-----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, OrZS0c4Dt4Xn33vMiHs0RikKGVDMzPNjVCoAaBNB2VA3IU9hxhUal3MGjr14LM3q AXmbsg3ni5/4k4COsHR65w== 0000912057-01-008695.txt : 20010330 0000912057-01-008695.hdr.sgml : 20010330 ACCESSION NUMBER: 0000912057-01-008695 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010329 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-K SEC ACT: SEC FILE NUMBER: 001-01361 FILM NUMBER: 1584520 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-K 1 a2043218z10-k.txt 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ TO _________________ 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 (IRS EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 7401 SOUTH CICERO AVENUE, CHICAGO, ILLINOIS 60629 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER: (773) 838-3400 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ------------------- COMMON STOCK - PAR VALUE $.69-4/9 PER SHARE NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: ----------------------------------------------------------- CLASS B COMMON STOCK - PAR VALUE $.69-4/9 PER SHARE 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / As of March 6, 2001, 33,018,174 shares of Common Stock, par value $.69-4/9 per share, were outstanding and the aggregate market value of the Common Stock (based upon the closing price of the stock on the New York Stock Exchange on such date) held by non-affiliates was approximately $913,533,690. As of March 6, 2001, 16,024,015 shares of Class B Common Stock, par value $.69-4/9 per share, were outstanding. Class B Common Stock is not traded on any exchange, is restricted as to transfer or other disposition, but is convertible into Common Stock on a share-for-share basis. Upon such conversion, the resulting shares of Common Stock are freely transferable and publicly traded. Assuming all 16,024,015 shares of outstanding Class B Common Stock were converted into Common Stock, the aggregate market value of Common Stock held by non-affiliates on March 6, 2001 (based upon the closing price of the stock on the New York Stock Exchange on such date) would have been approximately $980,298,590. Determination of stock ownership by non-affiliates was made solely for the purpose of this requirement, and the Registrant is not bound by these determinations for any other purpose. DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of the Company's Annual Report to Shareholders for the year ended December 31, 2000 (the "2000 Report") are incorporated by reference in Parts I and II of this report. 2. Portions of the Company's Definitive Proxy Statement for the Company's 2001 Annual Meeting of Shareholders (the "2001 Proxy Statement") are incorporated by reference in Part III of this report.
TABLE OF CONTENTS ITEM 1. Business..............................................................1 ITEM 2. Properties............................................................2 ITEM 3. Legal Proceedings.....................................................3 ITEM 4. Submission of Matters to a Vote of Security Holders...................3 ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters...............................................................4 ITEM 6. Selected Financial Data...............................................4 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................4 ITEM 8. Financial Statements and Supplementary Data...........................4 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................5 ITEM 10. Directors and Executive Officers of the Registrant...................5 ITEM 11. Executive Compensation...............................................6 ITEM 12. Security Ownership of Certain Beneficial Owners and Management.......6 ITEM 13. Certain Relationships and Related Transactions.......................6 ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......6
-i- PART I ITEM 1. BUSINESS. Tootsie Roll Industries, Inc. and its consolidated subsidiaries (the "Company") have been engaged in the manufacture and sale of candy for over 100 years. This is the only industry segment in which the Company operates and is its only line of business. The majority of the Company's products are sold under the registered trademarks TOOTSIE ROLL, TOOTSIE ROLL POPS, CHILD'S PLAY, CARAMEL APPLE POPS, CHARMS, BLOW-POP, BLUE RAZZ, ZIP-A-DEE-DOO-DA POPS, CELLA'S, MASON DOTS, MASON CROWS, JUNIOR MINT, CHARLESTON CHEW, SUGAR DADDY, SUGAR BABIES, ANDES AND FLUFFY STUFF. The Company acquired the trademarks for Junior Mint, Charleston Chew, Sugar Daddy and Sugar Babies in 1993 along with the manufacturing assets of the former Chocolate/Caramel Division of Warner Lambert Company. In 2000, the Company acquired the trademarks for Andes and Fluffy Stuff along with their corresponding manufacturing assets for an aggregate purchase price of $74,293,000. The Company's products are marketed in a variety of packages designed to be suitable for display and sale in different types of retail outlets. They are distributed through approximately 100 candy and grocery brokers and by the Company itself to approximately 15,000 customers throughout the United States. These customers include wholesale distributors of candy and groceries, supermarkets, variety stores, chain grocers, drug chains, discount chains, cooperative grocery associations, warehouse and membership club stores, vending machine operators, and fund-raising charitable organizations. The Company's principal markets are in the United States, Canada and Mexico. The Company's Mexican plant supplies a very small percentage of the products marketed in the United States and Canada. The Company has advertised nationally for many years. Although nearly all advertising media have been used at one time or another, at present most of the Company's advertising expenditures are for the airing of network and syndicated television and cable and spot television in major markets throughout the country. The domestic candy business is highly competitive. The Company competes primarily with other manufacturers of bar candy and bagged candy of the type sold in variety, grocery, mass merchandisers, drug chains and convenience stores. Although accurate statistics are not available, the Company believes it is among the ten largest domestic manufacturers in this field. In the markets in which the Company competes, the main forms of competition comprise brand recognition as well as a fair price for our products at various retail price points. The Company did not have a material backlog of firm orders at the