<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
TOOTSIE ROLL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
TOOTSIE ROLL INDUSTRIES, INC.
7401 SOUTH CICERO AVENUE, CHICAGO, ILLINOIS 60629
March 24, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
your Company to be held on Monday, May 1, 2000, at 9:00 A.M., Eastern Daylight
Savings Time, in Room 1200, Mutual Building, 909 East Main Street, Richmond,
Virginia.
At the meeting, you will be asked to consider and vote upon the election of
four directors and a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors of the Company.
The formal Notice of the Annual Meeting of Shareholders and the Proxy
Statement follow. It is important that your shares be represented and voted at
the meeting, regardless of the size of your holdings. Accordingly, please
promptly mark, sign and date the enclosed proxy and return it in the enclosed
envelope, whether or not you intend to be present at the Annual Meeting of
Shareholders.
<TABLE>
<S> <C>
Sincerely,
[SIGNATURE] [SIGNATURE]
Melvin J. Gordon Ellen R. Gordon
CHAIRMAN OF THE BOARD AND PRESIDENT AND
CHIEF EXECUTIVE OFFICER CHIEF OPERATING OFFICER
</TABLE>
<PAGE>
TOOTSIE ROLL INDUSTRIES, INC.
7401 SOUTH CICERO AVENUE, CHICAGO, ILLINOIS 60629
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 1, 2000
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of TOOTSIE
ROLL INDUSTRIES, INC. will be held in Room 1200, Mutual Building, 909 East Main
Street, Richmond, Virginia, on Monday, May 1, 2000, at 9:00 A.M., Eastern
Daylight Savings Time, for the following purposes:
1. To elect the full board of four directors;
2. To consider and act upon ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors for the Company for
the fiscal year ending December 31, 2000; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business on March 7, 2000 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof. The relative voting rights of the Company's Common Stock and Class B
Common Stock in respect of the Annual Meeting and the matters to be acted upon
at such meeting are described in the accompanying Proxy Statement.
Your attention is directed to the accompanying Proxy, Proxy Statement and
1999 Annual Report of Tootsie Roll Industries, Inc.
By Order of the Board of Directors
G. Howard Ember Jr., ASSISTANT
SECRETARY
Chicago, Illinois
March 24, 2000
NOTE: PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING
IN PERSON. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
TOOTSIE ROLL INDUSTRIES, INC.
7401 SOUTH CICERO AVENUE
CHICAGO, ILLINOIS 60629
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS--MAY 1, 2000
---------------------
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Tootsie Roll Industries, Inc. of the accompanying proxy
for the Annual Meeting of Shareholders of the Company to be held on Monday,
May 1, 2000, and at any adjournments thereof. The purpose of the meeting is for
the shareholders of the Company to: (1) elect four directors to terms of office
expiring at the 2001 Annual Meeting of Shareholders; (2) consider and act upon a
proposal to ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000; and
(3) transact such other business as may properly come before the meeting and any
adjournments thereof.
Proxies in the accompanying form, properly executed and received by the
Company prior to the meeting and not revoked, will be voted as directed therein
on all matters presented at the meeting. In the absence of a specific direction
from the shareholder, proxies will be voted for the election of all named
director nominees and for ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors. The Board of
Directors does not know of any other matters to be brought before the meeting;
however, if other matters should properly come before the meeting it is intended
that the persons named in the accompanying proxy will vote thereon at their
discretion. Any shareholder may revoke his or her proxy by giving written notice
of revocation to the Assistant Secretary of the Company at any time before it is
voted, by executing a later-dated proxy which is voted at the meeting or by
attending the meeting and voting his or her shares in person.
The Board of Directors has fixed the close of business on March 7, 2000 as
the record date for the determination of shareholders of the Company entitled to
receive notice of and to vote at the Annual Meeting of Shareholders to be held
on May 1, 2000, and at any adjournments thereof. As of the close of business on
March 7, 2000, there were outstanding and entitled to vote 32,440,569 shares of
Common Stock and 15,692,649 shares of Class B Common Stock. Each share of Common
Stock is entitled to one vote and each share of Class B Common Stock is entitled
to ten votes, and therefore the Common Stock will be entitled to a total of
32,440,569 votes and the Class B Common Stock will be entitled to a total of
156,926,490 votes. The Common Stock and the Class B Common Stock will vote
together as a single class with respect to the election of directors and all
other matters submitted to the Company's shareholders at the meeting. This Proxy
Statement and the enclosed form of proxy are being mailed to shareholders of the
Company on or about March 24, 2000.
