and interim periods within those years. Early adoption is permitted. The Company is~~31, 2022. We are currently evaluating our contracts and the ~~impact that~~optional expedients provided by the new ~~guidance will have on its consolidated financial statements.~~standard.

~~Recently Adopted Pronouncements~~

In November 2015, the FASB issued ASU 2015-17 which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position. This guidance was adopted on January 1, 2017 on a prospective basis. Prior period balances have not been adjusted.

Note 2 — Average Shares Outstanding

The average number of shares outstanding for ~~nine months 2017~~first quarter 2020 reflects aggregate stock purchases of ~~809~~260 shares for ~~$30,027~~$8,809 and a 3% stock dividend of ~~1,850~~1,942 shares distributed on April ~~17, 2017.~~3, 2020. The average number of shares outstanding for ~~nine months 2016~~first quarter 2019 reflects aggregate stock purchases of ~~740~~285 shares for ~~$26,293~~$10,519 and a 3% stock dividend of ~~1,819~~1,914 shares distributed on April ~~8, 2016.~~5, 2019.

Note 3 — Income Taxes

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 ~~2014~~2016 through ~~2016. With few exceptions, the Company is no longer subject to examination by tax authorities for the year 2013 and prior.~~2018. The Company’s consolidated effective income tax ~~rates were 31.0%~~rate was 21.5% and ~~30.6%~~24.3% in ~~third~~first quarter ~~2017~~2020 and ~~2016, respectively, and 29.8% and 31.1% in nine months 2017 and 2016,~~2019, respectively. The lower ~~effective~~ tax rate ~~for nine months 2017 compared to nine months 2016~~in first quarter 2020 principally reflects ~~certain benefits resulting from filing amended federal and~~lower state income tax ~~returns, including a state income tax carry forward.~~expense.

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NOTE 4—Share Capital and Capital In Excess of Par Value:


										Capital in
				Class B						Excess
	Common Stock			Common Stock			Treasury Stock			of Par
	Shares	Amount		Shares	Amount		Shares	Amount		Value
	(000’s)			(000’s)			(000’s)
Balance at December 31, 2019	38,836	$	26,969	26,287	$	18,254	90	$	(1,992)	$	696,059
Issuance of 3% stock dividend	1,157		803	786		547	3		—		42,243
Conversion of Class B common shares to common shares	36		25	(36)		(25)	—		—		—
Purchase and retirement of common shares and other	(260)		(180)	—		—	—		—		(8,629)
Balance at March 31, 2020	39,769	$	27,617	27,037	$	18,776	93	$	(1,992)	$	729,673

Balance at December 31, 2018	38,544	$	26,767	25,584	$	17,767	88	$	(1,992)	$	696,535
Issuance of 3% stock dividend	1,150		798	767		532	2		—		32,999
Conversion of Class B common shares to common shares	9		6	(9)		(6)	—		—		—
Purchase and retirement of common shares and other	(285)		(197)	—		—	—		—		(10,322)
Balance at March 31, 2019	39,418	$	27,374	26,342	$	18,293	90	$	(1,992)	$	719,212

Note 45 — Fair Value Measurements

Current accounting guidance defines fair value as the price that would be received on 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,

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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~~Management’s own judgments about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs isare reflected in the hierarchy assessment disclosed in the table below.

As of ~~September 30, 2017,~~March 31, 2020, December 31, ~~2016~~2019 and ~~September 30, 2016,~~March 31, 2019, 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 purchase of certain raw materials and foreign currencies, investments in trading securities and available for sale securities. The Company’s available for sale securities principally consist of corporate and municipal bonds that are publicly traded and variable rate demand notes with interest rates that generally reset weekly and the security can be “put” back and sold weekly. Trading securities principally consistbonds.

Table of ~~equity mutual funds that are publicly traded.~~Contents

The following table presents information about the Company’s financial assets and liabilities measured at fair value as of ~~September 30, 2017,~~March 31, 2020, December 31, ~~2016~~2019 and ~~September 30, 2016~~March 31, 2019 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:



	Estimated Fair Value September 30, 2017
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3


									Estimated Fair Value March 31, 2020
									Total		Input Levels Used
									Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	49,512	$	49,512	$	-	$	-	$	139,067	$	139,067	$	-	$	-
Available for sale securities		193,169		2,402		190,767		-		162,080		3,441		158,639		-
Foreign currency forward contracts		147		-		147		-		(93)		-		(93)		-
Commodity futures contracts		(364)		(364)		-		-		(480)		(480)		-		-
Trading securities		75,094		75,094		-		-		68,717		41,692		27,025		-
Total assets measured at fair value	$	317,558	$	126,644	$	190,914	$	-	$	369,291	$	183,720	$	185,571	$	-


	Estimated Fair Value December 31, 2016
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3


									Estimated Fair Value December 31, 2019
										Total	Input Levels Used
										Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	119,145	$	119,145	$	-	$	-	$	138,960	$	138,960	$	-	$	-
Available for sale securities		164,183		2,419		161,764		-		177,292		3,588		173,704		-
Foreign currency forward contracts		(119)		-		(119)		-		14		-		14		-
Commodity futures contracts, net		1,746		1,746		-		-		121		121		-		-
Trading securities		67,995		67,995		-		-		76,183		48,260		27,923		-
Total assets measured at fair value	$	352,950	$	191,305	$	161,645	$	-	$	392,570	$	190,929	$	201,641	$	-


	Estimated Fair Value September 30, 2016
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3


									Estimated Fair Value March 31, 2019
										Total	Input Levels Used
										Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	94,239	$	94,239	$	-	$	-	$	77,670	$	77,670	$	-	$	-
Available for sale securities		151,776		2,429		149,347		-		199,944		3,041		196,903		-
Foreign currency forward contracts		(532)		-		(532)		-		(197)		-		(197)		-
Commodity futures contracts		3,234		3,234		-		-		(151)		(151)		-		-
Trading securities		66,085		66,085		-		-		69,260		42,866		26,394		-
Total assets measured at fair value	$	314,802	$	165,987	$	148,815	$	-	$	346,526	$	123,426	$	223,100	$	-

The fair value of the Company’s industrial revenue development bonds at ~~September 30, 2017,~~March 31, 2020, December 31, ~~2016~~2019 and ~~September 30, 2016~~March 31, 2019 were valued using Level 2 inputs which approximates the carrying value of $7,500 for the respective periods. Interest rates on these bonds are reset weekly based on current market conditions.

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Note 56 — Derivative Instruments and Hedging Activities

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

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Statement of Financial Position. Derivative assets are recorded in other receivables and derivative liabilities are recorded in accrued liabilities. The Company uses hedge accounting for its foreign currency and commodity derivative instruments as discussed above. Derivatives that qualify for hedge accounting are designated

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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. Approximately ~~43%~~$331 and $149 of this accumulated comprehensive ~~net gain~~loss is expected to be reclassified as a charge to ~~net~~ earnings in ~~the next 12 months. Substantially all amounts~~2020 and 2021, respectively. Approximately $(175), $47 and $35 reported in accumulated other comprehensive ~~loss~~gain (loss) for foreign currency derivatives are expected to be reclassified to other income, net in ~~the next 12 months.~~2020, 2021 and 2022, respectively.