end of the calendar years 2000 or 1999. Packaging materials and ingredients used by the Company are readily obtainable from a number of suppliers at competitive prices. Packaging material costs, including films, cartons, corrugated containers and waxed paper, were stable in 2000. The Company continues to seek competitive bids to leverage the high volume of annual purchases it makes of these items and to lower per unit costs. The Company has engaged in hedging transactions primarily in sugar and corn syrup and may do so in the future if and when advisable. From time to time the Company changes the size of certain of its products, which are usually sold at standard retail prices, to reflect significant changes in raw material costs. The Company does not hold any material patents, licenses, franchises or concessions. The Company's major trademarks are registered in the United States and in many other countries. Continued trademark protection is of material importance to the Company's business as a whole. The Company does not expend significant amounts of money on research or development activities. The Company's compliance with Federal, State and local regulations which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect on the capital expenditures, earnings or competitive position of the Company nor does the Company anticipate any such material effects from presently enacted or adopted regulations. The Company employs approximately 1,950 persons. The Company has found that its sales normally maintain a consistent level throughout the year except for a substantial upsurge in the third quarter which reflects sales associated with Halloween. In anticipation of this high sales period, the Company generally begins its Halloween inventory build up in the second quarter of each year. The Company historically offers extended credit terms for sales made under Halloween sales programs. Each year, after Halloween receivables have been collected, the Company invests such funds in various temporary cash investments. Revenues from a major customer aggregated approximately 17.8%, 17.9% and 17.2% of total net sales during the years ended December 31, 2000, 1999 and 1998, respectively. For a summary of sales, net earnings and assets of the Company by geographic area and additional information regarding the foreign subsidiaries of the Company, see Note 12 of the Notes to Consolidated Financial Statements on Page 15 of the Company's Annual Report to Shareholders for the year ended December 31, 2000 (the "2000 Report") and on Page 4 of the 2000 Report under the section entitled "International." Note 12 and the aforesaid section are incorporated herein by reference. Portions of the 2000 Report are filed as an exhibit to this report. ITEM 2. PROPERTIES. The Company owns its principal plant and offices which are located in Chicago, Illinois in a building consisting of approximately 2,225,000 square feet. The Company utilizes approximately 1,825,000 square feet for offices, manufacturing and warehousing facilities and leases, or has available to lease to third parties, approximately 400,000 square feet. In addition to owning the principal plant and warehousing facilities mentioned above, the Company leases manufacturing and warehousing facilities at a second location in -2- Chicago which comprises 138,000 square feet. The lease is renewable by the Company every five years through June, 2011. The Company also periodically leases additional warehousing space at this second location as needed on a month to month basis. The Company's other principal manufacturing facilities, all of which are owned, are: LOCATION SQUARE FEET (a) -------- ----------- New York, New York 60,000 Covington, Tennessee 485,000 Cambridge, Massachusetts 142,000 Delevan, Wisconsin 162,000 Mexico City, Mexico 57,000 (a) Square footage is approximate and includes production, warehousing and office space. The Company owns substantially all of the production machinery and equipment located in its plants and considers that all of its facilities are well maintained, in good operating condition and adequately insured. ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings known to the Company to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the Company's shareholders through the solicitation of proxies or otherwise during the fourth quarter of 2000. ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT. See the information on Executive Officers set forth in the table in Part III, Item 10, Page 5 of this report, which is incorporated herein by reference. -3- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is traded on the New York Stock Exchange. The Company's Class B Common Stock is subject to restrictions on transferability and no market exists for such shares of Class B Common Stock. The Class B Common Stock is convertible at the option of the holder into shares of Common Stock on a share for share basis. As of March 6, 2001, there were approximately 9,500 holders of record of Common and Class B Common Stock. For information on the market price of, and dividends paid with respect to, the Company's Common Stock, see the section entitled "2000-1999 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Prices and Dividends" which appears on Page 16 of the 2000 Report. This section is incorporated herein by reference and filed as an exhibit to this report. ITEM 6. SELECTED FINANCIAL DATA. See the section entitled "Five Year Summary of Earnings and Financial Highlights" which appears on Page 17 of the 2000 Report. This section is incorporated herein by reference and filed as an exhibit to this report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. See the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 5-7 of the 2000 Report. This section is incorporated herein by reference and filed as an exhibit to this report. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. See the section entitled "Quantitative and Qualitative Disclosure of Market Risk and Other Matters" in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 7 of the 2000 Report. This section is incorporated herein by reference and filed as an exhibit to this report. See Note 1 of the Notes of Consolidated Financial Statements on Page 12 of the 2000 Report, which is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements, together with the report thereon of PricewaterhouseCoopers LLP dated February 12, 2001, appearing on Pages 8-15 of the 2000 Report and the Quarterly Financial Data on Page 16 of the 2000 Report are incorporated by reference in this report. With the exception of the aforementioned information and the information incorporated in Items 1, 5, 6 and 7, the 2000 Report is not to be deemed filed as part of this report. -4- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. See the information with respect to the Directors of the Company which is set forth in the section entitled "Election of Directors" of the Company's Definitive Proxy Statement to be used in connection with the Company's 2001 Annual Meeting of Shareholders (the "2001 Proxy Statement"). Except for the last paragraph of this section relating to the compensation of Directors, this section is incorporated herein by reference. See the information in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's 2001 Proxy Statement, which section is incorporated herein by reference. The following table sets forth the information with respect to the executive officers of the Company:
Name Position (1) Age - ---- ------------ --- Melvin J. Gordon* Chairman of the Board and Chief Executive Officer (2) 81 Ellen R. Gordon* President and Chief Operating Officer (2) 69 G. Howard Ember Jr. Vice President/Finance 48 John W. Newlin Jr. Vice President/Manufacturing 64 Thomas E. Corr Vice President/Marketing and Sales 52 James M. Hunt Vice President/Distribution 58 Barry P. Bowen Treasurer 45
*A member of the Board of Directors of the Company (1) Mr. and Mrs. Gordon and Messrs. Newlin, Corr, Ember and Bowen have served in the positions set forth in the table as their principal occupations for more than the past eight years. Mr. Hunt has served in his position for the past eight years and in the fifteen years prior to that, served the Company in the positions of Director of Distribution and Assistant Vice President of Distribution. Mr. and Mrs. Gordon have also served as -5- President and Vice President, respectively of HDI Investment Corp., a family investment company. (2) Melvin J. Gordon and Ellen R. Gordon are husband and wife. ITEM 11. EXECUTIVE COMPENSATION. See the information set forth in the section entitled "Executive Compensation and Other Information" of the Company's 2001 Proxy Statement. Except for the "Report on Executive Compensation" and "Performance Graph," this section of the 2001 Proxy Statement is incorporated herein by reference. See the last paragraph of the section entitled "Election of Directors" of the 2001 Proxy Statement, which paragraph is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. For information with respect to the beneficial ownership of the Company's Common Stock and Class B Common Stock by the beneficial owners of more than 5% of said shares and by the management of the Company, see the sections entitled "Ownership of Common Stock and Class B Common Stock by Certain Beneficial Owners" and "Ownership of Common Stock and Class B Common Stock by Management" of the 2001 Proxy Statement. These sections of the 2001 Proxy Statement are incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K. (a) Financial Statements. The following financial statements and schedules are filed as part of this report: (1) Financial Statements (filed herewith as part of Exhibit 13): Report of Independent Accountants Consolidated Statements of Earnings, Comprehensive Earnings and Retained Earnings for the three years ended December 31, 2000 Consolidated Statements of Financial Position at December 31, 2000 and 1999 Consolidated Statements of Cash Flows for the three years ended December 31, 2000 -6- Notes to Consolidated Financial Statements (2) Financial Statement Schedule: Report on Independent Accountants on Financial Statement Schedule For the three years ended December 31, 2000 - Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (3) Exhibits required by Item 601 of Regulation S-K: See Index to Exhibits which appears following Financial Schedule II. No reports on Form 8-K were filed during the quarter ended December 31, 2000. FORWARD-LOOKING INFORMATION From time to time, in the Company's statements and written reports, including this report, the Company discusses its expectations regarding future performance by making certain "forward-looking statements." These forward-looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and actual results may differ materially from those expressed or implied herein. Consequently, the Company wishes to caution readers not to place undue reliance on any forward-looking statements. In connection with the "safe harbor provisions" of the Private Securities Litigation Reform Act of 1995, the Company notes the following factors which, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. Among the factors that could impact the Company's ability to achieve its stated goals are the following: (i) significant competitive activity, including advertising, promotional and price competition, and changes in consumer demand for the Company's products; (ii) fluctuations in the cost and availability of various raw materials; and (iii) inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance. In addition, the Company's results may be affected by general factors, such as economic conditions, political developments, currency exchange rates, interest and inflation rates, accounting standards, taxes, and laws and regulations affecting the Company in markets where it competes. -7- SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Tootsie Roll Industries, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TOOTSIE ROLL INDUSTRIES, INC. By: Melvin J. Gordon -------------------------------------- Melvin J. Gordon, Chairman of the Board of Directors and Chief Executive Officer Date: MARCH 27, 2001 -------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Melvin J. Gordon Chairman of the Board - ------------------------- of Directors and Chief Melvin J. Gordon Executive Officer (principal executive officer) March 27, 2001 Ellen R. Gordon Director, President - ------------------------- and Chief Operating Officer March 27, 2001 Ellen R. Gordon Charles W. Seibert Director - ------------------------- Charles W. Seibert March 27, 2001 Lana Jane Lewis-Brent Director March 27, 2001 - ------------------------- Lana Jane Lewis-Brent Richard P. Bergeman Director March 27, 2001 - ------------------------- Richard P. Bergeman G. Howard Ember Jr. Vice President, Finance March 27, 2001 - ------------------------- (principal financial G. Howard Ember Jr. officer and principal accounting officer) -8- REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Tootsie Roll Industries, Inc. Our audits of the consolidated financial statements referred to in our report dated February 12, 2001 appearing in the 2000 Annual Report to Shareholders of Tootsie Roll Industries, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Chicago, Illinois February 12, 2001 TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS DECEMBER 31, 2000, 1999 AND 1998
