Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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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, 2025 (the "2025 Form 10-K").

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Net product sales were $227,163 in third quarter 2026 compared to $230,614 in third quarter 2025, a decrease of $3,451 or 1.5%. Nine months 2026 net product sales were $528,594 compared to $530,325 in nine months 2025, a decrease of $1,731 or 0.3%. Domestic (U.S.) net product sales in third quarter and nine months 2026 decreased by 2.2% and 0.8% compared to the corresponding period in the prior year; and foreign net product sales, including exports to foreign markets, increased 7.3% and 5.1%, respectively, compared to the corresponding periods in the prior year. For the third quarter and nine months 2026, domestic sales represented 91.6% and 92.1%, respectively, of total consolidated net product sales. Third quarter and nine months 2026 were adversely impacted by the timing of sales, including seasonal Halloween sales, between third and fourth quarter 2026 when compared to the prior year's corresponding quarterly periods. We are focused on the long term and have continued to support our brands with increased trade promotions, as well as advertising, in the third quarter and nine months 2026. Because trade promotions are accounted for as a reduction in reported net sales, these higher levels of trade promotions had some adverse effects on our reported net sales for third quarter and nine months 2026.

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Product cost of goods sold was $155,180 in third quarter 2026 compared to $152,741 in third quarter 2025, and $355,867 in nine months 2026 compared to $346,368 in nine months 2025. Product cost of goods sold includes $1 and $315 of certain deferred compensation expenses in third quarter 2026 and 2025, respectively, and $474 and $627 of certain deferred compensation expenses in nine months 2026 and 2025, respectively. These deferred compensation expenses principally resulted 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. Excluding the adjustment for deferred compensation expenses, product cost of goods sold increased from $152,426 in third quarter 2025 to $155,179 in third quarter 2026, an increase of $2,753 or 1.8%; and increased from $345,741 in nine months 2025 to $355,393 in nine months 2026, an increase of $9,652 or 2.8%. As a percentage of net product sales, adjusted product cost of goods sold was 68.3% and 66.1% in third quarter 2026 and 2025, respectively, an increase of 2.2 percentage points; and 67.2% and 65.2% in nine months 2026 and 2025, respectively, an increase of 2.0 percentage points. Third quarter and nine months 2026 product cost of goods sold and gross profit margins were adversely affected by higher unit costs for ingredients, primarily cocoa and chocolate, and packaging materials. However, our cocoa and chocolate unit costs were more favorable in third quarter 2026 compared to first half 2026 and we expect this to continue in fourth quarter 2026. Cocoa commodities markets have retreated from their extraordinarily high price levels in 2025 but remain well above historical levels. Higher energy costs have driven increases in unit costs for resin-based packaging materials which contributed to higher packaging costs primarily beginning in third quarter 2026. Increased costs, including the effects of inflation, for plant labor and benefits, maintenance, and supplies, also had an adverse effect on margins in third quarter and nine months 2026 compared to the corresponding periods in the prior year.

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The Company uses the Last-In-First-Out (LIFO) method of accounting for inventory and costs of goods sold which generally results in lower current net earnings during such periods of increasing costs and higher inflation. Under the LIFO method, the most current costs are charged to cost of goods sold thereby accelerating the realization of higher costs during such periods of rising costs. As the Company moves its product portfolio from synthetic colors to natural colors beginning in 2027, the related higher costs of these inputs will be realized earlier given that the most current costs are charged to cost of goods sold under the LIFO method. Although the Company continues to monitor its input costs, we are mindful of the effects and limits when passing on the above-discussed higher input costs to our customers as well as to the final consumers of our products.