The following table summarizes the Company’s outstanding derivative contracts and their effects on its Condensed Consolidated Statements of Financial Position at ~~September 30, 2017,~~March 31, 2020, December 31, ~~2016~~2019 and ~~September 30, 2016:~~March 31, 2019:



	September 30, 2017
	Notional
	Amounts		Assets		Liabilities



							March 31, 2020
							Notional
							Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	2,059	$	147	$	-	$	11,342	$	117	$	(210)
Commodity futures contracts		13,616		56		(420)		3,955		1		(481)
Total derivatives			$	203	$	(420)			$	118	$	(691)

	December 31, 2016
	Notional
	Amounts		Assets		Liabilities


							December 31, 2019
							Notional
							Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	2,357	$	-	$	(119)	$	5,533	$	14	$	—
Commodity futures contracts		10,811		1,932		(186)		7,147		205		(84)
Total derivatives			$	1,932	$	(305)			$	219	$	(84)

	September 30, 2016
	Notional
	Amounts		Assets		Liabilities


							March 31, 2019
							Notional
							Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	5,684	$	-	$	(532)	$	11,050	$	-	$	(197)
Commodity futures contracts		11,047		3,256		(22)		7,158		213		(364)
Total derivatives			$	3,256	$	(554)			$	213	$	(561)

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The effects of derivative instruments on the Company’s Condensed Consolidated Statements of Earnings and Retained Earnings and the Condensed Consolidated Statements of Comprehensive Earnings for periods ended ~~September 30, 2017~~March 31, 2020 and ~~September 30, 2016~~March 31, 2019 are as follows:



	For Quarter Ended September 30, 2017
					Gain (Loss)
			Gain (Loss)		on Amount Excluded
	Gain (Loss)		Reclassified from		from Effectiveness
	Recognized		Accumulated OCI		Testing Recognized
	in OCI		into Earnings		in Earnings



							For Quarter Ended March 31, 2020
											Gain (Loss)
									Gain (Loss)		on Amount Excluded
							Gain (Loss)		Reclassified from		from Effectiveness
							Recognized		Accumulated OCI		Testing Recognized
							in OCI		into Earnings		in Earnings

Foreign currency forward contracts	$	118	$	55	$	-	$	(205)	$	(98)	$	-
Commodity futures contracts		(99)		(83)		-		(756)		(155)		-
Total	$	19	$	(28)	$	-	$	(961)	$	(253)	$	-

	For Quarter Ended September 30, 2016
					Gain (Loss)
			Gain (Loss)		on Amount Excluded
	Gain (Loss)		Reclassified from		from Effectiveness
	Recognized		Accumulated OCI		Testing Recognized
	in OCI		into Earnings		in Earnings


							For Quarter Ended March 31, 2019
											Gain (Loss)
									Gain (Loss)		on Amount Excluded
							Gain (Loss)		Reclassified from		from Effectiveness
							Recognized		Accumulated OCI		Testing Recognized
							in OCI		into Earnings		in Earnings

Foreign currency forward contracts	$	(77)	$	(456)	$	-	$	210	$	-	$	-
Commodity futures contracts		1,365		793		-		340		(96)		-
Total	$	1,288	$	337	$	-	$	550	$	(96)	$	-

	For Year to Date Ended September 30, 2017
					Gain (Loss)
			Gain (Loss)		on Amount Excluded
	Gain (Loss)		Reclassified from		from Effectiveness
	Recognized		Accumulated OCI		Testing Recognized
	in OCI		into Earnings		in Earnings

Foreign currency forward contracts	$	266	$	1	$	-
Commodity futures contracts		(2,001)		108		-
Total	$	(1,735)	$	109	$	-

	For Year to Date Ended September 30, 2016
					Gain (Loss)
			Gain (Loss)		on Amount Excluded
	Gain (Loss)		Reclassified from		from Effectiveness
	Recognized		Accumulated OCI		Testing Recognized
	in OCI		into Earnings		in Earnings

Foreign currency forward contracts	$	613	$	(1,482)	$	-
Commodity futures contracts		3,798		836		-
Total	$	4,411	$	(646)	$	-

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Note 67 — Pension Plans

~~During 2017 and 2016,~~Beginning in 2012, the Company received ~~updated~~periodic notices ~~that~~from the Bakery, Confectionery, Tobacco Workers and ~~Confectionery~~Grain Millers International Union ~~and Industry International~~ Pension Plan (Plan), a multi-employer defined benefit pension plan for certain Company union employees, isthat the Plan’s actuary certified the Plan to be in “critical ~~and declining~~ status”, the “Red Zone”, as defined by the Pension Protection Act (PPA) and the Pension Benefit Guaranty Corporation (PBGC); and that a plan of rehabilitation was adopted by the trustees of the Plan in 2012. During 2015, the Company received new notices that the Plan was reclassified to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015. A designation of “critical and declining status” implies that the Plan is ~~projected~~expected to become insolvent in ~~2030.~~ the next 20 years. In 2016, the Company received new notices that the Plan’s trustees adopted an updated Rehabilitation Plan effective January 1, 2016, and all annual notices through 2020 have continued to classify the Plan in the “critical and declining status” category.

The Company has been advised that its withdrawal liability would have been ~~$72,700~~$99,800, $81,600 and $82,200 if it had withdrawn from the Plan during ~~2016.~~2019, 2018 and 2017, respectively. Should the Company actually withdraw from the Plan at a future date, a withdrawal liability, which could be higher than the above discussed ~~amount,~~amounts, could be payable to the Plan.

~~Table~~The amended rehabilitation plan requires that employer contributions include 5% compounded annual surcharge increases each year for an unspecified period of ~~Contents~~

time beginning January 2013 (in addition to the 5% interim surcharge initiated in June 2012) as well as certain plan benefit reductions. The Company’s pension expense for this Plan for first quarter 2020 and 2019 was $685 and $574, respectively ($2,961 and $2,836 for twelve months 2019 and 2018, respectively). The aforementioned expense includes surcharges of $241 and $184 for first quarter 2020 and 2019, respectively ($948 and $811 for twelve months 2019 and 2018, respectively), as required under the amended plan of rehabilitation.

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 or the effects of any modifications to the current amended rehabilitation plan ~~and new “hybrid plan” option discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)~~ could be material to its consolidated results of operations or cash flows in one or more future periods. ~~See also the Company’s Consolidated Financial Statements and related notes and Management’s Discussion and Analysis~~

Table of ~~Financial Condition and Results of Operations incorporated into the Company’s 2016 Form 10-K.~~Contents

Note 78 — Accumulated Other Comprehensive Earnings (Loss)

Accumulated Other Comprehensive Earnings (Loss) consists of the following components:



											Accumulated
	Foreign				Foreign				Postretirement		Other
	Currency				Currency		Commodity		and Pension		Comprehensive
	Translation		Investments		Derivatives		Derivatives		Benefits		Earnings (Loss)
Balance at December 31, 2016	$	(25,460)	$	(697)	$	(76)	$	1,114	$	4,873	$	(20,246)


																							Accumulated
													Foreign				Foreign				Postretirement		Other
													Currency				Currency		Commodity		and Pension		Comprehensive
													Translation		Investments		Derivatives		Derivatives		Benefits		Earnings (Loss)
Balance at December 31, 2019													$	(23,368)	$	882	$	10	$	92	$	2,139	$	(20,245)
Other comprehensive earnings (loss) before reclassifications		2,875		319		170		(1,276)		6		2,094		(3,674)		(827)		(155)		(574)		-		(5,230)
Reclassifications from accumulated other comprehensive loss		-		-		-		(69)		(700)		(769)		-		-		74		118		(256)		(64)
Other comprehensive earnings (loss) net of tax		2,875		319		170		(1,345)		(694)		1,325		(3,674)		(827)		(81)		(456)		(256)		(5,294)
Balance at September 30, 2017	$	(22,585)	$	(378)	$	94	$	(231)	$	4,179	$	(18,921)

