NEW YORK, Oct. 18, 2017 /PRNewswire/ -- Report entitled "More Tricks Than Treats" outlines how Tootsie Roll faces 25%-50% downside risk as a result of changing snacking preferences, financial misrepresentation of gross margins and cash flow and management's failure to attract a buyer


    --  Brand is Out of Step with Consumers and the Industry: Tootsie Roll's
        offering consists of sugary candies with fading nostalgia (e.g., tootsie
        roll, tootsie pop) and poor instore placement.  Demand for sugary
        candies has begun to fade as consumers demand healthier snack options
        and new FDA label requirements place greater emphasis on "added sugars".
        Tootsie Roll's product offering limits its ability to pivot as evidenced
        by its unwillingness to join industry SROs focused on initiatives such
        as banning marketing to children under the age of 12
    --  Opaque Financial Disclosures, Overstated Gross Margins and Inflated
        Operating Cash Flows: Tootsie Roll is notoriously secretive about its
        financials: it doesn't hold investor conference calls, invite analyst
        coverage, disclose key performance drivers and potential asbestos risk. 
        Tootsie also inflates its gross margins by 800bps, relative to peers, by
        excluding shipping, warehousing, and freight costs.  Spruce Point also
        believes Tootsie has inflated operating cash flows, through cookie jar
        accounting, by ~$50m since 2012 though early termination of its split
        dollar life insurance policy
    --  Excessive Takeover Optimism Driving Irrational Valuation: The perennial
        bull case is that Tootsie insiders will sell the company, yet no steps
        have ever been taken in that direction.  Spruce Point believes there are
        many "hidden" costs a potential acquirer would need to absorb that could
        amount to an extra $165m - $235m on top of Tootsie's already rich
        valuation at 4x, 19x, and 38x 2018E Sales/EBITDA/EPS

The research report can be found on our website at www.sprucepointcap.com/tootsie-roll-industries and updates will be posted on twitter @sprucepointcap. Spruce Point's CIO will also appear on CNBC's Closing Bell to discuss the thesis in greater detail.

Spruce Point Capital has a short position in Tootsie Roll Industries, Inc. and stands to benefit if its share price falls.

About Spruce Point Capital
 Spruce Point Capital Management, LLC, is a forensic fundamentally-oriented investment manager that focuses on short-selling, value and special situation investment opportunities.

Contact
Sean Donohue
Spruce Point Capital Management
sean.donohue@sprucepointcap.com
212-519-9813

Spruce Point Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 288248.

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SOURCE Spruce Point Capital Management, LLC