The entire cost of soliciting proxies in the accompanying form will be borne
by the Company. Proxies will be solicited by mail, and may be solicited
personally by directors, officers or regular employees of the Company who will
not receive special compensation for such services. Upon request, the Company
will reimburse brokers, dealers, banks and trustees, or their nominees, for
reasonable expenses incurred by them in forwarding proxy material to beneficial
owners of shares of the Company's Common Stock and Class B Common Stock.
<PAGE>
VOTING INFORMATION
A shareholder may, with respect to the election of directors (i) vote for
the election of all named director nominees, (ii) withhold authority to vote for
all named director nominees or (iii) vote for the election of all named director
nominees other than any nominee with respect to whom the shareholder withholds
authority to vote by so indicating in the appropriate space on the proxy. A
shareholder may, with respect to the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors (i) vote "FOR"
ratification, (ii) vote "AGAINST" ratification or (iii) "ABSTAIN" from voting on
the proposal. Proxies properly executed and received by the Company prior to the
meeting and not revoked will be voted as directed therein on all matters
presented at the meeting. In the absence of a specific direction from the
shareholder, proxies will be voted for the election of all named director
nominees and for ratification of the appointment of PricewaterhouseCoopers LLP
as the Company's independent auditors. If a proxy indicates that all or a
portion of the votes represented by such proxy are not being voted with respect
to a particular matter, such non-votes will not be counted in connection with
the vote on such matter, although such votes may be counted in connection with
the vote on other matters and will count for purposes of determining the
presence of a quorum.
The affirmative vote of a plurality of the votes present in person or by
proxy at the meeting and entitled to vote in the election of directors is
required to elect directors. Thus, assuming a quorum is present, the four
persons receiving the greatest number of votes will be elected to serve as
directors. Withholding authority to vote for a director(s) and non-votes with
respect to the election of directors will not affect the outcome of the election
of directors. If a quorum is present at the meeting, in order to ratify the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors,
the number of votes cast favoring the action must exceed the number of votes
cast opposing the action. Accordingly, non-votes and abstentions with respect to
such matter will not affect the determination of whether such matter is
approved.
PROPOSAL 1
ELECTION OF DIRECTORS
It is the intention of the persons named in the accompanying proxy to vote
for the election of each of the four persons named in the table below as a
director of the Company to serve until the 2001 Annual Meeting of Shareholders
and until his or her successor is duly elected and qualified. All of such
nominees are now directors of the Company, having been previously elected as
directors by the shareholders of the Company. In the event any of the nominees,
all of whom have expressed an intention to serve if elected, fail to stand for
election, the persons named in the proxy presently intend to vote for a
substitute nominee designated by the Board of Directors. The information
concerning the nominees and their shareholdings has been furnished by them to
the Company.
2
<PAGE>
The following table sets forth information with respect to the four nominees
for election as directors:
<TABLE>
<CAPTION>
NAME, AGE AND OTHER POSITIONS, PERIOD SERVED AS DIRECTOR AND
IF ANY, WITH COMPANY BUSINESS EXPERIENCE DURING PAST 5 YEARS
- ------------------------------------------ ------------------------------------------------------
<S> <C>
Melvin J. Gordon, 80; Chairman of the Director since 1952; Chairman of the Board since 1962;
Board and Chief Executive Officer(1)(2) Director and President of HDI Investment Corp., a
family investment company.
Ellen R. Gordon, 68, President and Chief Director since 1969; President since 1978; Director
Operating Officer(1)(2) and Vice- President of HDI Investment Corp., a
family investment company; director of Bestfoods
since 1991.
Charles W. Seibert, 85(3)(4) Director since 1978; retired; Vice-President of
Citibank through February, 1974 and consultant to
several banks since 1974.