											Accumulated
	Foreign				Foreign				Postretirement		Other
	Currency				Currency		Commodity		and Pension		Comprehensive
	Translation		Investments		Derivatives		Derivatives		Benefits		Earnings (Loss)
Balance at December 31, 2015	$	(21,644)	$	(605)	$	(1,675)	$	173	$	6,387	$	(17,364)
Balance at March 31, 2020													$	(27,042)	$	55	$	(71)	$	(364)	$	1,883	$	(25,539)

Balance at December 31, 2018													$	(24,159)	$	(1,516)	$	(309)	$	(444)	$	4,206	$	(22,222)
Other comprehensive earnings (loss) before reclassifications		(2,337)		451		391		2,424		-		929		391		1,112		159		258		-		1,920
Reclassifications from accumulated other comprehensive loss		-		3		946		(533)		(786)		(370)		-		-		-		72		(288)		(216)
Other comprehensive earnings (loss) net of tax		(2,337)		454		1,337		1,891		(786)		559		391		1,112		159		330		(288)		1,704
Balance at September 30, 2016	$	(23,981)	$	(151)	$	(338)	$	2,064	$	5,601	$	(16,805)
Balance at March 31, 2019													$	(23,768)	$	(404)	$	(150)	$	(114)	$	3,918	$	(20,518)

The amounts reclassified from accumulated other comprehensive income (loss) consisted of the following:


Details about Accumulated Other	Quarter Ended				Location of (Gain) Loss
Comprehensive Income Components	March 31, 2020		March 31, 2019		Recognized in Earnings
Foreign currency derivatives	$	98	$	-	Other income, net
Commodity derivatives		155		96	Product cost of goods sold
Postretirement and pension benefits		(338)		(381)	Other income, net
Total before tax		(85)		(285)
Tax (expense) benefit		21		69
Net of tax	$	(64)	$	(216)

Details about Accumulated Other

Quarter Ended

Year to Date Ended

Location of (Gain) Loss
Comprehensive Income Components

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Recognized in Earnings
Investments

$
-

$
-

$
-

$
4

Other income, net
Foreign currency derivatives

(55)

456

(1)

1,482

Other income, net
Commodity derivatives

83

(793)

(108)

(836)

Product cost of goods sold
Postretirement and pension benefits

(187)

(209)

(560)

(628)

Selling, marketing and administrative expenses
Postretirement and pension benefits

(179)

(202)

(537)

(604)

Product cost of goods sold
Total before tax

(338)

(748)

(1,206)

(582)

Tax (expense) benefit

123

271

437

212

Net of tax

$
(215)

$
(477)

$
(769)

$
(370)

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Note 89 — Restricted Cash

Restricted cash comprises certain cash deposits of the Company’s ~~majority-owned~~ Spanish ~~companies~~subsidiary with international banks that are pledged as collateral for letters of credit and bank borrowings.

Note 910 — Bank Loans

Bank loans ~~comprise~~consist of short term (less than 120 days) borrowings by the Company’s ~~majority-owned~~ Spanish ~~companies which~~subsidiary that are held by international banks. The weighted-average interest rate as of ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 was ~~1.9 %~~3.0% and ~~2.0%~~1.9%, respectively.

Note 11 — Leases

The Company leases certain buildings, land and equipment that are classified as operating leases. These leases have remaining lease terms of up to approximately 3 years. In the first quarter of 2020 and 2019, operating lease cost and cash paid for operating lease liabilities totaled $236 and $167, respectively, which is classified in cash flows from

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operating activities. As of March 31, 2020 and March 31 2019, operating lease right-of-use assets and operating lease liabilities were both $1,388 and $1,370, respectively. The weighted-average remaining lease term related to these operating leases was 1.6 years and 2.1 years as of March 31, 2020 and March 31, 2019, respectively. The weighted-average discount rate related to the Company’s operating leases was 3.1% as of March 31, 2020 and 2019. Maturities of our operating lease liabilities at March 31, 2020 are as follows: $632 in 2020, $695 in 2021, $61 in 2022.

The Company, as lessor, rents certain commercial real estate to third party lessees. The cost and accumulated depreciation related to these leased properties were $36,368 and $10,433, respectively, as of March 31, 2020 and were $36,371 and $9,709, respectively, as of March 31, 2019. Terms of such leases, including renewal options, may be extended for up to sixty years, many of which provide for periodic adjustment of rent payments based on changes in consumer or other price indices. The Company recognizes lease income on a straight-line basis over the lease term. Lease income in first quarter 2020 and 2019 was $737 and $749, respectively, and ~~maturity dates range~~is classified in cash flows from 1operating activities.

Note 12 — Contingencies

In the ordinary course of business, the Company is, from time to ~~2 years for~~time, subject to a variety of active or threatened legal proceedings and claims. While it is not possible to predict the outcome of such matters with certainty, in the Company’s opinion, both ~~periods.~~individually and in the aggregate, they are not expected to have a material effect on the Company’s financial condition, results of operations or cash flows.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This financial review discusses the Company’s financial condition, results of operations, liquidity and capital resources and other matters. Dollars are presented in thousands, except per share amounts. This review should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and related notes included in this Form 10-Q and with the Company’s Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Form 10-K for the year ended December 31, ~~2016~~2019 (the ~~“2016~~“2019 Form 10-K”).

Net product sales were ~~$182,173~~$102,803 in ~~third~~first quarter ~~2017~~2020 compared to ~~$185,473~~$101,019 in ~~third~~first quarter ~~2016, a decrease~~2019, an increase of ~~$3,300~~$1,784 or 1.8%.~~Nine months 2017~~ First quarter 2020 net product sales ~~were $390,495~~include increases in domestic sales of 3.0%. Successful marketing and sales programs as well as higher price realization contributed to the increase in net product sales in first quarter 2020 compared to ~~$393,094~~first quarter 2019. Lower foreign net product sales adversely affected reported consolidated net product sales in ~~nine months 2016, a decrease of $2,599 or 0.7%. Third~~first quarter sales continue to be the Company’s largest quarterly sales period due to back-to-school and pre-Halloween seasonal sales. The timing of sales to certain customers had some adverse impact on third quarter and nine months 2017 sales2020 compared to the corresponding period in 2019. A stronger U.S. dollar and the related translation of foreign sales also adversely affected first quarter sales in 2020 compared to the corresponding period in the prior year ~~corresponding periods.~~