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Selling, marketing and administrative expenses were $48,707 in third quarter 2026 compared to $47,031 in third quarter 2025; and $131,035 in nine months 2026 compared to $120,783 in nine months 2025. Selling, marketing and administrative expenses include $12 and $7,019 of certain deferred compensation expenses in third quarter 2026

and 2025, respectively, and $10,055 and $13,963 of certain deferred compensation expenses in nine months 2026 and 2025, respectively. As discussed above, these expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Excluding the adjustment for deferred compensation expenses, selling, marketing and administrative expenses increased from $40,012 in third quarter 2025 to $48,695 in third quarter 2026, an increase of $8,683 or 21.7%; and increased from $106,820 in nine months 2025 to $120,980 in nine months 2026, an increase of $14,160 or 13.3%. As a percentage of net product sales, adjusted selling, marketing and administrative expenses increased from 17.4% in third quarter 2025 to 21.4% in third quarter 2026, an unfavorable change of 4.0 percentage points; and from 20.1% in nine months 2025 to 22.9% in nine months 2026, an unfavorable change of 2.8 percentage points. These higher expenses as a percentage of sales principally reflect higher freight and delivery, advertising and marketing expenses as well as the adverse effects of higher wages, salaries, and benefits, and certain other expenses. Many of our selling, marketing and administrative expenses are fixed and increase with wage and other inflationary increases and do not change significantly with changes in sales. In addition, during third quarter and nine months 2026 the Company recognized approximately $1,300 and $2,500 of acquisition-related expenses as required under accounting guidance, which had an adverse effect on 2026 results when compared to the corresponding periods in 2025.

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The Company is continuing its higher support levels of its brands this year with increased advertising as well as higher trade promotions as discussed above. The Company's advertising was significantly increased and concentrated in the third quarter this year. As a result, third quarter and nine months 2026 reflect significantly higher advertising expense compared to the corresponding periods in the prior year. As disclosed in Note 1 of the Condensed Consolidated Financial Statements, advertising expenses included in selling, marketing, and administrative expenses were $5,078 and $1,931 in third quarter 2026 and 2025, respectively; and $8,116 and $4,054 in nine months 2026 and 2025, respectively.

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Selling, marketing and administrative expenses include $19,659 and $15,434 for customer freight, delivery and warehousing expenses in third quarter 2026 and 2025, respectively, an increase of $4,225 or 27.4%; and $48,619 and $42,397 in nine months 2026 and 2025, respectively, an increase of $6,222 or 14.7%. These expenses were 8.7% and 6.7% of net product sales in third quarter 2026 and 2025, respectively; and 9.2% and 8.0% of net product sales in nine months 2026 and 2025, respectively. During third quarter and nine months 2026, elevated energy costs contributed to significant increases in freight and delivery expenses, reflecting higher fuel surcharges driven by the increase in the cost of diesel fuel. This cost increase accelerated in third quarter 2026 and we expect freight and delivery costs to remain elevated through fourth quarter 2026 and likely into 2027.

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Earnings (losses) from operations were $24,703 in third quarter 2026 compared to $32,367 in third quarter 2025; and were $46,299 in nine months 2026 compared to $67,548 in nine months 2025. Earnings from operations include $13 and $7,334 of certain deferred compensation expenses in third quarter 2026 and 2025, respectively; and include $10,529 and $14,590 of certain deferred compensation expenses in nine months 2026 and 2025, respectively, which are discussed above. Adjusting for these deferred compensation expenses, adjusted earnings from operations were $24,716 and $39,701 in third quarter 2026 and 2025, respectively, a decrease of $14,985 or 37.7%; and $56,828 and $82,138 in nine months 2026 and 2025, respectively, a decrease of $25,310 or 30.8%. As a percentage of net product sales, these adjusted operating earnings were 10.9% and 17.2% in third quarter 2026 and 2025, respectively, an unfavorable 6.3 percentage point change; and 10.8% and 15.5% in nine months 2026 and 2025, respectively, an unfavorable 4.7 percentage point change. As discussed above, higher costs and expenses contributed to the decrease in adjusted operating earnings in third quarter and nine months 2026 when compared to the corresponding periods in the prior year.