Additions Balance at charged to Balance at beginning costs and End of Description of year expenses Deductions(1) Year - ----------- ------------ ----------- -------------- -------------- 2000: Reserve for bad debts $1,751,000 $298,228 $250,228 $1,799,000 Reserve for cash discounts 281,000 7,761,472 7,694,472 348,000 ------- --------- --------- ------- $2,032,000 $8,059,700 $7,944,700 $2,147,000 ========== ========== ========== ========== 1999: Reserve for bad debts $1,898,000 $275,289 $422,289 $1,751,000 Reserve for cash discounts 286,000 7,116,112 7,121,112 281,000 ------- --------- --------- ------- $2,184,000 $7,391,401 $7,543,401 $2,032,000 ========== ========== ========== ========== 1998: Reserve for bad debts $1,811,000 $275,920 $188,920 $1,898,000 Reserve for cash discounts 274,000 7,599,163 7,587,163 286,000 ------- --------- --------- ------- $2,085,000 $7,875,083 $7,776,083 $2,184,000 ========== ========== ========== ==========
(1) Deductions against reserve for bad debts consist of accounts receivable written off net of recoveries and exchange rate movements. Deductions against reserve for cash discounts consist of allowances to customers. INDEX TO EXHIBITS 2.1 Asset Sale Agreement dated September 29, 1993 between Warner-Lambert Company and the Company, including a list of omitted exhibits and schedules. Incorporated by reference to Exhibit 2 to the Company's Report on Form 8-K dated October 15, 1993; Commission File No. 1-1361. The Company hereby agrees to provide the Commission, upon request, copies of any omitted exhibits or schedules required by Item 601(b)(2) of Regulation S-K. 3.1 Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997; Commission File No. 1-1361. 3.2 Amendment to Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999; Commission File No. 1-1361. 3.3 Amended and Restated By-Laws . Incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996; Commission File No. 1-1361. 3.4 Specimen Class B Common Stock Certificate. Incorporated by reference to Exhibit 1.1 of the Company's Registration Statement on Form 8-A dated February 29, 1988. 10.8.1* Excess Benefit Plan. Incorporated by reference to Exhibit 10.8.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1990; Commission File No. 1-1361. 10.8.2* Amended and Restated Career Achievement Plan of the Company. Incorporated by reference to Exhibit 10.8.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998; Commission File No. 1-1361. 10.8.3* Amendment to the Amended and Restated Career Achievement Plan of the Company. Incorporated by reference to Exhibit 10.8.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999; Commission File No. 1-1361. 10.12* Restatement of Split Dollar Agreement (Special Trust) between the Company and the trustee of the Gordon Family 1993 Special Trust dated January 31, 1997. Incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996; Commission File No. 1-1361. 10.21* Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and G. Howard Ember Jr. dated July 30, 1994. Incorporated by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361. 10.22* Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and John W. Newlin dated July 30, 1994. Incorporated by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361. 10.23* Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and Thomas E. Corr dated July 30, 1994. Incorporated by reference to Exhibit 10.23 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361. 10.24* Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and James Hunt dated July 30, 1994. Incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994; Commission File No. 1-1361. 10.25* Form of Change In Control Agreement dated August, 1997 between the Company and certain executive officers. Incorporated by reference to Exhibit 10.25 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997; Commission File No. 1-1361. 10.26* Executive Split Dollar Insurance and Collateral Assignment Agreement between the Company and Barry Bowen dated April 1, 1997. Incorporated by reference to Exhibit 10.26 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997; Commission File No. 1-1361. 10.27* Amendment to Split Dollar Agreement (Special Trust) dated April 2, 1998 between the Company and the trustee of the Gordon Family 1993 Special Trust, together with related Collateral Assignments. Incorporated by reference to Exhibit 10.27 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998; Commission File No. 1-1361. 10.28* Tootsie Roll Industries, Inc. Bonus Incentive Plan. Incorporated by reference to Exhibit A of the Company's Proxy Statement dated March 27, 1997; Commission File No. 1-1361. 10.29* Tootsie Roll Industries, Inc. 2001 Bonus Incentive Plan. Incorporated by reference to Exhibit A of the Company's Proxy Statement dated March 30, 2001; Commission File No. 1-1361. 13 The following items incorporated by reference herein from the Company's 2000 Annual Report to Shareholders for the year ended December 31, 2000 (the "2000 Report"), are filed as Exhibits to this report: (i) Information under the section entitled "International" set forth on Page 4 of the 2000 Report; (ii) Information under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth on Pages 5-7 of the 2000 Report; (iii) Consolidated Statements of Earnings, Comprehensive Earnings and Retained Earnings for the three years ended December 31, 2000 set forth on Page 8 of the 2000 Report; (iv) Consolidated Statements of Financial Position at December 31, 2000 and 1999 set forth on Pages 9-10 of the 2000 Report; (v) Consolidated Statements of Cash Flow for the three years ended December 31, 2000 set forth on Page 11 of the 2000 Report; (vi) Notes to Consolidated Financial Statements set forth on Pages 12-15 of the 2000 Report; (vii) Report of Independent Accountants set forth on Page 15 of the 2000 Report; (viii) Quarterly Financial Data set forth on Page 16 of the 2000 Report; (ix) Information under the section entitled "2000-1999 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Prices and Dividends" set forth on Page 16 of the 2000 Report; and (x) Information under the section entitled "Five Year Summary of Earnings and Financial Highlights" set forth on Page 17 of the 2000 Report. 21 List of Subsidiaries of the Company.