Product cost of goods sold were ~~$114,848~~$66,443 in ~~third~~first quarter ~~2017~~2020 compared to ~~$114,748~~$64,856 in ~~third~~first quarter ~~2016, and nine months 2017 product cost of goods sold were $245,523 compared to $245,581 in nine months 2016.~~2019. Product cost of goods sold includes ~~$560~~$(319) and ~~$522~~$180 of certain deferred compensation expenses (credits) in ~~third~~first quarter ~~2017~~2020 and ~~2016, respectively, and $1,845 and $816 of certain deferred compensation expenses in nine months 2017 and 2016,~~2019, respectively. These deferred compensation expenses (credits) principally result from the 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 increased from ~~$114,226~~$64,676 in ~~third~~first quarter ~~2016~~2019 to ~~$114,288~~$66,762 in ~~third~~first quarter ~~2017,~~2020, an increase of ~~$62~~$2,086 or ~~0.1%; but decreased from $244,765 in nine months 2016 to $243,678 in nine months 2017, a decrease of $1,087 or 0.4%~~3.2%. As a percentage of net product sales, adjusted product cost of goods sold was ~~62.7%~~64.9% and ~~61.6%~~64.0% in ~~third~~first quarter ~~2017~~2020 and ~~2016,~~2019, respectively, an unfavorable increase of 1.1%; and adjusted product cost of goods sold was 62.4% and 62.3% in nine months 2017 and 2016, respectively, an unfavorable increase of 0.1%. Adjusted cost of goods sold as a percent of sales reflects higher ingredients costs, but some of these higher0.9 percentage points. Higher plant manufacturing overhead costs were ~~mitigated by~~the principal drivers of this cost increase. The Company is continuing its investments in its plant manufacturing operations to meet new consumer and customer demands, achieve quality improvements, ~~in manufacturing operating efficiencies driven by capital improvements~~and increase operational efficiencies. Capital investments and ongoing cost containment ~~programs. Adjusted costs~~programs did contribute to certain efficiencies and cost reductions.

Table of goods sold in prior year third quarter and nine months 2016 were adversely affected by higher manufacturing costs relating to uncertainties surrounding certain changes in state and national product labeling.Contents

Selling, marketing and administrative expenses were ~~$33,095~~$16,272 in ~~third~~first quarter ~~2017~~2020 compared to ~~$32,101~~$31,108 in ~~third~~first quarter ~~2016, and nine months 2017 selling, marketing and administrative expenses were $86,122 compared to $81,772 in nine months 2016.~~2019. Selling, marketing and administrative expenses ~~includes $1,717~~include $(9,056) and ~~$1,439~~$4,823 of certain deferred compensation expenses (credits) in ~~third~~first quarter ~~2017~~2020 and ~~2016, respectively, and $5,131 and $2,266 of certain deferred compensation expenses in nine months 2017 and 2016,~~2019, respectively. As discussed above, these expenses (credits) 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 deferred compensation expenses (credits), selling, marketing and administrative expenses ~~increased~~decreased from ~~$30,662~~$26,285 in ~~third~~first quarter ~~2016~~2019 to ~~$31,378~~$25,328 in ~~third~~first quarter ~~2017, an increase~~2020, a decrease of ~~$716~~$957 or ~~2.3%; and adjusted selling, marketing and administrative expenses increased from $79,506 in nine months 2016 to $80,991 in nine months 2017, an increase of $1,485 or 1.9%~~3.6%.

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As a percentage of net product sales, adjusted selling, marketing and administrative expenses ~~increased~~decreased from ~~16.5%~~26.0% in ~~third~~first quarter ~~2016~~2019 to ~~17.2%~~24.6% in ~~2017, an unfavorable increase~~first quarter 2020, a favorable decrease of ~~0.7%~~1.4 percentage points as a percent of net ~~sales, and~~sales. The decrease in adjusted selling, marketing and administrative expenses ~~increased from 20.2%~~ in ~~nine months 2016~~first quarter 2020 principally reflects decreases in freight and delivery expenses as well as reductions in overall general and administrative expenses in 2020 when compared to ~~20.7%~~the corresponding periods in ~~nine months 2017, an unfavorable increase of 0.5% as a percent of net sales.~~ 2019.

Selling, marketing and administrative expenses include ~~$12,699~~$10,672 and ~~$11,620~~$11,032 for customer freight, delivery and warehousing expenses in ~~third~~first quarter ~~2017~~2020 and ~~2016,~~2019, respectively, ~~and $31,775 and $30,265 for customer freight, delivery and warehousing expenses in nine months 2017 and 2016, respectively.~~a decrease of $360 or 3.3%. These expenses were ~~7.0%~~10.4% and ~~6.3%~~10.9% of net product sales in ~~third~~first quarter ~~2017~~2020 and 2016, respectively, and 8.1% and 7.7% of net product sales in nine months 2017 and 2016, respectively, and are the principal reasons for the above discussed increases in 2017 adjusted selling, marketing and administrative expenses. 2019, respectively.

Earnings from operations were ~~$34,832~~$20,744 in ~~third~~first quarter ~~2017~~2020 compared to ~~$39,273~~$5,758 in ~~third~~first quarter ~~2016, and were $60,864 in nine months 2017 compared to $67,786 in nine months 2016.~~2019. Earnings from operations include ~~$2,277~~$(9,375) and ~~$1,961~~$5,003 of certain deferred compensation expenses (credits) in ~~third~~first quarter ~~2017~~2020 and ~~2016, respectively, and include $6,976 and $3,082 of certain deferred compensation expenses in nine months 2017 and 2016,~~2019; respectively, which are discussed above. Adjusting for these deferred compensation costs, expenses and ~~expenses, operating~~(credits), earnings from operations were ~~$37,109~~$11,369 and ~~$41,234~~$10,761 in ~~third~~first quarter ~~2017~~2020 and ~~2016,~~2019, respectively, ~~a decrease~~an increase of ~~$4,125~~$608 or ~~10.0%; and adjusted operating earnings were $67,840 and $70,868 in nine months 2017 and 2016, respectively, a decrease of $3,028 or 4.3%~~5.7%. As a percentage of net product sales, these adjusted operating earnings were ~~20.4%~~11.1% and ~~22.2%~~10.7% in ~~third~~first quarter ~~2017~~2020 and ~~2016,~~2019, respectively, ~~an unfavorable decrease~~a favorable increase of ~~1.8% as a~~0.4 percentage ~~of net product sales; and as a percentage of net product sales, these adjusted operating earnings were 17.4% and 18.0% in nine months 2017 and 2016, respectively, an unfavorable decrease of 0.6%~~points as a percentage of net product sales. ~~These declines~~The improvement in ~~operating~~adjusted earnings from operations principally ~~reflect~~reflects the ~~adverse effects~~benefits of ~~lower~~increased sales, including higher ~~ingredient~~price realization, as well as the reduction and containment of certain costs and ~~increases in customer freight, delivery and warehousing expenses~~expense as discussed above.

Management believes the ~~presentation~~comparisons presented in ~~this and~~ the preceding paragraphs, ~~relating to amounts adjusted~~after adjusting for changes in deferred compensation, ~~expense~~ are more reflective of the underlying operations of the Company.

Other income (loss), net was ~~$4,121~~$(5,494) in ~~third~~first quarter ~~2017~~2020 compared to ~~$1,943~~$6,017 in ~~third~~first quarter ~~2016, a favorable increase~~2019, an unfavorable decrease of ~~$2,178; and other income, net, was $8,565 in nine months 2017 compared to $4,147 in nine months 2016, a favorable increase of $4,418.~~$11,511. Other income, net for ~~third~~first quarter ~~2017~~2020 and ~~2016~~2019 includes net (losses) gains and investment income of ~~$2,277~~$(9,375) and ~~$1,961,~~$5,003, respectively, on trading securities which provide an economic hedge of the Company’s deferred compensation ~~liabilities; and other income, net for nine months 2017 and 2016 includes net gains and investment income of $6,976 and $3,082, respectively, on trading securities relating to these programs.~~liabilities. These changes in trading securities were substantially offset by a like amount of deferred compensation expense included in product cost of goods sold and selling, marketing, and administrative expenses in the respective periods as discussed above. Other income, net for first quarter 2020 and 2019 includes investment income on available for sale securities of $1,181 and $1,071 in 2020 and 2019, respectively. Other income (loss), net also includes gains (losses) on foreign exchange of ~~$1,082~~$2,510 and ~~$(582)~~$(235) in ~~third~~first quarter ~~2017~~2020 and ~~2016, respectively, and $(527) and $(572) in nine months 2017 and 2016,~~2019, respectively.