Lana Jane Lewis-Brent, 53(3)(4) Director since 1988; President of Paul Brent Designer,
Inc. since 1992 (art publishing); former President
of Sunshine-Jr. Stores, Inc. (convenience stores).
</TABLE>
- ------------------------
(1) Member of the Executive Committee. When the Board of Directors is not in
session, the Executive Committee has the powers of the Board in the
management of the business and affairs of the Company, other than certain
actions which under the laws of the Commonwealth of Virginia must be
approved by the Board of Directors. The Executive Committee held three
meetings in 1999.
(2) Melvin J. Gordon and Ellen R. Gordon are husband and wife.
(3) Member of the Audit Committee. The Audit Committee (a) annually recommends
to the Board of Directors the appointment of independent public accountants
for the Company and subsidiaries; (b) reviews the scope of audits;
(c) approves the non-audit services of the independent public accountants
for the Company and subsidiaries and their fees for audit and non-audit
services; and (d) receives, reviews and takes action deemed appropriate with
respect to audit reports submitted. The Audit Committee held two meetings
during 1999.
(4) Member of the Compensation Committee. The Compensation Committee administers
the Tootsie Roll Industries, Inc. Bonus Incentive Plan and in this capacity
will make or recommend awards under such plan. The Compensation Committee
held one meeting during 1999.
The Company does not have a nominating committee.
The Board of Directors held four meetings during 1999. Mr. and Mrs. Gordon
do not receive fees for their service on the Board of Directors or committees.
Other directors received an annual fee of $24,000 plus $1,250 per meeting
attended for service on the Board of Directors during 1999. Each member of the
Audit Committee and the Compensation Committee received $1,250 per meeting
attended. Mr. Seibert, as the Chairman of the Audit Committee, received an
additional annual fee of $5,500. During 1999, all of the directors attended at
least 75 percent of the meetings of the Board of Directors and (if they were
members of the Executive Committee, Audit Committee or Compensation Committee)
the Executive Committee, Audit Committee and Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NAMED
DIRECTOR NOMINEES.
3
<PAGE>
OWNERSHIP OF COMMON STOCK AND CLASS B COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 7, 2000, information with
respect to the beneficial ownership of the Company's Common Stock and Class B
Common Stock by each person known to the Company to be the beneficial owner of
more than five percent of such Common Stock or Class B Common Stock. The
information has been furnished to the Company by such persons or derived from
filings with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK AND CLASS B
COMMON STOCK OWNED
BENEFICIALLY AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP(1) OUTSTANDING
-------------------------- SHARES OF
NAME DIRECT INDIRECT CLASS
- ---- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Melvin J. Gordon.............................. Common 1,042,491 -- 3.2%
............................... Class B 1,042,491 -- 6.6%
Ellen R. Gordon............................... Common 6,655,197 81,668(2) 20.8%
............................... Class B 6,752,953 31,668(2) 43.2%
Melvin J. Gordon
and Ellen R. Gordon,
jointly as fiduciaries...................... Common -- 4,213,050(3) 13.0%
............................... Class B -- 4,213,050(3) 26.8%
Leigh R. Weiner............................... Common 1,293,792 293,454(4) 4.9%
............................... Class B 1,767,181 384,276(4) 13.7%
</TABLE>
- ------------------------
The address of Mr. and Mrs. Gordon is c/o Tootsie Roll Industries, Inc.,
7401 South Cicero Avenue, Chicago, Illinois 60629. The address of
Mr. Weiner is c/o Becker Ross Stone DeStefano & Klein, 317 Madison Ave., New
York, New York 10017- 5372.
(1) The persons named in the above table have sole investment and voting power
over the shares indicated therein as being owned directly and share
investment and voting power over the shares indicated therein as being owned
indirectly. Shares of Class B Common Stock are at all times convertible into
shares of Common Stock on a share-for-share basis. Shares and percent of
class indicated for Common Stock do not reflect the shares of Common Stock
that could be acquired upon the conversion of the shares of Class B Common
Stock.
(2) Includes 31,668 shares of each of Common Stock and Class B Common Stock held
as co-trustee of the Company's pension plan, and 50,000 shares of Common
Stock held as co-trustee of the Company Stock Trust.