- -------------------------------------- *Executive compensation plan or arrangement. EX-13 2 a2043218zex-13.txt ANNUAL REPORT CORPORATE PROFILE Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of candy for 104 years. Our products are primarily sold under the familiar brand names, Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child's Play, Charms, Blow Pop, Blue Razz, Cella's, Mason Dots, Mason Crows, Junior Mints, Charleston Chew, Sugar Daddy, Sugar Babies, Andes and Fluffy Stuff. CORPORATE PRINCIPLES We believe that the differences among companies are attributable to the caliber of their people, and therefore we strive to attract and retain superior people for each job. We believe that an open family atmosphere at work combined with professional management fosters cooperation and enables each individual to maximize his or her contribution to the company and realize the corresponding rewards. We do not jeopardize long-term growth for immediate, short-term results. We maintain a conservative financial posture in the deployment and management of our assets. We run a trim operation and continually strive to eliminate waste, minimize cost and implement performance improvements. We invest in the latest and most productive equipment to deliver the best quality product to our customers at the lowest cost. We seek to outsource functions where appropriate and to vertically integrate operations where it is financially advantageous to do so. We view our well known brands as prized assets to be aggressively advertised and promoted to each new generation of consumers. [PHOTO] MELVIN J. GORDON, CHAIRMAN AND CHIEF EXECUTIVE OFFICER AND ELLEN R. GORDON, PRESIDENT AND CHIEF OPERATING OFFICER. [TOOTSIE ROLL LOGO] 1 TO OUR SHAREHOLDERS - ------------------------------------------------------------------------ We are pleased to report that Tootsie Roll Industries once again posted record operating results in 2000. Sales reached $427 million, a record high for the twenty-fourth consecutive year and an 8% increase over 1999 sales of $397 million. Sales growth is attributed to a strong Halloween selling season and successful promotional programs, as well as additional sales from businesses that were acquired during the year. Earnings per share reached $1.53, an increase of 9% over 1999 earnings per share of $1.41. Net earnings reached $76 million, an increase of 6% over 1999 net earnings of $71 million. This was the nineteenth consecutive year of record earnings. Earnings per share increased by a higher percentage than net earnings due to the lower number of average shares outstanding in 2000. The financial resources we have carefully cultivated through the years enabled us to take several key actions in 2000: - Cash dividends were paid for the fifty-eighth consecutive year, and - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
December 31, 2000 1999 - ------------------------------------------------------------------------------------------------------- (in thousands except per share data) Net Sales................................................... $427,054 $396,750 Net Earnings................................................ 75,737 71,310 Working Capital............................................. 145,765 168,423 Net Property, Plant and Equipment................................................ 131,118 95,897 Shareholders' Equity........................................ 458,696 430,646 Average Shares Outstanding*................................. 49,434 50,412 Per Share Items* Net Earnings............................................... $1.53 $1.41 Shareholders' Equity....................................... 9.36 8.62 Cash Dividends Paid........................................ .27 .23 - -------------------------------------------------------------------------------------------------------
*Based on average shares outstanding adjusted for stock dividends. - -------------------------------------------------------------------------------- the quarterly rate was increased by 15%. - Our thirty sixth consecutive stock dividend was distributed. - 957,450 of the company's common shares were repurchased in the open market. - Significant capital was invested in plant and equipment to improve efficiency and to support future sales growth. - Two branded candy businesses were acquired. While we anticipate that the investments we undertook this year will contribute to our operations in years to come, our financial position remains strong, giving us the flexibility to react to new investment opportunities, including acquisitions, which may arise in the future. SALES AND MARKETING Record sales levels reached in 2000 were largely the result of acquisitions and continued execution of sales and marketing programs that have proven successful in recent years. These efforts and the acquired product lines helped us gain access to new distribution opportunities for our product lines. They also helped us to sustain the traditionally high sell-through that makes our products appealing to retailers and distributors alike across all trade classes. A significant portion of our sales and marketing effort was again directed at Halloween, which has long been our most significant selling period, and remained so this year. Our bagged goods, including variety packs comprised of popular product assortments offered at value oriented price points, continued to move well through supermarket, mass merchandise, drug and warehouse club channels. In the area of merchandising, we expanded our use of display ready cases at Halloween and throughout the year. These cases are printed in vivid colors and feature convenient, removable side panels that improve product visibility and brand recognition at the retail level. We also expanded distribution of freestanding floor displays, both with mixed assortments and with straight goods. Specialized, retailer-oriented merchandising adaptations such as these ensure that our venerable brands retain their place in the contemporary retail environment. Another way we have worked to retain a contemporary market for - ------------------------------------------------------------------------ 2 - ------------------------------------------------------------------------ our products is through product extensions. This year we introduced Wild Berry Dots, a new flavor profile in the Dots line that features tart berry flavors sprinkled with super-sour flavor crystals. [PICTURE] We also extended the Charleston Chew