-----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, MFMN8/N8rBlJvt13ZXLVavRoRwzd5iFPgQ2l3MkAlSc4EOTyvAPohNVPphzyBu7l dxyxCQPhVY2zMbk3c0huIg== 0000098677-99-000011.txt : 19990813 0000098677-99-000011.hdr.sgml : 19990813 ACCESSION NUMBER: 0000098677-99-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19990812 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: 99685211 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 INDUSTRIES, INC. 10-Q ENDING 07/03/99 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 July 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 practicable date. Class Outstanding Common Stock, $.69 4/9 par value 33,241,555 Class B Common Stock, $.69 4/9 par value 15,808,093 PART I - FINANCIAL INFORMATION TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) ASSETS July 3, June 27, Dec. 31, CURRENT ASSETS 1999 1998 1998 Cash & Cash Equiv. $ 64,416,400 $ 42,422,848 $ 80,743,591 Investments 62,101,985 83,068,342 83,176,169 Trade Accounts Receivable, Less Allowances of $2,110,000,$2,242,000 & $2,184,000 15,400,062 16,479,410 19,110,304 Other Receivables 5,885,236 7,625,237 3,324,145 Inventories, at Cost (Last-in,First-out): Finished Goods & Work in Process 42,067,331 44,760,913 21,394,685 Raw Material & Supplies 18,695,793 18,844,947 15,125,269 Prepaid Expenses 5,567,276 5,891,727 3,081,281 Deferred Income Taxes 2,584,000 1,793,000 2,584,000 Total Current Assets 216,718,083 220,886,424 228,539,444 PROPERTY, PLANT & EQUIPMENT, (at cost) Land 7,774,820 6,895,294 7,773,504 Buildings 22,246,583 22,144,888 22,226,017 Machinery & Equipment 144,524,357 129,510,930 133,601,378 174,545,760 158,551,112 163,600,899 Less-Accumulated Depreciation 84,692,076 77,607,078 80,577,319 89,853,684 80,944,034 83,023,580 OTHER ASSETS Intangible assets, net of accumulated amortization of $22,144,000, $19,438,000, & $20,791,000 86,489,854 89,196,153 87,843,004 Investments 76,146,068 46,556,761 59,252,305 Cash Surrender Value of Life Insurance and Other Assets 32,266,776 24,491,287 28,764,817 194,902,698 160,244,201 175,860,126 Total Assets $501,474,465 $462,074,659 $487,423,150
(UNAUDITED) LIABILITIES AND SHAREHOLDERS( EQUITY July 3, June 27, Dec. 31, CURRENT LIABILITIES 1999 1998 1998 Notes Payable to Banks $ -- $ 7,000,000 $ -- Accounts Payable 13,026,031 10,049,803 12,449,800 Dividends Payable 3,070,307 2,525,616 2,513,774 Accrued Liabilities 28,478,519 31,338,177 31,297,560 Income Taxes Payable 10,108,155 6,932,280 7,123,316 Total Current Liabilities 54,683,012 57,845,876 53,384,450 NON-CURRENT LIABILITIES Ind.Dev.Bonds 7,500,000 7,500,000 7,500,000 Post Retirement Benefits 6,327,717 6,068,347 6,144,943 Deferred Compensation and Other Liabilities 16,716,917 13,089,880 14,922,897 Deferred Income Taxes 8,516,992 8,274,497 9,014,031 Total Non-Current Liabilities 39,061,626 34,932,724 37,581,871 SHAREHOLDERS( EQUITY Common Stk., $.69-4/9 par value- 50,000,000 shares author. 33,241,555, 32,610,182 & 32,438,988, respectively, issued and outstanding 23,084,205 22,645,749 22,526,866 Class B Common Stk $.69-4/9 par value- 20,000,000 shares author. 15,808,093,15,496,638 & 15,422,232, respectively, issued 10,977,743 10,761,454 10,709,784 Capital in Excess of Par Value 264,695,118 219,169,952 210,063,413 Retained Earnings 120,459,556 127,281,538 164,652,120 Accumulated Other Comprehensive Earnings (9,495,392) (10,562,634) (10,522,766) Treasury Stock (at cost)- 50,000, 0 & 25,000, shares respectively (1,991,403) -- (972,588) Total Shareholders( Equity 407,729,827 369,296,059 396,456,829 Total Liabilities and Shareholders( Equity $501,474,465 $462,074,659 $487,423,150
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS (NOTE 1) (UNAUDITED) 13 Weeks Ended 26 Weeks Ended July 3, 1999 & June 27, 1998 July 3, 1999 & June 27,1998 1999 1998 1999 1998 NET SALES (Note 2) $ 88,265,054 $ 85,930,837 $162,464,568 $155,631,680 Cost of goods sold 42,363,471 40,798,091 77,747,726 73,532,953 Gross Margin 45,901,583 45,132,746 84,716,842 82,098,727 Selling, Marketing and Administrative Expense 23,853,618 23,953,841 44,509,021 43,735,492 Amortization of Intangible Assets 676,575 676,575 1,353,150 1,353,150 Earnings from Operations 21,371,390 20,502,330 38,854,671 37,010,085 Other Income, Net 1,785,404 1,285,104 3,650,891 2,447,866 Earnings before Income Taxes 23,156,794 21,787,434 42,505,562 39,457,951 Provision for Income Taxes 8 406,000 7,877,000 15,430,000 14,331,000 Net Earnings (Note 5) $ 14,750,794 $ 13,910,434 $ 27,075,562 $ 25,126,951 Net Earnings $ 14,750,794 $ 13,910,434 $ 27,075,562 $ 25,126,951 Other Comprehensive Earnings, Net of Tax 251,254 444,545 1,027,374 906,131 Comprehensive Earnings $ 15,002,048 $ 14,354,979 $ 28,102,936 $ 26,033,082 Retained Earnings at Beginning of Period $108,775,945 $115,896,720 $164,652,120 $159,123,991 Net Earnings 14,750,794 13,910,434 27,075,562 25,126,951 Cash Dividends (3,067,183) (2,525,616) (5,578,594) (4,455,955) Stock Dividends - 3% -- -- (65,689,532) (52,513,449) Retained Earnings at End of Period $120,459,556 $127,281,538 $120,459,556 $127,281,538 Net Earnings per Share (Note 3) $ .30 $ .28 $ .55 $ .51 Dividends per Share * $ .0625 $ .0525 $ .115 $ .09375 Average Number of Shares Outstanding (Notes 3 & 4) 49,173,123 49,551,248 49,213,505 49,563,977 *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 on 6/22/98.