(3) Includes 3,748,578 shares each of Common Stock and Class B Common Stock held
by Mr. and Mrs. Gordon as fiduciaries for their children and 464,472 shares
each of Common Stock and Class B Common Stock owned by a charitable
foundation in which members of the Gordon family are interested.
(4) Includes 61,266 shares of Common Stock and 37,535 shares of Class B Common
Stock held by Mr. Weiner's wife (of which he disclaims beneficial
ownership), 156,564 shares of Common Stock and 114,254 shares of Class B
Common Stock held by Mr. Weiner or by his wife as custodian for their
children and 75,624 shares of Common Stock and 232,487 shares of Class B
Common Stock held by a charitable foundation in which Mr. Weiner and members
of his family are interested.
4
<PAGE>
OWNERSHIP OF COMMON STOCK AND CLASS B COMMON STOCK BY MANAGEMENT
The following table sets forth, as of March 7, 2000, information with
respect to the beneficial ownership of the Company's Common Stock and Class B
Common Stock by each director, by each executive officer who is named in the
summary compensation table included in this proxy statement, and by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK AND CLASS B
COMMON STOCK OWNED
BENEFICIALLY AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP(1) OUTSTANDING
-------------------------- SHARES OF
NAME DIRECT INDIRECT CLASS
- ---- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Melvin J. Gordon.................... Common (2) (2) (2)
..................... Class B (2) (2) (2)
Ellen R. Gordon..................... Common (2) (2) (2)
..................... Class B (2) (2) (2)
Charles W. Seibert.................. Common 1,065 -- (3)
..................... Class B 1,065 -- (3)
Lana Jane Lewis-Brent............... Common 3,541 17,505 (3)
..................... Class B -- -- (3)
John W. Newlin, Jr.................. Common 9,649 1,192 (3)
..................... Class B 9,649 1,192 (3)
Thomas E. Corr...................... Common -- -- (3)
..................... Class B -- -- (3)
G. Howard Ember, Jr................. Common -- 8,309 (3)
..................... Class B -- -- (3)
All directors and executive officers
as a group (9 persons)............ Common 7,711,943 4,321,724 37.1%
..................... Class B 7,806,158 4,245,910 76.8%
</TABLE>
- ------------------------
(1) The persons named in the above table have sole investment and voting power
over the shares indicated therein as being owned directly and share
investment and voting power over the shares indicated therein as being owned
indirectly. Shares of Class B Common Stock are at all times convertible into
shares of Common Stock on a share-for-share basis. Shares and percent of
class indicated for Common Stock do not reflect the shares of Common Stock
that could be acquired upon the conversion of the shares of Class B Common
Stock.
(2) See the table under the caption "Ownership of Common Stock and Class B
Common Stock by Certain Beneficial Owners" above for shareholdings of
Mr. and Mrs. Gordon.
(3) Less than 1% of the outstanding shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent of the
Company's Common Stock or Class B Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and New York
Stock Exchange. Such persons are also required to furnish the Company with
copies of all such reports.
Based solely on its review of the copies of such reports received by the
Company, and written representations from certain reporting persons, the Company
is pleased to note that its directors, executive officers and greater than ten
percent shareholders filed all required reports during or with respect to fiscal
year 1999.
