-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RJIztQSMKsB4CbYAEiEvU2LtQR7JDC78JDCXdyHYMZecHoodSP52L2VeMCn/kv2P 4kJMCORuc/O0O1dxOOtASA== 0000098677-99-000003.txt : 19990513 0000098677-99-000003.hdr.sgml : 19990513 ACCESSION NUMBER: 0000098677-99-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOOTSIE ROLL INDUSTRIES INC CENTRAL INDEX KEY: 0000098677 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 221318955 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01361 FILM NUMBER: 99617693 BUSINESS ADDRESS: STREET 1: 7401 S CICERO AVE CITY: CHICAGO STATE: IL ZIP: 60629 BUSINESS PHONE: 3128383400 FORMER COMPANY: FORMER CONFORMED NAME: SWEETS CO OF AMERICA INC DATE OF NAME CHANGE: 19660921 10-Q 1 TOOTSIE ROLL INDUSTIES, INC 10-Q ENDING 04/03/99 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended April 3, 1999 Commission File Number 1 - 1361 TOOTSIE ROLL INDUSTRIES, INC. (Exact name of registrant as specified in its charter) VIRGINIA 22 - 1318955 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 7401 South Cicero Avenue Chicago, Illinois 60629 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (773) 838 - 3400 None Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practible date. Class Outstanding Common Stock, $.69 4/9 par value 33,446,257 Class B Common Stock, $.69 4/9 par value 15,846,841 PART I - FINANCIAL INFORMATION TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED) ASSETS April 3, March 28, Dec. 31, CURRENT ASSETS 1999 1998 1998 Cash & Cash Equiv. $ 76,565,908 $ 34,384,760 $ 80,743,591 Investments 74,227,270 92,450,294 83,176,169 Trade Accounts Receivable, Less Allowances of $2,082,000,$2,238,000 & $2,184,000 18,424,094 18,414,892 19,110,304 Other Receivables 7,882,608 6,586,536 3,324,145 Inventories, at Cost (Last-in,First-out): Finished Goods & Work in Process 29,546,106 31,228,297 21,394,685 Raw Material & Supplies 14,856,605 15,550,639 15,125,269 Prepaid Expenses 6,158,831 5,795,280 3,081,281 Deferred Income Taxes 2,584,000 1,793,000 2,584,000 Total Current Assets 230,245,422 206,203,698 228,539,444 PROPERTY, PLANT & EQUIPMENT, (at cost) Land 7,773,504 6,895,114 7,773,504 Buildings 22,226,017 22,082,109 22,226,017 Machinery & Equipment 138,638,705 126,300,215 133,601,378 168,638,226 155,277,438 163,600,899 Less-Accumulated Depreciation 82,631,283 75,234,907 80,577,319 86,006,943 80,042,531 83,023,580 OTHER ASSETS Intangible assets, net of accumulated amortization of $21,467,000, $18,761,000, $20,791,000 87,166,429 89,872,728 87,843,004 Investments 68,507,383 51,519,053 59,252,305 Cash surrender value of Life Insurance and Other Assets 30,229,651 22,525,607 28,764,817 185,903,463 163,917,388 175,860,126 Total Assets $502,155,828 $450,163,617 $487,423,150
(UNAUDITED) LIABILITIES AND SHAREHOLDERS( EQUITY April 3, March 28, Dec. 31, CURRENT LIABILITIES 1999 1998 1998 Accounts Payable $ 12,732,737 $ 11,654,609 $ 12,449,800 Dividends Payable 2,693,837 2,179,102 2,513,774 Accrued Liabilities 27,997,577 29,611,543 31,297,560 Income Taxes Payable 13,396,027 13,060,208 7,123,316 Total Current Liabilities 56,820,178 56,505,462 53,384,450 NON-CURRENT LIABILITIES Ind.Dev.Bonds 7,500,000 7,500,000 7,500,000 Post Retirement Benefits 6,240,390 5,991,768 6,144,943 Deferred Compensation and Other Liabilities 15,844,932 12,325,480 14,922,897 Deferred Income Taxes 8,885,136 8,617,653 9,014,031 Total Non-Current Liabilities 38,470,458 34,434,901 37,581,871 SHAREHOLDERS( EQUITY Common Stk., $.69-4/9 par value- 50,000,000 shares author. 33,446,257, 16,315,044 & 32,438,988 respectively, issued 23,226,358 11,329,753 22,526,866 Class B Common Stk $.69-4/9 par value- 20,000,000 shares author. 15,846,841, 7,761,366 & 15,422,232 respectively, issued 11,004,651 5,389,772 10,709,784 Capital in Excess of Par Value 274,577,472 237,614,188 210,063,413 Retained Earnings 108,775,945 115,896,720 164,652,120 Accumulated Other Comprehensive Earnings (9,746,646) (11,007,179) (10,522,766) Treasury Stock (at cost)- 25,750, 0 & 25,000, shares respectively (972,588) -- (972,588) Total Shareholders( Equity 406,865,192 359,223,254 396,456,829 Total Liabilities and Shareholders( Equity $502,155,828 $450,163,617 $487,423,150
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS (NOTE 1) (UNAUDITED) 13 Weeks Ended April 3, 1999 & March 28, 1998 1999 1998 Net Sales (Note 2) $ 74,199,514 $ 69,700,843 Cost of Goods Sold 35,384,255 32,734,862 Gross Margin 38,815,259 36,965,981 Selling, Marketing and Administrative Expense 20,655,403 19,781,651 Amortization of Intangible Assets 676,575 676,575 Earnings from Operations 17,483,281 16,507,755 Other Income, Net 1,865,487 1,162,762 Earnings before Income Taxes 19,348,768 17,670,517 Provision for Income Taxes 7,024,000 6,454,000 Net Earnings (Note 5) $ 12,324,768 $ 11,216,517 Net Earnings $ 12,324,768 $ 11,216,517 Other Comprehensive Earnings, Net of Tax 776,120 461,586 Comprehensive Earnings $ 13,100,888 $ 11,678,103 Retained Earnings at Beginning of Period $164,652,120 $159,123,991 Net Earnings 12,324,768 11,216,517 Cash Dividends (2,511,411) (1,930,339) Stock Dividends - 3% (65,689,532) (52,513,449) Retained Earnings at End of Period $108,775,945 $115,896,720 Net Earnings Per Share (Note 3) $.25 $ .23 Dividends Per Share * $.0525 $ .04125 Average Number of Shares Outstanding (Notes 3 & 4) 49,267,348 49,575,948 *Does not include 3% Stock Dividend to Shareholders of Record on 3/09/99 and 3/10/98, but has been restated for the 2-for-1 Stock Split to Shareholders of Record 6/22/98