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Other income, net was $6,455 in third quarter 2026 compared to $16,233 in third quarter 2025; and $26,625 in nine months 2026 compared to $30,254 in nine months 2025. Other income, net also includes net gains and investment income of $13 and $7,334 for third quarter 2026 and 2025, respectively, and $10,529 and $14,590 in nine months 2026 and 2025, respectively, on trading securities which provide an economic hedge of the Company's deferred compensation liabilities. The changes in net investment activity on trading securities in third quarter and nine months 2026 and 2025 reflect the overall changes in the equity markets during these periods. These changes 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.

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Management believes the comparisons presented in the preceding paragraphs, after adjusting for changes in deferred compensation, are useful to our investors and other users of our financial information in assessing the operations of the Company.

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Other income, net includes investment income from available for sale securities and cash equivalents of $3,863 and $8,614 for third quarter 2026 and 2025, respectively; and $14,359 and $15,560 in nine months 2026 and 2025, respectively. The prior year third quarter and nine months 2025 includes a favorable cumulative adjustment to record bond accretion not previously reported on certain bonds purchased at a discount. As a result, third quarter and nine months 2026 had lower reported investment income on available for sale securities compared to the corresponding periods in the prior year. In addition, other income, net also includes pre-tax gains (losses) on foreign exchange of $566 and $91 in third quarter 2026 and 2025, respectively, and $(94) and $(1,297) in nine months 2026 and 2025, respectively. Also, the Company collected and realized $1,800 in tariff refund recoveries in third quarter and nine months 2026.

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The Company's effective income tax rates were 25.6% and 26.7% in third quarter 2026 and 2025, respectively, and 25.8% and 27.2% in nine months 2026 and 2025, respectively. The changes in the effective tax rates in the comparative periods principally reflect the effects of changes in certain deferred income taxes relating to deferred compensation that will not be deductible for income taxes when paid in future periods. The Company is currently under audit for its federal income tax returns for 2022 to 2024 calendar years. The Company has not been advised of any proposed audit adjustments that would be material.

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Net earnings attributable to Tootsie Roll Industries, Inc. were $23,216 (after $25 net loss attributed to non-controlling interests) in third quarter 2026 compared to $35,659 (after $12 net loss attributed to non-controlling interests) in third quarter 2025, and earnings per share were $0.31 and $0.48 in third quarter 2026 and 2025, respectively, a decrease of $0.17 per share, or 35.4%. Nine months 2026 net earnings attributable to Tootsie Roll Industries, Inc. were $54,224 (after $81 net loss attributed to non-controlling interests) compared to nine months 2025 net earnings of $71,261 (after $43 net loss attributed to non-controlling interests), and net earnings per share were $0.72 and $0.95 in nine months 2026 and nine months 2025, respectively, a decrease of $0.23 per share or 24.2%. Earnings per share attributable to Tootsie Roll Industries, Inc. for third quarter and nine months 2026 benefited from the reduction in average shares outstanding resulting from purchases in the open market by the Company of its common stock during the preceding twelve months. Average shares outstanding decreased from 75,060 at third quarter 2025 to 74,806 at third quarter 2026, and from 75,091 in nine months 2025 to 74,959 in nine months 2026.

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Goodwill and intangibles, principally trademarks, 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 events, as defined, or other adverse information that would indicate a material impairment of its goodwill or intangibles in third quarter or nine months 2026. Although management has not identified any triggering events at this time relating to its intangibles, factors outlined in the Company's risk factors discussed on Form 10-K for the year ended December 31, 2025 or as discussed in previous Form 10-Qs filed during 2026, could change this assessment in the future.

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As outlined in Note 2 of the Company's Condensed Consolidated Financial Statements, on September 1, 2026, the Company acquired a confectionery business principally comprising the Winis brand whose products are manufactured and sold in Mexico. Management believes that this product line will be complementary to the Company's existing Mexican subsidiary's confectionery business which manufactures and sells products under the Tutsi brand. The sales and operating results of this acquisition were not material to the reported consolidated sales and operating results for the third quarter and nine months 2026. During third quarter and nine months 2026, the Company recognized approximately $1,300 and $2,500, respectively, of acquisition-related expenses which are included in selling, marketing and administrative expenses. The recognition of these expenses had an adverse effect on 2026 reported results when compared to the prior year corresponding periods.