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following summary compensation table sets forth the compensation for the
last three calendar years of the Chairman and Chief Executive Officer of the
Company and the four other most highly compensated executive officers of the
Company serving at the end of 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION --------------------- --------
------------------------------------ RESTRICTED ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS LTIP COMPENSATION
POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS (1)(2)(3)
- -------------------------- -------- -------- ---------- ------------ ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $999,000 $1,023,000 $0 $0 0 $0 $1,027,771
Melvin J. Gordon ......... 1998 955,000 930,000 0 0 0 0 936,595
Chairman and CEO 1997 875,000 760,000 0 0 0 0 940,852
Ellen R. Gordon .......... 1999 $957,000 $ 957,000 $0 $0 0 $0 $1,015,766
President and Chief 1998 870,000 870,000 0 0 0 0 929,805
Operating Officer 1997 798,000 755,000 0 0 0 0 934,145
John W. Newlin, Jr. ...... 1999 $569,000 $ 313,500 $0 $0 0 $0 $ 309,233
Vice President/ 1998 516,000 285,000 0 0 0 0 302,923
Manufacturing 1997 473,000 246,000 0 0 0 0 293,621
Thomas E. Corr ........... 1999 $531,000 $ 330,000 $0 $0 0 $0 $ 293,490
Vice President/ 1998 475,000 300,000 0 0 0 0 280,666
Marketing and Sales 1997 404,000 260,000 0 0 0 0 272,795
G. Howard Ember, Jr. ..... 1999 $378,000 $ 233,500 $0 $0 0 $0 $ 199,470
Vice President/ 1998 315,000 212,000 0 0 0 0 192,448
Finance 1997 275,000 185,000 0 0 0 0 185,961
</TABLE>
- --------------------------
(1) "All Other Compensation" includes (i) contributions to the Company's
pension, profit-sharing and excess benefit plans, (ii) annual awards to the
Company's Career Achievement Plan ("CAP") in the form of deferred
compensation with vesting and forfeiture provisions and (iii) benefits under
the Company's split dollar life insurance plan (see note 3 below).
(2) For 1999, (i) contributions to the Company's pension, profit-sharing and
excess benefit plans, (ii) CAP awards and (iii) split dollar life insurance
benefits were, respectively, as follows: $160,771, $0 and $867,000 for
Melvin J. Gordon; $148,766, $0 and $867,000 for Ellen R. Gordon; $106,400,
$190,000 and $12,833 for John W. Newlin, Jr.; $102,990, $184,000 and $6,500
for Thomas E. Corr; and $68,737, $125,000 and $5,733 for G. Howard Ember Jr.
(3) In 1993, the Board of Directors approved a split dollar life insurance plan
for Melvin J. Gordon and Ellen R. Gordon that replaced benefits that were
already earned under the Company's CAP and previous split dollar insurance
programs pursuant to which Mr. and Mrs. Gordon received awards during the
years 1982 through 1992. In 1993, 1996 and 1997, the Board of Directors
approved additional split dollar life insurance for Mr. and Mrs. Gordon, a
portion of which replaced benefits previously earned under deferred
compensation and excess benefit plans. Although the Company will fully
recover all premiums paid for the split dollar life insurance after
approximately 17 years, the plan includes a compensation element for the
additional benefits attributable to the Company's after-tax cost for
advancing the premium payments. The compensation element represents the
total expected after-tax cost of the benefits provided allocable to the
service provided by Melvin J. Gordon and Ellen R. Gordon during the year.
6
<PAGE>
CHANGE IN CONTROL AGREEMENTS
The Company has entered into severance agreements (the "Agreements") with
five executive officers, excluding Mr. and Mrs. Gordon but including the other
executive officers named in the Summary Compensation Table. The Agreements
generally provide that in the event the executive's employment is terminated by
the Company without "cause" or by the executive for "good reason" within two
years after a "change in control" (as such terms are defined in the Agreements),
the executive will receive a pro-rated bonus for the year of termination plus
three times his annual base salary and three times the higher of his incentive
bonus for the last fiscal year or his average incentive bonus over the prior
three fiscal years. The executive would also be eligible for three years of
coverage under the Company's health, life and disability benefit plans and for a
"gross-up" payment as reimbursement of any federal excise (but not income) taxes
payable. The executive would also become vested in, and be paid, any unvested
accrued benefits under the Company's Pension, Profit Sharing and Excess Benefit
Plans and the maximum award under the CAP Plan. In the event of such a
termination, each executive has agreed to a noncompetition and nonsolicitation
covenant applicable for one year following the termination of his employment.
The Board of Directors believes that the foregoing arrangements are frequently
part of executive compensation practices at major public corporations. Mr. and
Mrs. Gordon have advised the Board of Directors that the Gordon Family intends
to maintain voting control of the Company and, therefore, the Board of Directors
believes that it is unlikely that the Agreements would be utilized.