brand with the expansion of Mini Charleston Chews, a bite-sized version that consumers can share with friends or save for later in the convenient, recloseable box. [PICTURE] We have further grown our business through seasonal offerings of bagged goods at Valentine's Day, Easter and Christmas. Festive graphics and attractive price points increasingly make these holidays occasions for consumers to bring home Tootsie Roll products. Additionally, sales in our seasonal line came from our 2000 Christmas tin, the latest in a collectable series. Collectable tins help to create an important and nostalgic impression of our brands. [PICTURE] Lastly, sales growth in 2000 was positively impacted by two acquisitions completed during the first half of the year. ACQUISITIONS Both children and adults have long enjoyed cotton candy at special events such as fairs, carnivals and the circus. In February we acquired the assets of a small manufacturer that, after many years of research and development, perfected a way to mass produce commercial quantities of this melt-in-your-mouth treat in attractive, shelf-stable packages. Sold under the brand name Charms Fluffy Stuff, we hope to expand distribution of this unique confection to the range of outlets and trade classes where our other products are sold, and make Fluffy Stuff a special treat that is available every day. This acquisition included a production facility in Maryland. [PICTURE] In May we acquired Andes Candies, a more familiar, but equally unique confection, along with its production facility located in Wisconsin. Andes products are easily recognizable for their attractive foil wrappers and distinctive rectangular shape. The most popular flavor in the Andes line is Cream de Menthe, a 50 year old confection. It consists of a thin layer of refreshing green mint, sandwiched between two layers of chocolaty goodness and is wrapped in green foil. During the last half of the year we successfully absorbed both the Fluffy Stuff and the Andes businesses into our own. Our sales and marketing organizations quickly integrated both product lines and we are well along in the task of developing appropriate promotional strategies for these new items. [PICTURE] ADVERTISING AND PUBLIC RELATIONS We continued to utilize television to bring our advertising message to children and adults during 2000. Network, spot and cable T. V. carried a variety of targeted themes including the classic "How Many Licks?" featuring Tootsie Pops, along with "That's a Blow Pop" and several other commercials that were run on prominent cartoon, game and adventure shows. Tootsie Rolls have been included in military rations for many years, and in 2000 we were honored to participate in a reunion marking the 50th anniversary of the Korean War Battle of the Chosin Reservoir. This battle was noteworthy both because our 15,000 Marine and Army troops were outnumbered by 120,000 Chinese enemy troops and because of the harsh, 36 degree below zero temperatures our men had to endure. Time and - -------------------------------------------------------------------------------- 3 - ------------------------------------------------------------------------ again we heard poignant stories from Marine veterans who survived for days on Tootsie Rolls and Charms squares because their regular food rations were frozen solid. It was gratifying to participate in the events honoring the "Chosin Few" brave survivors of one of the most famous military battles ever fought by the U.S. armed forces. Numerous articles and stories appeared during the year in recognition of the company and its accomplishments. Most notably, our Chairman and Chief Executive Officer was ranked as the top performing executive in the food/ beverage category by Chief Executive magazine, and our President and Chief Operating Officer shared her management insights in a number of publications including Fortune and Executive Excellence magazines. Tootsie Roll was also honored as one of the "100 Best Corporate Citizens" by Business Ethics magazine. CAPITAL EXPENDITURES Our capital expenditure program continues to focus on initiatives that increase capacity, improve product quality, or reduce cost. Capital expenditures in 2000 were $16 million, encompassing a variety of projects including enhanced environmental air control, additional kitchen capacity and state of the art inspection systems to keep up with increased throughput. Also during 2000 we completed our first headquarters expansion and renovation in 14 years and commenced construction to increase the size of our Tennessee distribution center. Both of these projects provide infrastructure needed to support the integration of recent acquisitions as well as general growth in our business. INFORMATION TECHNOLOGY With the Year 2000 software issue behind us, we focused on two key initiatives this year. First was the successful integration of the two acquisitions into our business systems. Secondly, we commenced projects involving several critical business applications. Although these do not impact our general operating system, these subsystems must evolve in order to take full advantage of current technologies and to keep pace with the ever-changing environment in which we do business. Methodologies that were quite acceptable even a few years ago can quickly become outdated. We are committed to deploying leading edge practices and technologies in every aspect of our operations and view our information technologies as a prime strategic tool for future growth. PURCHASING Prices for key raw materials were generally favorable during the year, although savings in this category were partially offset by increased costs for packaging materials. Management tools such as our commodity hedging program and competitive bidding process help to ensure that the company's purchases are sourced as economically as possible. Also during 2000 we successfully incorporated the purchasing of ingredients and packaging for Andes and Fluffy Stuff into our centralized purchasing systems. INTERNATIONAL Sales grew in our Mexican operation as a result of marketing improvements, successful promotions and strong second half seasonal sales. Profits increased by an even greater percentage as a result of intensified cost control measures. Canadian sales were steady, with continued strength in bagged items at Halloween. Export sales grew due to the foreign sales of the companies acquired and accelerated sales and marketing efforts in selected