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Beginning in 2012, the Company has received periodic notices from the Bakery and Confectionery Union and Industry International Pension Fund (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", 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. Beginning in 2015, 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 expected to become insolvent in 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 2024, prior to receipt of Special Financial Assistance, have continued to classify the Plan in the "critical and declining status" category. In 2024 the Plan received Special Financial Assistance of $3.4 billion. As required by federal law, the Plan is certified to be in "critical status" for plan year 2026 and will be in this status until the plan year ending in 2051 as a result of the Special Financial Assistance received.

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Based on these updated notices, the Plan's funded percentage (plan investment assets as a percentage of plan liabilities as reported), as defined, were 41.0%, 45.2%, and 47.0% as of January 1, 2025, 2024, and 2023, respectively (these valuation dates are as of the beginning of each Plan year and reflect the most recent information available). These funded percentages are based on actuarial values, as defined, and do not reflect the Special Financial Assistance or the actual market value of Plan investments as of these dates. If the market value of investments had been used as of January 1, 2025, including the Special Financial Assistance, the funded percentage would be 81.2% (not 41.0%).

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The Company has been advised that its withdrawal liability would have been $102,800, $97,500 and $102,200 if it had withdrawn from the Plan during 2025, 2024 and 2023, respectively (most recent information provided by the Plan). The most recent increase in the withdrawal liability as advised by the Plan was primarily due to the full present value of vested benefits being valued at the PBGC interest rates, as required for plans that receive Special Financial Assistance, rather than a blended interest rate assumption used in previous years. After receiving the Special Financial Assistance, the Plan was required to use PBGC interest rates to value all, instead of a portion, of the present value of vested benefits to provide an estimate of the Company's withdrawal liability. The net impact of the interest rate assumption change was a decrease in the effective interest rate, which resulted in a higher vested Plan benefit liability. In addition, for withdrawal liability purposes, PBGC regulations require the Special Financial Assistance to be phased-in over a period of time instead of fully recognized immediately.

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Based on the Company's most recent actuarial estimates using the information provided by the Plan with respect to its 2025 withdrawal liability (based on most recent information provided to the Company) and certain provisions in ERISA and laws relating to withdrawal liability payments, management believes that the Company's liability had the Company withdrawn in 2025 would likely be limited to twenty annual payments of $2,706 which have a present value in the range of $32,904 to $35,413 depending on the interest rate used to discount these payments. While the Company's actuarial consultant does not anticipate that the Plan will incur 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 same actuarial estimates, had a mass withdrawal occurred in 2025, the present value of such perpetuities is in the range of $47,812 to $56,833 and would apply in the unlikely event that substantially all employers withdraw from the Plan. The aforementioned is based on a range of interest rates which 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.

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The Company's pension expense for this Plan for nine months 2026 and 2025 was $2,647 and $2,572, respectively. The aforementioned expense includes surcharges of $933 and $907 for nine months 2026 and 2025, respectively, as required under the amended plan of rehabilitation. The Company's twelve months pension expense for this Plan for 2025 and 2024 was $3,290 and $3,332 respectively, which includes surcharges of $1,160 and $1,174, respectively.

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The Plan advised the Company that it was granted approximately $3.4 billion in Special Financial Assistance funds and received those funds in 2024. According to the Company's actuary, it remains unclear if the Plan can remain solvent through the targeted date of 2051, although as a requirement of the American Rescue Plan Act of 2021, the Plan must remain in "critical status" through 2051 regardless of solvency. The regulations under the aforementioned PBGC financial assistance could result in a higher withdrawal liability even with PBGC financial assistance since those regulations require use of settlement interest rates to value all, instead of a portion, of the present value of vested benefits in determining the Company's withdrawal liability. In addition, for withdrawal liability purposes, PBGC regulations require the Special Financial Assistance to be phased-in over a period of time instead of fully recognized immediately. While it is uncertain how the requirements imposed by the Special Financial Assistance will impact the Company's withdrawal liability in the future, the Company's actuary believes any withdrawal will likely continue to

be limited to the twenty annual payments previously discussed and that those payments will not be affected by Special Financial Assistance regulation.