The consolidated effective tax rates were ~~31.0%~~21.5% and ~~30.6%~~24.3% in ~~third~~first quarter ~~2017~~2020 and ~~2016, respectively, and 29.8% and 31.1% in nine months 2017 and 2016,~~2019, respectively. The lower ~~effective~~ tax rates ~~for nine months 2017 compared to nine months 2016~~in first quarter 2020 principally reflect ~~certain benefits resulting from filing amended federal and~~lower state income tax ~~returns,~~expense. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the Covid-19 pandemic, including tax relief and government loans, grants and investments. The CARES Act did not have a ~~state income tax carry forward benefit.~~material impact on our consolidated financial statements for first quarter 2020. We continue to monitor any effects that may result from the CARES Act.

Net earnings attributable to Tootsie Roll Industries, Inc. were ~~$26,933~~$11,982 (after ~~$46~~$6 net loss attributed to non-controlling interests) in ~~third~~first quarter ~~2017~~2020 compared to ~~$28,637~~$8,955 (after ~~$40~~$44 net loss attributed to non-controlling interests) in ~~third~~first quarter ~~2016,~~2019, and earnings per share were ~~$0.43~~$0.18 and ~~$0.45~~$0.13 in ~~third~~first quarter ~~2017~~2020 and ~~2016,~~2019, respectively, ~~a decrease~~an increase of ~~$0.02~~$0.05 per share, or 4%38.5%. ~~Nine months 2017~~First quarter 2020 net earnings ~~attributable to Tootsie Roll Industries, Inc. were $48,879 (after $131 net loss attributed to non-controlling interests) compared to nine months 2016 net earnings~~benefited from after-tax foreign exchange gains of ~~$49,669 (after $142 net earnings attributed to non-controlling interests), and net earnings~~approximately $1,900 or $0.03 per ~~share were $0.77 in both nine months 2017 and nine months 2016.~~share. Earnings per share attributable to Tootsie Roll Industries, Inc. for ~~third~~first quarter ~~and nine months 2017 did benefit~~2020 also benefited from the reduction in average shares outstanding resulting from purchases in the open market by the Company of its common stock. Average shares outstanding decreased from ~~64,021 in third~~67,814 at first quarter ~~2016~~2019 to ~~62,986 in third~~66,875 at first quarter ~~2017, and from 64,205 in nine months 2016 to 63,286 in nine months 2017.~~2020.

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Goodwill and intangibles are assessed annually as of December 31 or whenever events or circumstances indicate that the carrying values may not be recoverable from future cash flows. The Company has not identified any triggering

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events, as defined, or other adverse information that would indicate a material impairment of its goodwill or intangibles in ~~nine months 2017.~~first quarter 2020. There were also no impairments in the comparative ~~nine months 2016~~first quarter 2019 period or in calendar ~~2016.~~year 2019. Although Company management has not identified any trigging events relating to its intangibles, primarily indefinite lived trademarks, the ultimate effects of the Covid-19 pandemic could change this assessment in the future, as discussed below and as outlined in the Company’s risk factors discussed on Form 10-K for the year ended December 31, 2019.

Beginning in 2012, the Company received periodic notices from the Bakery, Confectionery, Tobacco Workers and ~~Confectionery~~Grain Millers International Union ~~and Industry International~~ Pension Plan (Plan), a multi-employer defined benefit pension plan for certain Company union employees, that the Plan’s actuary certified the Plan to be in “critical status”, the “Red Zone”, as defined by the Pension Protection Act (PPA) and the Pension Benefit Guaranty Corporation (PBGC),; and that a plan of rehabilitation was adopted by the trustees of the Plan in ~~2012 (and was further amended in 2016).~~2012. During 2015, the Company received notices that the Plan’s status was changed to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015, and that the Plan was projected to have an accumulated funding deficiency for the 2017 through 2024 plan years. A designation of “critical and declining status” implies that the Plan is expected to become insolvent in the next 20 years. ~~In April 2017, the~~The Company ~~received new~~has continued to receive annual notices each year (2016 through 2020) that ~~the~~this Plan remains in “critical and declining status” and is projected to become insolvent ~~in 13~~within the next 20 years. These notices have also ~~advise~~advised that the Plan trustees ~~are~~were considering the reduction or elimination of certain retirement benefits and may seek assistance from the PBGC. Plans in “critical and declining status” may elect to suspend (temporarily or permanently) some benefits payable to all categories of participants, including retired participants, except retirees that are disabled or over the age of 80. Suspensions must be equally distributed and cannot drop below 110% of what would otherwise be guaranteed by the PBGC.

Based on these updated notices, the Plan’s funded ~~percentages~~percentage (plan investment assets as a percentage of plan liabilities), as defined, were ~~57.0%~~50.4%, ~~62.8%~~51.6%, and ~~65.1%~~54.7% as of the most recent valuation dates available, January 1, ~~2016 (most recent valuation date available), 2015,~~2019, 2018, and ~~2014,~~2017, respectively (these valuation dates are as of the beginning of each Plan year). These funded percentages are based on actuarial values, as defined, and do not reflect the actual market value of Plan investments as of these dates. If the market value of investments had been used as of January 1, ~~2016,~~2020 the funded percentage would be ~~53.0%~~48.8% (not ~~57.0%~~50.4%). Given the recent declines in the equity markets due to the Covid-19 pandemic, the current funded percentage is likely much lower than the aforementioned 48.8%. As of the January 1, ~~2016~~2019 valuation date (most recent valuation available), ~~20%~~only 16% of Plan participants were current active employees, ~~51%~~53% were retired or separated from service and receiving benefits, and ~~29%~~31% were retired or separated from service and entitled to future benefits. The number of current active employee Plan participants as of January 1, ~~2016~~2019 fell 2%14% from the previous year and 4%17% over the past two years. When compared to the Plan valuation date of January 1, 2011 ~~(five~~(seven years earlier), current active ~~employees~~employee participants have declined ~~31%~~47%, whereas participants who were retired or separated from service and receiving benefits increased 6%4% and participants who were retired or separated from service and entitled to future benefits increased 8%14%. The ~~bankruptcy of a major participating employer in~~Company understands that the Plan ~~contributed~~is continuing to ~~the above discussed Plan results. The Internal Revenue Service recently issued updated mortality tables (increasing life expectancy) effective January 1, 2018~~explore additional restructuring measures which ~~will likely increase the Plan’s liabilities and further decrease the above discussed funding percentages.~~include incentives to participating employers in exchange for providing additional future cash contributions as well as suspension of certain retirement benefits.