markets for our existing core brands. We hope to build upon this base and develop synergies across product lines to further improve international distribution. IN APPRECIATION... We wish to thank the many loyal employees, customers, suppliers, sales brokers and foreign distributors with whom we work, as well as our shareholders who have been supportive through the years. While we are pleased with the record results achieved in 2000, we are committed to build upon them for the future. [SIGNATURE] Melvin J Gordon Chairman of the Board and Chief Executive Officer [SIGNATURE] Ellen R. Gordon President and Chief Operating Officer - ------------------------------------------------------------------------ 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in thousands except per share, percentage and ratio figures) - -------------------------------------------------------------------------------- EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC NET SALES Millions of dollars
1996 1997 1998 1999 2000 $341 $376 $389 $397 $427
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC NET EARNINGS Millions of dollars
1996 1997 1998 1999 2000 $47.2 $60.7 $67.5 $71.3 $75.7
FINANCIAL REVIEW This financial review discusses the company's financial condition, results of operations, liquidity and capital resources. It should be read in conjunction with the Consolidated Financial Statements and related footnotes that follow this discussion. FINANCIAL CONDITION Our financial condition remained strong in 2000, bolstered by another year of record profits. Net earnings rose from $71,310 in 1999 to $75,737 in 2000. Shareholders' equity increased by 6.5% from $430,646 in 1999 to $458,696 in 2000, due principally to the addition of these earnings, partially offset by stock repurchases of $32,945 and cash dividends declared of $13,350. The company has paid cash dividends for fifty-eight consecutive years. Shareholders also received a 3% stock dividend in 2000, the thirty-sixth consecutive year that one has been distributed. The company responded to several investment opportunities during the year. In February we acquired substantially all of the assets of a small manufacturer of shelf stable cotton candy. This product is sold under the brand name Charms Fluffy Stuff and is suitable for national distribution. In May we acquired substantially all of the assets of Andes Candies. Andes is best known as the maker of Andes Creme de Menthe Thins, a three layered, chocolaty rectangular mint sold nationally through a variety of outlets including supermarkets, drug chains and mass merchandisers. The combined $74,293 purchase price for these acquisitions was financed by a combination of cash and short term borrowings, which were paid off prior to year end. In addition, cash outflows during the year related to capital expenditures were $16,189. The company continues to be financed principally by funds generated from operations rather than with borrowed funds. The investments made in 2000 are reflected in the following ratios: current ratio declined from 4.0 to1 to 3.5 to 1; quick ratio declined from 3.2 to 1 to 2.7 to 1; current liabilities to net worth declined from 13.0% to 12.5% and debt to equity remained negligible at 1.6% compared to 1.7% a year ago. The company retains a conservative financial posture and sufficient capital to respond to future investment opportunities. Accordingly, we continue to seek appropriate acquisitions to complement our existing business. RESULTS OF OPERATIONS 2000 vs. 1999 Net sales increased in 2000 to $427,054, a record level for the twenty-fourth consecutive year and a 7.6% increase over 1999 sales of $396,750. Sales remained at the highest level in the third quarter, due to successful Halloween and Back to School promotions. Other factors contributing to sales increases during the year were growth across many of our core brands, gains in our seasonal lines, incremental business from product line extensions, increases in certain international markets and sales from acquired brands. Comparing quarterly sales in 2000 to those of 1999, increases were seen in each quarter. The third quarter showed the largest increase in dollar terms due to Halloween, and the fourth quarter showed the greatest growth in percentage terms due to $14,457 in sales from acquired brands. In the fourth quarter we experienced both increased competitive pressures and general softness throughout the segment of the industry in which we principally operate. 5 Cost of goods sold as a percentage of sales remained consistent at 48.5% in 2000 versus 48.5% in 1999. Raw material prices were generally favorable during the year but were offset by higher packaging costs and product mix variations, some of which are related to the acquired brands. The company continues to focus on cost control throughout all levels of its operations. Gross margin grew by 7.7% to $219,954 due to increased sales. As a percentage of sales, gross margin remained constant at 51.5% in 2000 versus 51.5% in 1999. Gross margins in the third and fourth quarters continue to be somewhat lower due to the seasonal nature of our business and the product mix sold in those quarters. Operating expenses, comprised of marketing, selling, advertising, physical distribution, general and administrative expenses, as a percentage of sales, increased slightly from 24.4% to 24.8%. Amortization of intangible assets increased from $2,706 to $3,420 reflecting the partial year impact of two acquisitions. Earnings from operations increased from $104,519 to $110,729, a 5.9% increase. Other income, consisting primarily of interest and dividend income net of interest expense was, $7,079 versus $6,928 last year. The effective tax rate of 35.7% was comparable to the prior year rate of 36.0%. Consolidated net earnings rose 6.2% to a new company record of $75,737. Our net earnings were 17.7% of sales in 2000 and 18.0% of sales in 1999. Earnings per share increased by 8.5% to a record $1.53 from the previous record of $1.41 reached in 1999. Earnings per share increased by a greater percentage than net earnings due to lower average shares outstanding during 2000 as a result of share repurchases made during the year. 2000 was the nineteenth year of record earnings achievement for the company. 