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Under terms of the Company's current union contract the Company is obligated to continue its participation in the Plan through expiration in September 2027. The Company is 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 could have a material adverse effect on the Company's consolidated results of operations or cash flows in one or more future periods. See also Note 7 of the Company's Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, 2025.

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Our operations and sales are principally in North America, and our cross border transactions with Canada and Mexico qualify under the USMCA free-trade agreement. Certain ingredients, including cocoa, chocolate and edible oils, as well as some packaging and other purchases, do have foreign origins outside of USMCA and the related higher tariffs on these purchases added to our costs in 2025 and early 2026. Tariffs on cocoa and palm oil were rescinded during fourth quarter 2025 and third quarter 2026, respectively, which will reduce the annualized impact of these tariffs as the ingredients work their way through our supply chain. We estimated that the incremental cost of tariffs, including those paid directly by our suppliers and passed on to us, negatively impacted our business in 2025 by $3,700 between when they were implemented in second quarter 2025 and the end of 2025. We estimate that the impact on the full year 2026 will also be approximately $3,700. In February 2026, the Supreme Court of the United States issued a ruling that stated the International Emergency Economic Powers Act (IEEPA) does not authorize the imposition of tariffs that were imposed by the President in 2025. In third quarter 2026 the Company collected $1,800 in tariffs previously paid both directly by the Company and indirectly to its suppliers. The Company records any refund benefits when such funds are received.

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The Company is focused on the longer term and therefore is continuing to support our brands with higher levels of advertising and trade promotions. We are also continuing to make investments in plant manufacturing operations to meet new customer and consumer product demands, achieve product quality improvements, expand capacity in certain product lines, and increase operational efficiencies in order to provide genuine value to consumers.

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LIQUIDITY AND CAPITAL RESOURCES

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Net cash flows provided by operating activities were $24,701 and $57,288 in nine months 2026 and 2025, respectively, a decrease of $32,587. The decrease in cash flows from operating activities principally reflects the $17,075 decline in net earnings as discussed above, and the changes in accounts receivable and income taxes payable in the comparative periods. The change in accounts receivable principally results from the timing of sales and collections in the comparative periods; and the change in income taxes payable principally reflects the timing and amounts of income tax payments in the comparative periods, including estimated payments made in the current periods for the respective years.

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Cash flows used in investing activities were $56,361 and $91,843 in nine months 2026 and 2025, respectively, a change of $35,482. The decrease in cash flows used in investing activities principally reflects a decrease in purchases of available for sale securities, and an increase in sales and maturities of available for sale investments, partially offset by the $41,471 business acquisition (see Note 2 to the Condensed Consolidated Financial Statements). Nine months 2026 and 2025 investing activities also include capital expenditures of $31,847 and $21,914, respectively. The Company is currently undergoing a plant expansion at one of its manufacturing facilities in the USA, including additional and replacement of certain processing and packaging lines, to better meet the level of forecasted demand for certain products on a timelier and more cost-effective basis. The Company expects that this will take place over the next several years, however, most of the actual expenditures, which relate to the building construction, are expected to occur in 2026 and 2027. We have incurred approximately $29,000 of capital expenditures relating to this expansion to date. Company management believes that the total cost of this expansion, including new machinery and equipment, some of which is normal and recurring replacements, and for food processing infrastructure, and raw materials warehousing will approximate $75,000 to $85,000 over the seven years beginning in 2026. All capital expenditures have been and are expected to be funded from the Company's cash flow from operations and internal sources including investments in available for sale securities.