The Company has been advised that its withdrawal liability would have been ~~$72,700, $61,000~~$99,800, $81,600, and ~~$56,400~~$82,200 if it had withdrawn from the Plan during ~~2016, 2015~~2019, 2018 and ~~2014,~~2017, respectively. The increase from ~~2015~~2018 to ~~2016 principally reflects poor investment returns of the plan in 2015,~~2019 was mainly attributable to a decrease in the ~~PBGC interest rates,~~Plan’s assets during 2018, net of market returns, and the withdrawal of a ~~higher~~large contributing employer where their actual withdrawal payments (likely over 20 years as discussed below) are not enough to fully fund their actual withdrawal liability. The Company’s relative share of the Plan’s ~~unfunded vested benefits allocated to~~contribution base, driven by employer withdrawals, has increased for the ~~Company.~~last several years, and Management believes that this trend could continue indefinitely which will add upward pressure on the Company’s withdrawal liability. Based on the above, including the Plan’s projected insolvency in ~~13 years, management~~the year 2030, Management believes that the Company’s withdrawal liability ~~will likely~~could increase further in future years.

Based on the Company’s updated actuarial study and certain provisions in ERISA and the law relating to withdrawal liability payments, ~~management~~Management believes that the Company’s liability would likely be limited to twenty annual payments of ~~$2,914~~$3,045 which have a present value in the range of ~~$34,200~~$35,700 to ~~$44,700.~~$46,700 depending on the interest rate

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used to discount these payments. While the Company’s actuarial consultant does not believe that the Plan will suffer a future mass withdrawal (as defined) of participating employers, in the event of a mass withdrawal, the Company’s annual withdrawal payments would theoretically be payable in perpetuity. Based on the Company’s updated actuarial study, the present value of such perpetuities is in the range of $49,900 to $104,500 and would apply in the unlikely event that substantially all employers withdraw from the Plan. The aforementioned is based on a range of ~~valuation~~valuations and interest rates which ~~management understands~~the Company’s actuary has advised is provided under the statute. Should the Company actually withdraw from the Plan at a future date, a withdrawal liability, which could be higher than the above discussed amounts, could be payable to the Plan.

The ~~Company’s existing~~Company and the union concluded a new labor contract ~~with~~in 2018 which requires the ~~local union commits the~~ Company’s continued participation in this ~~Plan. The Company’s labor contract expired on~~Plan through September 30, 2017 but has provisions for automatic extensions unless the one of the parties provides a 60 day notice that they will not extend. Both parties are currently continuing under this automatic extension provision.2022. The amended rehabilitation plan, which also continues, requires that employer contributions include 5% compounded annual surcharge increases each year for an unspecified period of time beginning in 2012 as well as certain plan benefit reductions. The Company’s pension expense for this Plan for ~~calendar years 2016~~first quarter 2020 and ~~2015~~2019 was ~~$2,541~~$685 and ~~$2,574, respectively. The aforementioned expense~~$574, respectively, which includes surcharges of ~~$542~~$241 and ~~$447 in calendar years 2016 and 2015,~~$184, respectively, as required under the ~~plan of~~amended rehabilitation ~~as amended. The Company’s pension expense~~plan. Such surcharges for ~~this Plan for nine months 2017~~calendar years 2019 and ~~2016 was $2,064~~2018 were $948 and ~~$1,959 respectively, which includes surcharges of $517 and $417~~$811, respectively.

~~Table~~The Company understands that the U.S Congress and the U.S Senate have proposed various legislation, including the “Butch Lewis Act,” that would provide varying degrees of ~~Contents~~

~~During third quarter 2017,~~assistance to troubled multi-employer plans similar to this Plan, ~~representatives informed~~including long-term low interest loans to troubled multi-employer plans. Certain provisions proposed would change the withdrawal liability rules which could increase the Company’s obligation in the event that the Company ~~that they had received preliminary approval~~withdrew from ~~the PBGC that would transform the~~this Plan, ~~into~~resulting in higher annual payment amounts and payments for a “hybrid plan” which would comprise both an “old pool” and a “new pool” for participating employers. The “hybrid plan” would allow current participating employers to enter a “new pool” and withdraw from the “old pool” if they agree to 30 yearslonger period of ~~additional annual installment payments to discharge their existing withdrawal liability~~time in excess of the “old pool”. The “new pool” option would provide certain protections from future withdrawal liabilities and reduced surcharges relating to future plan contributions, but would require employers to remain a participating employer in the “new pool” Plan for 30 years. The Plan believes that this “hybrid plan” as restructured will avoid insolvency. If the Company were to exercise this option, it would be required to make additional annual installment payments (which are in addition to the annual pension expense and surchargesmaximum twenty year period discussed above) to the Plan of $2.1 million for 30 years ($63.0 million total) beginning in 2019, or a lump-sum payment of approximately $40.7 million in 2019. The Company is currently evaluating this proposal with its actuaries and legal counsel. If the Company were to decide to enter this “hybrid plan” agreement, it would record a charge to net after-tax earnings of approximately $25.6 million which reflects the aforementioned lump-sum pre-tax payment of $40.7 million (or the present value of the $2.1 million annual payments for 30 years discussed above), net of the Company’s estimated future income tax benefits.

above. The Company is currently unable to determine the ultimate outcome of the above discussed multi-employer union pension matter and therefore is unable to determine the effects on its consolidated financial statements, but the ultimate outcome ~~or the effects of any modifications to the current rehabilitation plan~~ could be material to its consolidated results of operations or cash flows in one or more future periods. See also Note 7 in the Company’s Consolidated Financial Statements ~~and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in~~on Form 10-K for the ~~Company’s 2016 Form 10-K.~~year ended December 31, 2019.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows provided by operating activities were ~~$18,420~~$14,581 and ~~$47,032~~$10,556 in ~~nine months 2017~~first quarter 2020 and ~~2016,~~2019, respectively, a ~~decrease~~favorable increase of ~~$28,612.~~$4,025. The ~~decrease~~increase in ~~nine months 2017~~first quarter 2020 cash flows from operating activities principally reflects increased net earnings, the timing of payments relating to accounts payable and accrued liabilities as well as the timing of sales and collections of ~~account receivables including~~accounts receivable trade. Increased production and resulting higher inventories in first quarter 2020 had some adverse impact on cash flows from operating activities. This higher production and inventories were planned in the ~~effects of seasonal (pre-Halloween) sales payment terms,~~event that the ~~effects of higher finished goods inventories at September 30, 2017 reflecting~~Company might have to shut-down one or more manufacturing plant operations in response to the timing of pre-Halloween shipments during the comparative September and October periods, and changes in other receivables primarily due to increased broker margin deposit requirements on commodity hedges.Covid-19 pandemic, which is further discussed below.