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 26 Weeks Ended July 3, 1999 & June 27, 1998 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $27,075,562 $25,126,951 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 5,358,053 5,899,590 (Increase) decrease in assets: Accounts receivable 3,812,043 2,155,441 Other receivables (2,561,091) (2,942,623) Inventories (23,938,035) (26,951,052) Prepaid expenses and other assets (5,547,302) (6,660,362) Increase (decrease) in liabilities: Accounts payable and accrued liabilities (2,304,943) (1,066,339) Income taxes payable and deferred 2,556,483 (703,406) Postretirement health care and life insurance benefits 182,774 163,754 Deferred compensation and other liabilities 1,794,020 3,007,462 Other 282,509 160,821 Net cash provided by (used in) operating activities 6,710,073 (1,809,763) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (10,955,007) (9,088,412) Purchase of held to maturity securities (104,311,000) (73,647,614) Maturity of held to maturity securities 110,330,442 66,944,226 Purchase of available for sale securities (79,297,278) (74,978,240) Sale and maturity of available for sale securities 77,468,984 74,874,377 Net cash (used in) investing activities (6,763,859) (15,895,663) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of notes payable -- 7,000,000 Purchase of treasury stock (1,018,815) -- Shares repurchased and retired (10,051,416) (3,194,858) Dividends paid in cash (5,203,174) (4,109,441) Net cash used in financing activities (16,273,405) (304,299) Decrease in cash and cash equivalents (16,327,191) (18,009,725) Cash and cash equivalents-beginning of year 80,743,591 60,432,573 Cash and cash equivalents-end of quarter $64,416,400 $42,422,848 Supplemental cash flow information: Income taxes paid $12,688,000 $15,253,000 Interest paid $ 385,000 $ 272,000
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JULY 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 July 3, 1999 amounted to $44,700,000. 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 and the 2-for-1 stock split distributed on July 13, 1998. Note 5 - Results of operations for the period ended July 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 Second Quarter of 1999 Note 7 - Sales of unregistered Securities - None. Note 8 - New Accounting Pronouncement Effective January 1, 1998, Tootsie Roll adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement requires that all items recognized under accounting standards as components of comprehensive earnings be reported in an annual financial statement that is displayed with the same prominence as other annual financial statements. Such components may include foreign currency translation adjustments and unrealized gains and losses on marketable securities classified as available for sale. Annual financial statements for prior periods will be reclassified as required. The Company(s total comprehensive income was as follows: (in thousands) 13 Weeks Ended July 3, 1999 June 27, 1998 Net earnings $14,751 $13,910 Other comprehensive gain 251 445 Total comprehensive earnings $15,002 $14,355 (in thousands) 26 Weeks Ended July 3, 1999 June 27, 1998 Net earnings $27,076 $25,127 Other comprehensive gain (loss) 1,027 906 Total comprehensive earnings $28,103 $26,033 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: Second Quarter, 1999 Second Quarter vs. 1999 1998 Second Quarter, 1998 $88,265,054 $85,930,837 +2.7% First Half, 1999 First Half vs. 1999 1998 First Half, 1998 $162,464,568 $155,631,680 +4.4% Second Quarter 1999 net sales of $88,265,000, a record, were up 2.7% from the Second Quarter 1998 net sales of $85,931,000. First Half 1999 net sales of $162,465,000 were up 4.4% from First Half 1998 net sales of $155,632,000. Second Quarter 1999 net sales of $88,265,000 were up 19.0% from First Quarter 1999 net sales of $74,200,000. This is not considered unusual as the First quarter of the year is historically the Company(s lowest sales quarter. Record sales for the Second Quarter and First Half of 1999 are the result of successful marketing and promotional programs as well as new products and product line extensions. These record sales are primarily the