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) 13 Weeks Ended April 3, 1999 & March 28, 1998 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings $12,324,768 $11,216,517 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 2,680,685 2,850,838 (Increase) decrease in assets: Accounts receivable 768,921 223,237 Other receivables (4,558,463) (1,903,922) Inventories (7,724,917) (10,117,321) Prepaid expenses and other assets (4,099,897) (4,388,669) Increase (decrease) in liabilities: Accounts payable and accrued liabilities (3,041,243) (1,189,185) Income taxes payable and deferred 6,180,958 5,769,285 Postretirement health care and life insurance benefits 95,447 87,175 Deferred compensation and other liabilities 922,035 2,319,641 Other 140,138 90,051 Net cash provided by operating activities 3,688,432 4,957,647 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,047,473) (5,814,732) Purchase of held to maturity securities (41,033,294) (51,490,774) Maturity of held to maturity securities 40,024,101 30,483,669 Purchase of available for sale securities (55,899,440) (45,885,963) Sale and maturity of available for sale securities 56,602,453 45,070,979 Net cash used in investing activities (5,353,653) (27,636,821) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid in cash (2,512,462) (1,930,339) Shares repurchased and retired -- (1,438,300) Net cash used in financing activities (2,512,462) (3,368,639) Decrease in cash and cash equivalents (4,177,683) (26,047,813) Cash and cash equivalents-beginning of year 80,743,591 60,432,573 Cash and cash equivalents end of quarter $76,565,908 $34,384,760 Supplemental cash flow information: Income taxes paid $ 1,265,000 $ 788,000 Interest paid $ 170,000 $ 147,000
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APRIL 3, 1999 (UNAUDITED) Note 1 - Foregoing data has been prepared from the unaudited financial records of the Company and in the opinion of Management all adjustments necessary for a fair statement of the results for the interim period have been reflected. All adjustments were of a normal and recurring nature. Note 2 - The Company's unshipped orders at April 3, 1999 amounted to $11,900,000. Note 3 - Based on Average Shares outstanding adjusted for Stock Dividends. Note 4 - Includes 3% stock dividends distributed on April 21, 1999 and April 22, 1998. Note 5 - Results of operations for the period ended April 3, 1999 are not necessarily indicative of results to be expected for the year to end December 31, 1999 because of the seasonal nature of the Company's operations. Historically, the Third Quarter has been the Company's largest sales quarter due to Halloween sales. Note 6 - Form 8-K was not required to be filed during the First Quarter of 1999. Note 7 - Sales of unregistered Securities - None. -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following is Management's discussion of the Company's operating results and analysis of factors which have affected the accompanying Statement of Earnings: NET SALES: First Quarter, 1999 First Quarter vs. 1999 1998 First Quarter, 1998 $74,199,514 $69,700,843 +6.5% First Quarter 1999 net sales of $74,200,000, a record, were up 6.5% from First Quarter 1998 net sales of $69,701,000. Sales rose as a result of successful marketing and promotional programs, as well as new products and product line extensions. These record sales principally reflect sales gains of the Company's core brands. First Quarter 1999 net sales of $74,200,000 were down from Fourth Quarter 1998 net sales of $88,797,000. This is not considered unusual as the First Quarter of the year is historically the company's lowest sales quarter. COST OF SALES: Cost of Sales as a First Quarter Percentage of Net Sales 1999 1998 1st Qtr. 1999 1st Qtr. 1998 $35,384,255 $32,734,862 47.7% 47.0% Cost of sales as a percentage of net sales increased slightly from 47.0% for First Quarter 1998 to 47.7% for First Quarter 1999. This increase generally reflects higher labor and related fringe benefit costs as well as changes in product mix. NET EARNINGS: First Quarter, 1999 First Quarter vs. 1999 1998 First Quarter, 1998 $12,324,768 $11,216,517 +9.9% First Quarter 1999 net earnings of $12,325,000 a record, were up 9.9% from net earnings of $11,217,000 for the First Quarter 1998. The increase in net earnings reflects higher sales and effective on-going cost control programs which resulted in higher income from operations. First Quarter 1999 income from operations was $17,483,000, an increase of 6% from First Quarter 1998 income from operations of $16,508,000. Other income in First Quarter 1999 benefited from decreased foreign