Net cash ~~used in~~from (used in) investing activities was ~~$42,166~~$8,261 in ~~nine months 2017~~first quarter 2020 compared to ~~$34,267~~$(22,221) in ~~nine months 2016.~~first quarter 2019. Cash flows from (used in) investing activities reflect ~~$51,935~~$21,312 and ~~$45,298~~$20,919 of purchases of available for sale securities during ~~nine months 2017~~first quarter 2020 and ~~2016,~~2019, respectively, and ~~$21,328~~$35,217 and ~~$26,517~~$5,379 of sales and maturities of available for sale securities during ~~nine months 2017~~first quarter 2020 and ~~2016,~~2019, respectively. ~~Nine months 2017~~First quarter 2020 and ~~2016~~2019 investing activities include capital expenditures of ~~$11,699~~$3,737 and ~~$13,067,~~$4,683, respectively. Company Management has committed approximately $25,000 to a rehabilitation upgrade and expansion of one of its manufacturing plants in the U.S.A. The Company spent approximately $2,400 in 2019, and Management’s projected cash outlays for this project are approximately $12,600 in 2020 and $10,000 in 2021. All capital expenditures ~~in 2017~~ are ~~expected~~ to be funded from the Company’s cash flow from operations and internal sources. In addition, Company management has committed approximately $15,000 to a manufacturing plant rehabilitation upgrade and expansion of one of its manufacturing facilities in the U.S.A. Management anticipates capital outlayssources including available for ~~this project to approximate $500 in 2017, $6,000 in 2018, $6,000 in 2019 and $2,500 in 2020.~~sale securities.

The Company’s consolidated financial statements include bank borrowings of ~~$404~~$781 and ~~$447~~$755 at ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively, all of which relates to its ~~two majority-owned and controlled~~ Spanish ~~companies.~~subsidiary. The Company had no other outstanding bank borrowings at ~~September 30, 2017.~~March 31, 2020.

Financing activities include Company common stock purchases and retirements of ~~$30,027~~$8,809 and ~~$26,293~~$10,519 in ~~nine months 2017~~first quarter 2020 and ~~2016,~~2019, respectively. Cash dividends of ~~$16,965~~$11,703 and ~~$16,694~~$11,530 were paid in ~~nine months 2017~~first quarter 2020 and ~~2016,~~2019, respectively.

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The Company’s current ratio (current assets divided by current liabilities) was ~~3.8~~4.3 to 1 at ~~September 30, 2017~~March 31, 2020 compared to ~~4.7~~4.4 to 1 at December 31, ~~2016~~2019 and ~~3.6~~5.3 to 1 at ~~September 30, 2016.~~March 31, 2019. Net working capital was ~~$217,650~~$257,104 at ~~September 30, 2017~~March 31, 2020 compared to ~~$235,739~~$273,786 and ~~$202,304~~$226,927 at December 31, ~~2016~~2019 and ~~September 30, 2016,~~March 31, 2019, respectively.

The aforementioned net working capital amounts are principally reflected in aggregate cash and cash equivalents and short-term investments of ~~$123,784~~$216,577 at ~~September 30, 2017~~March 31, 2020 compared to ~~$186,658~~$239,404 and ~~$122,144~~$159,656 at December 31, ~~2016~~

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2019 and ~~September 30, 2016,~~March 31, 2019, respectively. In addition, long term investments, principally debt securities comprising corporate ~~and municipal~~ bonds were ~~$193,991~~$153,287 at ~~September 30, 2017,~~March 31, 2020, as compared to ~~$164,665~~$153,031 and ~~$189,956~~$187,218 at December 31, ~~2016~~2019 and ~~September 30, 2016,~~March 31, 2019, respectively. Aggregate cash and cash equivalents and short and long-term investments were ~~$317,775, $351,323,~~$369,864, $392,435, and ~~$312,100,~~$346,874, at ~~September 30, 2017,~~March 31, 2020, December 31, ~~2016~~2019 and ~~September 30, 2016,~~March 31, 2019, respectively. The aforementioned includes ~~$75,094, $67,995,~~$68,717, $76,183, and ~~$66,085~~$69,260 at ~~September 30, 2017,~~March 31, 2020, December 31, ~~2016~~2019 and ~~September 30, 2016,~~March 31, 2019, respectively, relating to trading securities which are used as an economic hedge for the Company’s deferred compensation liabilities. Investments in available for sale securities, primarily high quality corporate ~~and municipal~~ bonds, ~~variable rate demand notes, and other debt securities~~ that matured during ~~nine months 2017~~first quarter 2020 and ~~2016~~2019 were generally used to purchase the Company’s common stock or were replaced with debt securities of similar maturities.

The Company periodically contributes 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 currently using these VEBA funds to pay the actual cost of such benefits through most of ~~2017.~~2022. The VEBA trust held ~~$602, $3,027~~$11,762, $12,085 and ~~$3,379~~$15,522 of aggregate cash and cash equivalents at ~~September 30, 2017,~~March 31, 2020, December 31, ~~2016~~2019 and ~~September 30, 2016,~~March 31, 2019, respectively. This asset value is included in prepaid expenses and long-term other assets in the Company’s Consolidated Statement of Financial Position. These assets are categorized as Level 1 within the fair value hierarchy.

COVID-19 PANDEMIC

The Covid-19 pandemic, and resulting “shelter in place” and closures of “nonessential” businesses by many state and local governments, as well as foreign governments, has had a significant adverse impact on the overall economy. The aforementioned has resulted in the curtailment or complete closing of certain trade channels where our products are distributed as well as resulting changes in consumer behavior and shopping habits. Many of the Company’s products are larger confectionary products where a high value is provided to consumers, and such products are often consumed at many “sharing” and “give-a-way” events and activities. However, many of these consumption occasions as well as impulse purchases of our products have been significantly affected or completely curtailed by “shelter in place” mandates, public health guidelines, and consumer fears of returning to their previous lifestyles. As a result, the Company has experienced a very significant decline in its customer orders and sales to date in second quarter 2020 compared to second quarter 2019, and the Company expects this trend to have a material adverse effect on sales and net earnings in second quarter 2020. The effects of this pandemic are unprecedented and its future effects including the “reopening up the economy” are very uncertain. The Company is ~~planning~~not able to ~~make a contribution~~predict the effects of this pandemic on the second half of 2020 and beyond. However, the Company believes that the pandemic will likely have some adverse effect on its sales and earnings in second half 2020.

Although the Company has not yet experienced any significant disruptions to ~~this VEBA in~~its business, the ~~range of $10,000 to $15,000 in fourth quarter 2017. This contribution would~~Covid-19 pandemic could also result in the ~~prepayment~~following:

●

Disruption to supply chain resulting in the unavailability or untimely delivery of raw materials and supplies as well as key services by third parties for the manufacture and distribution of products.

●

Disruption to manufacturing due to plant closures which could result in a lack of labor and supervision because of employee Covid-19 positive tests or related quarantine of employees, excessive sickness, fears or unwillingness of employees to come to work, union demands and resistance to work, or closures mandated by local, state or federal governmental authorities.

●

Disruption to shipping and delivery of inventory, supplies and products to distribution centers and customers where third-party carriers are used.

●

Changes in consumer attitudes and participation in key holidays and seasonal events, including Halloween which has historically comprised approximately 50% of third quarter sales.

●

Deteriorating economic conditions, which are discussed in the Company Risk Factors on Form 10-K for the year ended December 31, 2019, including high unemployment, declining consumer confidence and spending, and effects of lower GDP, any of which could change the demand for one or more of our products.

Table of ~~these employee benefits.~~Contents

The safety of our employees is our highest priority and therefore the Company has taken many steps to provide our employees with a safe and healthy work environment, including increased sanitation, social distancing measures at all Company locations, having office employees work remotely, curtailing visitors at Company locations, and limiting all airline and other travel by employees. Because the Company has a sizable investment in marketable securities (see Liquidity and Capital Resources section above) it is well positioned financially to respond to the adverse effects of this pandemic in the short-term, as well as for a longer period of time if necessary.