result of increased sales volume. COST OF SALES: Cost of Sales as a Second Quarter Percentage of Net Sales 1999 1998 2nd Qtr. 1999 2nd Qtr. 1998 $42,363,471 $40,798,091 48.0% 47.5% Cost of Sales as a First Half Percentage of Net Sales 1999 1998 1st Half 1999 1st Half 1998 $77,747,726 $73,532,953 47.9% 47.2% Cost of sales as a percentage of net sales increased slightly from 47.5% for the Second Quarter of 1998 to 48.0% for the Second Quarter of 1999. First Half cost of sales also increased slightly from 47.2% in 1998 to 47.9% for the same period in 1999. This increase generally reflects higher ingredient costs as well as higher labor and related fringe benefit costs. NET EARNINGS: Second Quarter, 1999 Second Quarter vs. 1999 1998 Second Quarter, 1998 $14,750,794 $13,910,434 +6.0% First Half, 1999 First Half vs. 1999 1998 First Half, 1998 $27,075,562 $25,126,951 +7.8% Second Quarter 1999 net earnings were $14,751,000, a record, compared to $13,910,000 in the Second Quarter 1998. Second Quarter 1999 earnings per share of $.30 were up 7% over Second Quarter 1998 earnings per share of $.28. First Half 1999 net earnings were $27,076,000 compared to prior year(s First Half 1998 net earnings of $25,127,000. First Half 1999 earnings per share of $.55 were up 8% over First Half 1998 earnings per share of $.51. Second Quarter 1999 net earnings of $14,751,000 increased $2,426,000 or 19.7% from First Quarter 1999 net earnings of $12,325,000. The increase in net earnings for the Second Quarter and First Half of 1999 reflects higher sales and effective ongoing cost control programs which resulted in higher income from operations. Second Quarter 1999 income from operations was $21,371,000, an increase of 4% from Second Quarter 1998 income from operations of $20,502,000. Income from operations for the First Half 1999 increased 5% to $38,855,000 from $37,010,000 in the First Half of 1998. Other income in the Second Quarter and First Half benefited from decreased foreign exchange translation losses relating to the Company(s Mexican operations. The consolidated effective income tax rate remained at 36.3% for the First Half of both years. LIQUIDITY AND CAPITAL RESOURCES: The Company(s current ratio (current assets divided by current liabilities) is almost 4 to 1 as of the end of the Second 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, as amended by Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133", is effective for all fiscal years beginning after June 15, 2000. 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 supercedes 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 relates 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 of adoption on the consolidated financial statements. 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 also 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 vender. The Company has further completed its year 2000 remediation project at its Mexican operations including system testing, and no exceptions were detected that, in the opinion of management, could have material adverse consequences. 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 formally 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 Item 4. Submission of Matters to a Vote of Security-Holders At the Annual Meeting of Shareholders of the Company, held on May 3, 1999, the following number of votes were cast for the matters indicated: 1. For the election of five Directors of the Company by the holders of Common Shares and Class B Common Shares voting together: Broker Nominee For Withheld Abstain Non-vote Melvin J. Gordon 178,741,389 169,811 -0- -0- Ellen R. Gordon 178,742,219 169,981 -0- -0- Lana Jane Lewis-Brent 178,722,796 188,404 -0- -0- Charles W. Siebert 178,693,022 218,178 -0- -0- 2. Proposal to Amend the Articles of Incorporation For Withheld Abstain Common Shares and Class B Common Shares voting together 175,022,103 3,754,524 134,573 3. Proposal to ratify the appointment of PriceWaterhouseCoopers LLP as auditors for the fiscal year 1999: Broker For Withheld Abstain Non-vote Common Shares and Class B Common Shares voting together 177,016,461 1,717,382 177,357 -0- No other matters were submitted to a vote by ballot at the 1999 Annual Meeting. 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: August 9, 1999 BY: Melvin J. Gordon Chairman of the Board BY: G. Howard Ember Vice President - Finance EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND 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 Jul-01-1999 Apr-03-1999 6-MOS 64,416 62,102 23,395 2,110 60,763 216,718 174,546 84,692 501,474 54,683 7,500 0 0 34,062 373,669 501,474 162,465 162,465 77,748 45,862 (3,771) 252 120 42,506 15,430 27,076 0 0 0 27,076 .55 .55
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