On this page of StockholderLetter.com we present the 4/13/2023 shareholder letter from TOOTSIE ROLL INDUSTRIES INC — ticker symbol TR. Reading current and past TR letters to shareholders can bring important insights into the investment thesis.
2022
Corporate Profile Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of confectionery products for over 125 years. Our products are primarily sold under the familiar brand names: Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child s Play, Charms, Blow Pop, Blue Razz, Cella s chocolate covered cherries, Dots, Crows, Junior Mints, Junior Caramels, Charleston Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff cotton candy, Dubble Bubble, Razzles, Cry Baby, Nik-L-Nip and Tutsi (Mexico). Corporate Principles We believe that the differences among companies are attributable to the caliber of their people, and therefore we strive to attract and retain superior people for each job. We believe that an open family atmosphere at work combined with professional management fosters cooperation and enables each individual to maximize his or her contribution to the Company and realize the corresponding rewards. We do not jeopardize long-term growth for immediate, short-term results. We maintain a conservative financial posture in the deployment and management of our assets. We invest in the latest and most productive equipment to deliver the best quality product to our customers at the lowest cost. We seek to outsource functions where appropriate and to vertically integrate operations where it is financially advantageous to do so. We view our well known brands as prized assets to be aggressively advertised and promoted to each new generation of consumers. We conduct business with the highest ethical standards and integrity which are codified in the Company s Code of Business Conduct and Ethics. We run a trim operation and continually strive to eliminate waste, minimize cost and implement performance improvements. Financial Highlights December 31, 2022 2021 (in thousands except per share data) Net Product Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Earnings Attributable to Tootsie Roll Industries, Inc. . . . . . . . . . . . . . . . . . Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average Shares Outstanding* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Per Share Items Net Earnings Attributable to Tootsie Roll Industries, Inc.* . . . . . . . . . . . . . . . . Cash Dividends Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *Adjusted for stock dividends. $681,440 75,937 218,894 212,043 783,171 68,827 $566,043 65,326 188,333 208,906 769,042 69,438 $1.10 0.36 $0.94 0.36
To Our Shareholders (OOHQ 5 *RUGRQ &KDLUPDQ DQG &KLHI ([HFXWLYH 2 FHU Net product sales in 2022 advanced to $681 million. This was a record for the Company and represented an increase of $115 million or 20% over 2021 sales of $566 million. Sales growth was driven by an overall increase in demand for our core brands and by higher price realization. With the waning of the pandemic, customer orders and sales increased throughout the year. Many of our products are popular at sharing or give-a-way occasions which seem to have returned to pre-pandemic levels as consumers largely resumed normal activities. The most important of these give-a-way occasions for the Company is Halloween and we had another strong selling associated with this festive holiday. Net earnings in 2022 were $75.9 million compared to $65.3 million in 2021, an increase of 16%. Earnings per share were $1.10 compared to $0.94 in the prior year. These favorable increases were the result of strong sales growth. However, we also encountered increased costs for ingredients, packaging materials, certain manufacturing supplies, and energy which included fuel surcharges. As is customary in the candy industry, we pay freight on the inputs we receive as well as for delivery of our products to customers, so fuel surcharges are a direct headwind to the bottom line. /ike many companies, our e ciency was adversely a ected throughout 2022 by recurring supply chain challenges. These resulted in much longer lead times and critical shortages of key inputs which, in turn, necessitated shorter runs and more frequent changeovers in order to maintain service levels to our customers. Also, increases in production volume to meet the increased demand for our products exceeded the volume of our annual purchasing contracts for certain commodities. These commodities were then procured in the spot market at substantially higher prices. This action was instrumental in sustaining distribution of our products in the market place, and was well worth the extra cost.