REPORT ON EXECUTIVE COMPENSATION
During 1999, the entire Board of Directors was responsible for determining
the compensation structure and amounts for the executive officers of the
Company. The Compensation Committee of the Board of Directors (the "Compensation
Committee") was responsible for administering the Tootsie Roll Industries, Inc.
Bonus Incentive Plan (the "Bonus Incentive Plan"). This report describes the
policies and rationale for the Board and the Compensation Committee in
establishing the principal components of compensation for the executive officers
during 1999.
EXECUTIVE COMPENSATION POLICY
The Company's compensation program is designed to encourage and reward both
individual effort and teamwork leading to improvement in the Company's financial
performance and attainment of the Company's principal long-term objective of
profitably building the Company's well-known brands. The Company's executive
officer compensation program is balanced between short-term and long-term
compensation and incentives. The program is comprised of base salary, annual
cash incentive bonuses, annual awards to the Company's Career Achievement Plan
("CAP"), split-dollar insurance plans, and pension, profit-sharing and excess
benefit plans generally available to employees of the Company. The Board of
Directors believes that this program will lead to increased shareholder value on
a long-term basis.
BASE SALARY
The Board of Directors annually reviews each executive officer's salary. The
Board considers the following with respect to the determination of an individual
executive officer's base salary:
- Performance and contribution to the Company, including length of service
in the position;
- Comparative compensation levels of other companies, including periodic
compensation studies performed by independent compensation and benefit
consultants;
- Overall competitive environment for executives and the level of
compensation considered necessary to attract and retain executive talent;
and
- Historical compensation and performance levels for the Company.
7
<PAGE>
Companies used in comparative analyses for the purpose of determining each
executive officer's salary are selected periodically with the assistance of
professional compensation consultants. Selection of such companies is based on a
variety of factors, including market capitalization and industry classification.
The companies used in these comparative analyses include some of the companies
in the Peer Group used in the Performance Graph, as well as other companies. The
Board of Directors believes that the Company's primary competitors for executive
talent are companies with a similar market capitalization and, accordingly,
relies on a broad array of companies in various industries for comparative
analyses.
ANNUAL INCENTIVES AND OTHER AWARDS
Effective January 1, 1997, the Compensation Committee established the Bonus
Incentive Plan. The Bonus Incentive Plan was adopted to ensure the tax
deductibility of the annual bonus that may be earned by executive officers of
the Company. Under the Plan, certain key employees (including employees who are
also directors) designated by the Compensation Committee may receive annual
incentive compensation determined by pre-established objective performance
goals. In 1999, the eligible employees for the Bonus Incentive Plan included the
Chairman and Chief Executive Officer and the President and Chief Operating
Officer. Performance goals were based on the measures, objectives and financial
criteria discussed below.
In addition, annual incentive bonuses to other executive officers and CAP
and split-dollar insurance awards are made at the discretion of the Board of
Directors to executive corporate officers in order to recognize and reward each
individual executive officer's contribution to the Company's overall performance
in terms of both financial results and attainment of individual and Company
goals.
The annual cash incentive bonus is designed to reward executives, as well as
other management personnel, for their contributions to the Company's financial
performance during the recently completed year.
The annual CAP award and split dollar life insurance program is principally
designed to provide an incentive to executive officers to achieve both
short-term and long-term financial and other goals, including strategic
objectives. These programs are also designed to provide an incentive for the
executive to remain with the Company on a long-term basis. These awards are
determined by the Board of Directors based on the performance of the Company and
the executive's contribution to the growth and success of the Company.
The Board of Directors considers both achievement of strategic objectives
and financial performance measures in determining compensation levels. Although
the Board of Directors does not use a fixed formula for determining annual
incentive and other awards, the following measures of Company performance were
considered in the determination of 1999 bonuses and awards:
- Earnings per share;
- Increase in sales of core brands and total sales;
- Return on assets;
- Return on equity; and
- Net earnings as a percentage of sales.
The awards for 1999 recognize the Company's achievement of record
profitability for the year and the high level of achievement on other measures
of financial performance.