exchange translation losses relating to the Company's Mexican operations. First Quarter 1999 earnings per share were $0.25 compared to $0.23 in 1998, reflecting the increase in net earnings discussed above. The consolidated effective income tax rate decreased from 36.5% in the First Quarter of 1998 to 36.3% in the First Quarter of 1999. This improvement generally reflects increased tax-free investment income. First Quarter 1999 net earnings of $12,325,000 decreased $2,858,000 or 18.8% from Fourth Quarter of 1998 net earnings of $15,183,000, which reflects the lower level of sales in the First Quarter 1999 compared to the Fourth Quarter 1998. This is consistent with historical trends. LIQUIDITY AND CAPITAL RESOURCES: The Company's current ratio (current assets divided by current liabilities) is in excess of 4 to 1 as of the end of the First Quarter 1999. Capital expenditures for 1999 are anticipated to be generally in line with historical spending and are to be funded from the Company's cash flow from operations and internal sources. NEW ACCOUNTING PRONOUNCEMENTS: In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", which is effective for all fiscal quarters beginning after June 15, 1999. Under existing practice, there exist a variety of bases on which derivatives are reported on the balance sheet. SFAS 133 establishes a new model which supersedes and amends a number of existing standards. This Statement requires that all derivatives be recorded in the balance sheet as either assets or liabilities and be measured at fair value. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Company's use of derivatives relate principally to hedging activities in order to fix the future price of certain ingredients. Management is in the process of evaluating this standard and has not yet determined the future impact on the consolidated financial statements upon adoption. YEAR 2000 COMPUTER ISSUE The company has completed its year 2000 assessment of all of its computer systems which includes business software applications, operating systems and data bases, electronic data interchange (EDI), system networks, manufacturing controllers and facility management systems. The Company has substantially completed its assessment of its key customers, suppliers and outside organizations, such as banks and sales brokers, in order to evaluate their Year 2000 readiness. All of the Company's Year 2000 compliance efforts are now substantially complete, and management has not ascertained any exception that in its opinion could have material adverse consequences to the Company. Most of the Company's mission critical business applications are Year 2000 compliant because they are Oracle-based software applications that operate within the Oracle data base. These systems utilize modern technologies where year 2000 dates are not problematic. However, the Company is in the process of upgrading these systems to the version or release that has been Year 2000 "certified" by the software vendor. The Company has further completed its Year 2000 remediation project at its Mexican operations and is in the process of completing system testing. Based on the progress to date, as well as the Company's ongoing assessment of this matter, no contingency plans are expected to be needed, and therefore, none have been developed. However, the Company continues to monitor its Year 2000 issues, and if necessary, the Company will prepare a contingency plan to mitigate any identifiable risks. The cost associated with Year 2000 compliance is not incremental to the Company, but principally represents a reallocation of existing resources. The remediation and testing effort is being accomplished with existing staff. The incremental cost is not expected to exceed $100,000. The Company's assessment of Year 2000 compliance issues is a forward looking statement subject to risk and uncertainties. If the Company's assessment of its systems is in error, remediation work is not completed properly, or key suppliers or other third parties are not Year 2000 compliant, then resulting problems could have a material adverse effect on the Company's operations. However, Company management believes that material adverse consequences are unlikely based on its assessment of the Company's systems and results to date on its Year 2000 compliance plan. PART II - OTHER INFORMATION TOOTSIE ROLL INDUSTRIES, INC AND SUBSIDIARIES - NONE - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TOOTSIE ROLL INDUSTRIES, INC. Date: May 10, 1999 BY: Melvin J. Gordon Chairman of the Board BY: G. Howard Ember Vice President - Finance -7- EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QTR 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AND CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 Dec-31-1999 Jan-01-1999 Apr-03-1999 3-MOS 76,566 74,227 28,389 2,082 44,403 230,245 168,638 82,631 502,156 56,820 7,500 0 0 34,231 372,633 502,156 74,200 74,200 35,384 21,332 (1,956) 45 91 19,349 7,024 12,325 0 0 0 12,325 .25 .25
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