Cost pressures of one sort or another are a constant challenge. We always endeavor to keep our operations lean so that we can deliver maximum value to our consumers and our shareholders. We are mindful that a key objective for our venerable brands is to maintain their value orientation. In order to achieve this goal we strive to mitigate costs and maximize e ciency wherever possible without jeopardizing the long term strength of the Company and its brands. We deem it essential to be a low cost producer and one of the ways we work toward this goal is by actively pursuing investments in the latest equipment and technology to maintain our advantage. Capital expenditures were $23 million in 2022. The Company is continuing its investments in manufacturing operations to meet evolving customer and consumer demands, achieve quality improvements and increase operational e ciencies. In particular, during 2022 new high-speed production and packaging equipment was added in a number of our plants and several important infrastructure projects were completed. Other highlights of 2022 include: Cash dividends were paid to shareholders for the eightieth consecutive year. Our cash dividends in 2022 totaled $0.36 per share. Our fty-eighth consecutive annual 3% stock dividend was distributed. 817,805 shares of our common stock were repurchased in the open market. The above actions were accomplished using internally generated funds. We ended 2022 with $318 million of cash and investments, net of interest bearing debt and excluding investments that hedge deferred compensation liabilities. These solid nancial resources enable the Company to continue to reinvest in operating assets, promote our brands, develop new products and line extensions, distribute cash dividends, repurchase Company stock and seek business acquisition opportunities. We are continuously active in each of these important aspects of our business. 2022 marked the 100th anniversary of our stock being listed on the New <ork Stock Exchange. This listing, rst recorded under the original company name Sweets Company of America, ranks us as the 29th longest listed company on the NYSE and the longest listed candy company. We believe that this milestone gives testament to the wisdom of the principles enumerated on the inside cover page of this report. They have guided the Company for many years. For example, we have always maintained a conservative nancial posture and have taken a long term perspective toward our business and the care of our brands. These principles have served the Company and its shareholders well and we remain committed to them.
Candy is sold in virtually every retail trade channel and we face intense competition in our industry. Consumers can choose from a broad array of appealing product o erings and the trade is highly selective in the items they carry. The market is also uid as pack sizes, product presentations and assortments continually evolve to meet the changing preferences of the trade and of our consumers. The Company s iconic brands have been successful for many years. Our goal is to keep them pure and satisfying to the many longterm consumers who know and enjoy them, yet tailor them in response to shifting market conditions and to attract new generations of consumers. Halloween is traditionally the largest selling season for us and this was the case again in 2022. Sales during this important season were driven by promotions targeted to our most signi cant classes of trade including mass merchandisers, drug chains, warehouse clubs, grocery stores and dollar stores. Packaged goods have remained highly successful in these channels, including mixed assortments of our most popular items. Favorites such as Tootsie Rolls, Tootsie Pops and Blow Pops are o ered in a variety of pack sizes designed to meet consumer needs ranging from pantry to party. Smaller bags index higher with smaller, budget conscious households and are most suitable for personal consumption. /arger stand-up pouch style bags o er superior value and appeal more to larger households. They are optimal for family occasions, sharing, such as candy bowls or other give-aways, and social occasions. These larger pack sizes were on trend in 2022 as consumers returned to more normal activities including larger gatherings, parties or other festivities where our products are often enjoyed. There were several new product introductions in 2022. For instance, the fall theme inherent in our popular Caramel Apple Pops was extended to the Tootsie Roll line with the addition of Tootsie Roll Harvest Chews. This assortment of savory fall avors includes sweet cinnamon, pumpkin spice, candy corn and, of course, caramel apple. These unique avors, along with fall-themed graphics, evoke the warm, nostalgic feelings associated with the harvest season. Many new items or new avor assortments that we introduce have a lifecycle of a few years. Others, such as our Caramel Apple Pops, catch on and become core brands for the Company. In either case, appropriate new items and line extensions generate interest from both the trade and from consumers and also serve to complement our well established assortment of popular brands. We continue to use our voice on social media to reach our consumers on many platforms. These include Facebook, Twitter, Instagram, Pinterest, YouTube and most recently TikTok. This allows us to reach across generations with a more personalized message. We continue to strengthen our social media strategy by engaging with our fans through
 • shareholder letter icon 4/13/2023 Letter Continued (Full PDF)
 • stockholder letter icon 3/25/2024 TR Stockholder Letter
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 • Benford's Law Stocks icon TR Benford's Law Stock Score = 82