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The Company's condensed consolidated financial statements include short term bank borrowings of $8,325 and $1,011 at September 30, 2026 and 2025, respectively, of which $7,500 of the September 30, 2026 balance relates to the Company's industrial development bond that matures and is payable in June of 2027. The remaining $825 of bank borrowings at September 30, 2026 and all of the bank borrowings as of September 30, 2025 relate to the Company's Spanish subsidiary. The Company had no other outstanding bank borrowings at September 30, 2026 and 2025.

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Financing activities include Company common stock purchases and retirements of $17,558 and $6,483 in nine months 2026 and 2025, respectively. Cash dividends of $20,103 and $19,497 were paid in nine months 2026 and 2025, respectively.

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The Company's current ratio (current assets divided by current liabilities) was 2.7 to 1 at September 30, 2026 compared to 3.3 to 1 at December 31, 2025 and 2.8 to 1 at September 30, 2025. Net working capital was $206,936 at September 30, 2026 compared to $223,016 and $196,184 at December 31, 2025 and September 30, 2025, respectively. Included in net working capital is cash and cash equivalents and short-term investments totaling $132,461 at September 30, 2026 compared to $176,633 and $119,830 at December 31, 2025 and September 30, 2025, respectively. In addition, long term investments, principally debt securities comprising corporate bonds, were $396,569 at September 30, 2026, as compared to $437,114 and $436,532 at December 31, 2025 and September 30, 2025, respectively. Aggregate cash and cash equivalents and short and long-term investments were $529,030, $613,747, and $556,362, at September 30, 2026, December 31, 2025 and September 30, 2025, respectively, including $131,379, $121,541, and $119,592 at September 30, 2026, December 31, 2025 and September 30, 2025, respectively, relating to trading securities which are used as an economic hedge for the Company's deferred compensation liabilities.

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Investments in available for sale securities, primarily high-quality corporate bonds, that matured during nine months 2026 and 2025, were generally used in the business acquisition as discussed above and capital expenditures or were replaced with debt securities of similar maturities. The net unrealized gain (loss) on available for sale investments was approximately $(6,500) and $1,600 at September 30, 2026 and 2025, respectively, which generally reflects the higher interest rate environment. The Company believes it is likely to hold most of these securities to maturity and therefore does not expect to ultimately realize significant unrealized losses on these investments (see also Item 3 below, QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK).

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The Company periodically contributes to a Voluntary Employee Benefit Association (VEBA) trust, managed and controlled by the Company, to fund the estimated future costs of certain employee health, welfare and other benefits. The Company funded $20,000 to the VEBA trust in 2023. No contribution was made during nine months 2026 or 2025. The Company has and will continue to use these VEBA funds to pay the actual cost of such benefits through part or all of 2027. The VEBA trust held $5,042, $8,953 and $10,989 of aggregate cash and cash equivalents at September 30, 2026, December 31, 2025 and September 30, 2025, respectively. This asset value is included in prepaid expenses and long-term other assets in the Company's Condensed Consolidated Statement of Financial Position. These assets primarily comprise cash and corporate bonds and are categorized as Level 1 and Level 2 within the fair value hierarchy.

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ACCOUNTING PRONOUNCEMENTS

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See Note 1 of the Company's Condensed Consolidated Financial Statements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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See Note 1 of the Company's Condensed Consolidated Financial Statements for more information related to our use of estimates in the preparation of financial statements as well as information related to material changes in our significant accounting policies that were included in our 2025 Form 10-K.

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FORWARD-LOOKING STATEMENTS

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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 effects of implementing natural colors in products, including related higher costs and availability of supply; changes in and the effects of U.S. tariffs as well as retaliatory tariffs and other import fees and surcharges by other countries; the ability to recover increases in input costs through price increases; successful distribution and sell-through during Halloween and other seasons; the overall competitive environment in the Company's industry; and the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2025 and as updated in previously filed Form 10-Qs in 2026.

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

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