The Company’s effective income tax rates were 27.1% and 48.8% in fourth quarter 2025 and 2024 respectively, and 27.1% and 31.6% in twelve months 2025 and 2024, respectively. These effective tax rates reflect the adverse effect of certain deferred compensation that will not be deductible for income taxes when paid in future periods. The higher effective tax rates in fourth quarter and twelve months 2024 also reflect the write off of deferred tax assets relating to prior years’ deferred compensation which was no longer determined as tax deductible at that time. Excluding the income tax effects of such nondeductible deferred compensation, net earnings would have been $29,116,000 and $33,519,000 for fourth quarter 2025 and 2024, respectively; and $103,148,000 and $97,837,000 for twelve months 2025 and 2024, respectively. The decline in the aforementioned adjusted net earnings in fourth quarter 2025 reflects the favorable effects of the prior year’s LIFO liquidation as discussed above, and higher ingredient costs, primarily cocoa and chocolate, unfavorable sales mix, and adverse results of foreign operations in fourth quarter 2025.
Fourth quarter and twelve months 2025 net earnings did benefit from increased investment income from the Company’s investments in marketable securities, including a favorable adjustment to record additional bond accretion not previously reported on certain bonds purchased at a discount. However, fourth quarter and twelve months 2025 results were adversely impacted by unfavorable foreign exchange.
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. During fourth quarter 2025, tariffs on cocoa were rescinded and therefore we should realize some additional cost reductions on these purchases in 2026. We have estimated that our 2025 incremental cost of tariffs was approximately $3.7 million, which includes estimates of tariffs that were paid directly by our suppliers and passed on to us.
We are focused on the longer term and therefore are 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.”
Safe Harbor Statement
This release contains 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 U.S. tariffs as well as retaliatory tariffs and other import fees and surcharges by other countries, the overall competitive environment in the Company’s industry, the ability to recover increases in input costs and tariffs through price increases, successful distribution and sell-through during Halloween and other seasons, and changes in assumptions, judgments and risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2025.
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.