TR 4/13/2023 Shareholder/Stockholder Letter Transcript:

2022

Corporate Profile
Tootsie Roll Industries, Inc. has been engaged in the
manufacture and sale of confectionery products for
over 125 years. Our products are primarily sold under
the familiar brand names: Tootsie Roll, Tootsie Roll Pops,
Caramel Apple Pops, Child   s Play, Charms, Blow Pop,
Blue Razz, Cella   s chocolate covered cherries, Dots,
Crows, Junior Mints, Junior Caramels, Charleston
Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff
cotton candy, Dubble Bubble, Razzles, Cry Baby,
Nik-L-Nip and Tutsi (Mexico).
Corporate Principles
We believe that the differences among companies are
attributable to the caliber of their people, and therefore
we strive to attract and retain superior people for each
job.
We believe that an open family atmosphere at work
combined with professional management fosters
cooperation and enables each individual to maximize
his or her contribution to the Company and realize the
corresponding rewards.
We do not jeopardize long-term growth for immediate,
short-term results.
We maintain a conservative financial posture in the
deployment and management of our assets.
We invest in the latest and most productive equipment
to deliver the best quality product to our customers at
the lowest cost.
We seek to outsource functions where appropriate and
to vertically integrate operations where it is financially
advantageous to do so.
We view our well known brands as prized assets to be
aggressively advertised and promoted to each new
generation of consumers.
We conduct business with the highest ethical
standards and integrity which are codified in the
Company   s    Code of Business Conduct and Ethics.   
We run a trim operation and continually strive to
eliminate waste, minimize cost and implement
performance improvements.
Financial Highlights
December 31,
2022
2021
(in thousands except per share data)
Net Product Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Earnings Attributable to Tootsie Roll Industries, Inc. . . . . . . . . . . . . . . . . .
Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders    Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average Shares Outstanding* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per Share Items
Net Earnings Attributable to Tootsie Roll Industries, Inc.* . . . . . . . . . . . . . . . .
Cash Dividends Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*Adjusted for stock dividends.
$681,440
75,937
218,894
212,043
783,171
68,827
$566,043
65,326
188,333
208,906
769,042
69,438
$1.10
0.36
$0.94
0.36

To Our
Shareholders
(OOHQ 5  *RUGRQ  &KDLUPDQ DQG &KLHI ([HFXWLYH 2   FHU
Net product sales in 2022 advanced to $681 million. This was a record for the
Company and represented an increase of $115 million or 20% over 2021 sales of
$566 million. Sales growth was driven by an overall increase in demand for our
core brands and by higher price realization. With the waning of the pandemic,
customer orders and sales increased throughout the year. Many of our products
are popular at sharing or    give-a-way    occasions which seem to have returned to
pre-pandemic levels as consumers largely resumed normal activities. The most
important of these    give-a-way    occasions for the Company is Halloween and we
had another strong selling associated with this festive holiday.
Net earnings in 2022 were $75.9 million compared to $65.3 million in 2021, an
increase of 16%. Earnings per share were $1.10 compared to $0.94 in the prior
year. These favorable increases were the result of strong sales growth. However,
we also encountered increased costs for ingredients, packaging materials, certain
manufacturing supplies, and energy which included fuel surcharges. As is customary in the candy industry, we pay freight on the inputs we receive as well as for
delivery of our products to customers, so fuel surcharges are a direct headwind to
the bottom line.
/ike many companies, our e   ciency was adversely a   ected throughout 2022 by
recurring supply chain challenges. These resulted in much longer lead times and
critical shortages of key inputs which, in turn, necessitated shorter runs and more
frequent changeovers in order to maintain service levels to our customers. Also,
increases in production volume to meet the increased demand for our products
exceeded the volume of our annual purchasing contracts for certain commodities.
These commodities were then procured in the spot market at substantially higher
prices. This action was instrumental in sustaining distribution of our products in the
market place, and was well worth the extra cost.

Cost pressures of one sort or another are a constant challenge. We always endeavor to keep our operations lean so
that we can deliver maximum value to our consumers and
our shareholders. We are mindful that a key objective for
our venerable brands is to maintain their value orientation.
In order to achieve this goal we strive to mitigate costs and
maximize e   ciency wherever possible without jeopardizing
the long term strength of the Company and its brands. We
deem it essential to be a low cost producer and one of the
ways we work toward this goal is by actively pursuing investments in the latest equipment and technology to maintain
our advantage.
Capital expenditures were $23 million in 2022. The Company is continuing its investments in manufacturing operations
to meet evolving customer and consumer demands, achieve
quality improvements and increase operational e   ciencies.
In particular, during 2022 new high-speed production and
packaging equipment was added in a number of our plants
and several important infrastructure projects were completed.
Other highlights of 2022 include:
    Cash dividends were paid to shareholders for the eightieth
consecutive year.
    Our cash dividends in 2022 totaled $0.36 per share.
    Our   fty-eighth consecutive annual 3% stock dividend was
distributed.
    817,805 shares of our common stock were repurchased in
the open market.
The above actions were accomplished using internally
generated funds. We ended 2022 with $318 million of cash
and investments, net of interest bearing debt and excluding
investments that hedge deferred compensation liabilities.
These solid   nancial resources enable the Company to continue to reinvest in operating assets, promote our brands,
develop new products and line extensions, distribute cash
dividends, repurchase Company stock and seek business
acquisition opportunities. We are continuously active in
each of these important aspects of our business.
2022 marked the 100th anniversary of our stock being listed
on the New 

shareholder letter icon 4/13/2023 Letter Continued (Full PDF)
 

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