RATIONALE OF CEO COMPENSATION
The Board of Directors established the compensation of Melvin J. Gordon,
Chairman of the Board of Directors and Chief Executive Officer, using the same
criteria that were used to determine the other
8
<PAGE>
executive officers' compensation as discussed above. In addition, the Board
considered Mr. Gordon's leadership of the Company in achieving the Company's
strategic and long-term objectives. A substantial portion of his compensation
was at risk, in the form of annual cash incentive bonus. As discussed above, the
Compensation Committee determined pre-established objective performance goals to
determine Mr. Gordon's bonus. It is the Board's opinion that Mr. Gordon's
compensation package was based on an appropriate assessment of the Company's
performance, his individual performance and competitive standards.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Internal Revenue Code limits the tax deductibility of executive
compensation in certain circumstances. In the event a portion of executive
compensation were not tax deductible, the Board of Directors may require the
executive to defer the non-deductible portion of compensation until such time as
the compensation may be deductible by the Company. In order to enable the
Company to receive federal income tax deductions for the compensation paid to
the executive officers of the Company in 1999 and in future years, the
Compensation Committee established the Bonus Incentive Plan.
The foregoing report has been approved by the entire Board of Directors, the
members of which are:
Melvin J. Gordon
Ellen R. Gordon
Charles W. Seibert
Lana Jane Lewis-Brent
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above under "Report on Executive Compensation," during 1999 the
Board of Directors of the Company was responsible for determining the
compensation of the executive officers of the Company. Mr. Gordon is the
Chairman of the Board and Chief Executive Officer of the Company and
Mrs. Gordon is President and Chief Operating Officer of the Company.
9
<PAGE>
PERFORMANCE GRAPH
The following performance graphs compare the Company's cumulative total
shareholder return on the Company's Common Stock for a ten-year period
(December 31, 1989 to December 31, 1999) and a five-year period (December 31,
1994 to December 31, 1999) with the cumulative total return of Standard & Poor's
500 Stock Index ("S&P 500") and the Dow Jones Industry Food Index ("Peer Group,"
which includes the Company).
TEN-YEAR CUMULATIVE TOTAL RETURN*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEAR TOOTSIE ROLL S&P 500 PEER GROUP
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 115.68 96.88 110.21
1991 215.50 126.42 151.83
1992 235.34 136.08 153.21
1993 223.14 149.80 148.68
1994 200.41 151.78 158.02
1995 267.75 208.82 196.74
1996 277.87 256.76 230.59
1997 454.28 342.43 319.70
1998 588.90 440.29 347.49
1999 514.05 532.94 272.63
</TABLE>
FIVE-YEAR CUMULATIVE TOTAL RETURN*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEAR TOOTSIE ROLL S&P 500 PEER GROUP
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 133.60 137.58 124.05
1996 138.65 169.17 145.79
1997 226.67 225.61 201.67
1998 293.84 290.09 219.41
1999 256.60 351.13 171.36
</TABLE>
- ------------------------
* Assumes (i) $100 invested on December 31 of the first year of the chart in
each of the Company's Common Stock, S&P 500 and the Dow Jones Industry Food
Index and (ii) the reinvestment of dividends.
10
<PAGE>
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP, independent
public accountants, as the independent auditors for the Company for the fiscal
year ending December 31, 2000. PricewaterhouseCoopers LLP has been the Company's
independent auditors since 1968. Although not required by the Company's Articles
of Incorporation or Bylaws, the Board of Directors deems it to be in the best
interest of the Company to submit to the shareholders a proposal to ratify the
appointment of PricewaterhouseCoopers LLP and recommends a vote in favor of such
ratification. It is not expected that representatives of PricewaterhouseCoopers
LLP will attend the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy materials for
the 2001 Annual Meeting of Shareholders, any shareholder proposals should be
addressed to Tootsie Roll Industries, Inc., 7401 South Cicero Avenue, Chicago,
Illinois 60629, Attention: Ellen R. Gordon, President, and must be received no
later than December 1, 2000. In addition, the Company's Bylaws establish an
advance notice procedure for shareholder proposals to be brought before any
annual meeting of shareholders, including proposed nominations of persons for
election to the Board of Directors. Shareholders at the 2000 Annual Meeting of
Shareholders may consider shareholder proposals or nominations brought by a
shareholder of record on March 7, 2000, who is entitled to vote at the 2000
Annual Meeting of Shareholders and who has given the Assistant Corporate
Secretary timely written notice, in proper form, of the shareholder's proposal
or nomination. A shareholder proposal or nomination intended to be brought
before the 2000 Annual Meeting of Shareholders must have been received by the
Assistant Corporate Secretary on or after February 1, 2000 and on or prior to
March 2, 2000. The Assistant Corporate Secretary did not receive notice of any
shareholder proposals or nominations relating to the 2000 Annual Meeting of
Shareholders. The 2001 Annual Meeting of Shareholders is expected to be held on
May 7, 2001. A shareholder proposal or nomination intended to be brought before
the 2001 Annual Meeting of Shareholders must be received by the Assistant
Corporate Secretary on or after February 6, 2001 and on or prior to March 8,
2001.