~~ACCOUNTING~~

ACCOUNTING PRONOUNCEMENTS

See Note 1 of the Company’s ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

~~RISK FACTORS~~

~~There were no material changes to the risk factors disclosed in the Company’s 2016 Form 10-K.~~

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,” “plan” 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.”~~Factors” in this report and under the heading “Risk Factors” in the Company’s 2019 Form 10-K.

The risk factors identified and referred to above, including the effects of the Covid-19 pandemic, 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.

~~statements.~~

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to various market risks, including fluctuations in and sufficient availability of sugar, corn syrup, edible oils, including palm oils, cocoa, dextrose, milk and whey, and gum-base input ingredients and packaging, and fuel costs principally relating to freight and delivery fuel surcharges. 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 is exposed to exchange rate fluctuations in Mexico, Canada, and Spain where its subsidiaries sell products in their local currencies. The Company invests in securities with maturities dates of up to approximately three years which are generally held to maturity, and variable rate demand notes where interest rates are generally reset weekly, all of which limits the Company’s exposure to interest rate fluctuations. There have been no material changes in the Company’s market risks that would significantly affect the disclosures made in the Form 10-K for the year ended December 31, ~~2016.~~ 2019.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of ~~management,~~Management, the Chief Executive Officer and Chief Financial Officer of the Company have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of ~~September 30, 2017~~March 31, 2020 and, based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and

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procedures are also designed to ensure that information is accumulated and communicated to ~~management,~~Management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended ~~September 30, 2017~~March 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information on legal proceedings is included in Note 12to the Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

The following additional risk factor relates to the Covid-19 pandemic and should be read in conjunction with the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” of our 2019 Annual Report on Form 10-K (the "2019 Form 10-K") filed with the SEC. The developments described in this additional risk factor have been expanded upon, and in some cases heightened certain of the risks disclosed in the risk factor section of our 2019 Form 10-K. Except as described herein, the Company is not aware of any material changes with respect to the risk factors disclosed in our 2019 Form 10-K.

Supplemental Risk Factor

Our financial results may be negatively impacted by changes in confectionary trade practices and consumer patterns, operational challenges associated with the actual or perceived effects of a disease or pandemic outbreak, and public health concerns such as the Covid-19 pandemic.

Our business and financial results are impacted by consumer spending levels, impulse purchases, shopping habits and behaviors, consumer activities, events and traditions where confectionary products are consumed, the availability of our products at retail, including at large retail customers, and our ability to manufacture and distribute products to our customers and consumers in an effective and efficient manner. The fear of exposure or actual effects of a disease, such as the Covid-19 pandemic, could negatively impact our overall business and financial results. Specific factors that may impact our operations, some of which have had an unfavorable impact on our operations as a result of Covid-19, include, but are not limited to:

●

Significant reductions in demand for one or more of our products - Changes in demand may be caused by, among other things, the temporary inability of consumers to purchase our products due to illness, quarantine, travel restrictions, financial hardship, “shelter in place” directives, or overall fear to return to past behaviors. Shifts in demand for one or more of our products, changes in trade and distribution patterns, or changes in consumer buying habits, if prolonged, could negatively impact our results.

●

The inability to meet our customers’ needs and achieve efficient production of finished products - Disruptions in our manufacturing operations or supply arrangements caused by the loss or disruption of essential manufacturing materials, supplies and services, transportation resources, workforce availability, or other manufacturing and distribution capability could have significant adverse effects on our business and financial results.

●

Significant adverse changes in the political conditions and government mandates or directives - In markets in which we manufacture, sell or distribute our products, governmental or regulatory actions, closures or other restrictions such as quarantine or travel restrictions, that limit or close our manufacturing, distribution or office facilities, or otherwise prevent our third-party suppliers, sales brokers, or customers from achieving the level of operations necessary for the production, distribution, sale, and support of our products, could negatively impact our results.

●

Risk related to Halloween and other seasonal sales - The Company’s sales are highest during the Halloween season which has historically comprised approximately 50% of third quarter sales. Changes in consumer behavior, traditions, behaviors, and interest in Halloween activities and events, or changes mandated or recommended by government or health officials, as well as negative media coverage, could significantly affect the Company’s seasonal sales.

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●

Risk of impairment of goodwill or indefinite-lived intangible assets - Significant changes in product demand could adversely affect our long-term sales and cash flows of certain products and brands, and their related trademarks, which could result in an impairment and write-down of certain trademarks or other indefinite lived intangibles. Other long-lived assets are likewise tested for impairment upon the occurrence of a triggering event, which could also result in a write-down.

●

Risks relating to increase in unfunded liability in multi-employer pension plan and effects on the Company withdrawal liability - The Company participates in a multi-employer pension plan (Plan) which is currently in “critical and declining status”, as defined by applicable law, and the Company is subject to a significant withdrawal liability (see also Note 7 of the Company’s Notes to Consolidated Financial Statements and Management’s Discussion and Analysis). If recent declines in the equity markets are sustained, the adverse effects on the Plan’s investments would likely increase the Plan’s unfunded status and the Company’s withdrawal liability. In addition, other adverse effects, such as increases in participating employer withdrawals from the Plan, would also likely increase the Company’s withdrawal liability.

With respect to the Covid-19 pandemic, the situation remains fluid and could possibly result in additional material adverse effects on the Company and its financial results. The Company's efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts depends on many factors beyond our control, including the duration and severity the Covid-19 pandemic, as well as actions taken to contain its spread and mitigate public health effects.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes the Company’s purchases of its common stock during the quarter ended ~~September 30, 2017:~~March 31, 2020:



					Approximate Dollar
	(a) Total			Shares	Value of Shares that
	Number of	(b) Average		Purchased as Part of	May Yet Be Purchased
	Shares	Price Paid per		Publicly Announced Plans	Under the Plans
Period	Purchased	Share		Or Programs	or Programs

Jan 1 to Jan 31	30,610	$	34.27	Not Applicable	Not Applicable

Feb 1 to Feb 29	74,842		34.31	Not Applicable	Not Applicable

Mar 1 to Mar 31	154,846		33.47	Not Applicable	Not Applicable

Total	260,298	$	33.80	Not Applicable	Not Applicable

Approximate Dollar

(a) Total

Shares

Value of Shares that

Number of

(b) Average

Purchased as Part of

May Yet Be Purchased

Shares

Price Paid per

Publicly Announced Plans

Under the Plans
Period

Purchased

Share

Or Programs

or Programs

Jul 1 to Jul 31

116,012

$
35.78

Not Applicable

Not Applicable

Aug 1 to Aug 31

156,575

36.56

Not Applicable

Not Applicable

Sep 1 to Sep 30

-

-

Not Applicable

Not Applicable

Total

272,587

$
36.23

Not Applicable

Not Applicable

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

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ITEM 6. EXHIBITS

Exhibits 31.1 — Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibits 31.2 — Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32 — Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101.INS - XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH - XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.LAB - XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document.

Exhibit 101.DEF - XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 104 - Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		TOOTSIE ROLL INDUSTRIES, INC.

Date:	~~November 7, 2017~~May 8, 2020	BY:	/S/ELLEN R. GORDON
			Ellen R. Gordon
			Chairman and Chief
			Executive Officer

Date:	~~November 7, 2017~~May 8, 2020	BY:	/S/G. HOWARD EMBER, JR.
			G. Howard Ember, Jr.
			Vice President Finance and
			Chief Financial Officer

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