GENERAL
The Board of Directors does not know of any matters other than the foregoing
that will be presented for consideration at the Annual Meeting. However, if
other matters should be properly presented at the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote thereon in
accordance with their best judgment pursuant to the discretionary authority
granted in the proxy.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1999 is being mailed herewith.
A COPY OF THE COMPANY'S 1999 ANNUAL REPORT ON FORM 10-K WITHOUT EXHIBITS MAY
BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO TOOTSIE ROLL
INDUSTRIES, INC., 7401 SOUTH CICERO AVENUE, CHICAGO, ILLINOIS 60629, ATTENTION:
G. HOWARD EMBER JR., VICE PRESIDENT/FINANCE AND ASSISTANT SECRETARY. A
REASONABLE CHARGE WILL BE MADE FOR REQUESTED EXHIBITS.
By Order of the Board of Directors
G. Howard Ember Jr.
ASSISTANT SECRETARY
Chicago, Illinois
March 24, 2000
11
<PAGE>
PROXY
TOOTSIE ROLL INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of TOOTSIE ROLL INDUSTRIES, INC. (the
"Company" hereby appoints ELLEN R. GORDON, MICHAEL L. SOFFIN and ROBERT A.
GOULDIN, and each of them, as the undersigned's proxies (with the power of
substitution) to vote all the shares of Common Stock and/or Class B Common
Stock of the Company which the undersigned would be entitled to vote at the
annual meeting of shareholders of such Company to be held on May 1, 2000, at
9:00 A.M. (EDST) and any adjournment thereof, on the matters set forth on the
reverse side hereof.
This Proxy will be voted in accordance with instructions specified on
the reverse side, but in the absence of any instructions will be voted "FOR"
Item (1), (2) and (3). If any other business is presented at the meeting, the
proxies are authorized to vote thereon in their discretion. The undersigned
hereby revokes any proxy heretofore given.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
A RETURN ENVELOPE IS ENCLOSED.
FOLD AND DETACH HERE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE BOARD OF Please mark /X/
DIRECTOR'S NOMINEES AND FOR THE PROPOSALS LISTED BELOW. your votes as
indicated in
this example
- --------------------------------------------------------------------------------
(1)- Election of Directors: Melvin J. Gordon, Ellen R. Gordon,
Lana Jane Lewis-Brent, Charles W. Siebert.
FOR all nominees WITHHOLD (Instructions: To withhold authority
listed above AUTHORITY to vote for any individual nominee,
(except as marked to vote for all strike a line through the nominee's
to the contrary nominees name in the list above)
above) listed above
/ / / /
- --------------------------------------------------------------------------------
(2)- Ratify the appointment of PricewaterhouseCoopers LLP as auditors for the
fiscal year 2000.
FOR AGAINST ABSTAIN
/ / / / / /
- --------------------------------------------------------------------------------
(3)- In their discretion, transact any other business that may properly come
before such meeting.
FOR AGAINST ABSTAIN
/ / / / / /
- --------------------------------------------------------------------------------
Signature ______________________ Signature ______________________ Date _________
Please date and sign exactly as name appears hereon. Executors, Administrators,
Trustees, etc. should so indicate when signing. If shares are held jointly,
both shareholders should sign.
FOLD AND DETACH HERE