1999 vs. 1998 1999 was our twenty-third consecutive year of record sales achievement. Sales of $396,750 were up 2.1% over 1998 sales of $388,659. The third quarter, driven by Halloween sales, continued to be our largest selling period and surpassed levels attained in previous years. Also in 1999, the timing of certain Halloween shipments had a favorable effect on the third quarter and a corresponding unfavorable impact on the fourth quarter as compared to the prior year. Throughout the year, sales were attributable to successful promotional programs as we continued to broaden distribution in mass merchandisers and other select trade classes with our core product offerings. Line extensions, new products and seasonal packs all contributed to added sales. Sales growth occurred in our two most significant foreign operations as well. In Mexico, stabilizing local conditions and aggressive new marketing and promotional programs complemented the already strong business we have developed for the Christmas holiday season in that market. Sales growth in our Canadian operation was attributable to another strong Halloween season coupled with further distribution gains in the mass merchandiser and grocery trade classes. Also, the new Way 2 Sour Blow Pop was successfully introduced in this market. Cost of goods sold, as a percentage of sales, remained steady at 48.5% versus 48.3%. This reflected generally stable cost levels for packaging and minor ingredients, although certain of our raw material costs did increase somewhat. These increases were largely offset by higher production efficiencies associated with increased volumes in relation to fixed costs. Gross margin dollars grew by 1.6% to $204,189, and remained steady as a percent of sales at 51.5% versus 51.7% in 1998, due to the factors cited above. Operating expenses as a percentage of sales, declined slightly from 25.7% to 25.1%. This improvement was due to effective expense control programs aimed at holding down costs. Earnings from operations increased by 3.2% to $104,519, or 26.3% of sales, as a result of favorable gross margins and operating expenses. Other income increased by $2,130 to $6,928, primarily reflecting significantly lower foreign exchange losses in Mexico where local economic conditions improved. Also, interest expense was lower and interest income was higher due to lower average borrowings and increased investments in marketable securities, respectively, during 1999. Interest income was also higher in 1999 due to higher interest rates. The effective tax rate was 36.0% in 1999 versus 36.3% in 1998. Consolidated net earnings rose 5.6% to a new company record of $71,310. Earnings per share increased by 6.0% to $1.41 from the previous record of $1.33 reached in 1998. Earnings per share increased by a greater percent than net earnings due to lower average shares outstanding during 1999 as a result of share repurchases made during the year. - ------------------------------------------------------------------------- 6 - ------------------------------------------------------------------------ EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC NET EARNINGS AS a % of Sales
1996 1997 1998 1999 2000 13.8 16.2 17.4 18.0 17.7
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC NET EARNINGS Per Share
1996 1997 1998 1999 2000 $0.92 $1.19 $1.33 $1.41 $1.53
Our net earnings as a percent of sales increased to 18.0% from 17.4%. 1999 was the eighteenth consecutive year of record earnings achievement for the company. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities increased to $84,881 in 2000 from $72,935 in 1999 and $77,735 in 1998. The increase in 2000 was principally attributable to higher net earnings, and the additional depreciation and amortization related to the acquired businesses. In 1999, the decrease in cash flows from operating activities was principally attributable to increases in other receivables and prepaid expenses and other assets. Also, depreciation expense was lower in 1999 due to foreign currency translation. Cash flows from investing activities in 2000 reflect $74,293 for the purchase of Fluffy Stuff and Andes Candies, capital expenditures of $16,189 and a net decrease in marketable securities of $24,015 which was used to help finance those expenditures. In 1999 capital expenditures were $20,283 and there was a net increase in marketable securities of $6,710. In 1998, capital expenditures were $14,878 and there was a net increase in marketable securities of $19,951. Cash flows from financing activities reflect share repurchases of $32,945, $26,869 and $13,445 in 2000, 1999 and 1998, respectively. Short term borrowings in 2000 were primarily related to the Andes acquisition which were subsequently repaid. In 1998 there was also a short term borrowing which was subsequently repaid during that same year. Cash dividends of $13,091, $11,313 and $9,150 were paid in 2000, 1999 and 1998, respectively. The increase in 2000 was 15.7% over 1999 and 2000 represented the fifty-eighth consecutive year in which we have paid cash dividends. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK AND OTHER MATTERS The company is exposed to various market risks, including fluctuations in sugar, corn, edible oils, cocoa and packaging costs. The company also invests in securities with maturities of up to three years, the majority of which are held to maturity, which limits the company's exposure to interest rate fluctuations. There has been no material change in the company's market risks during 2000. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The company has concluded that adoption of SFAS No. 133 will not have a material impact on the company's results of operations. The results of our operations and our financial condition are expressed in the following financial statements. - ------------------------------------------------------------------------ 7 - ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- 8 CONSOLIDATED STATEMENT OF EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data) - --------------------------------------------------------------------------------
For the year ended December 31, 2000 1999 1998 ---------------- ---------------- ---------------- Net sales.............................. $427,054 $396,750 $388,659 Cost of goods sold..................... 207,100 192,561 187,617 ---------------- ---------------- ---------------- Gross margin........................... 219,954 204,189 201,042 ---------------- ---------------- ---------------- Selling, marketing and administrative expenses............................. 105,805 96,964 97,071 Amortization of intangible assets...... 3,420 2,706 2,706 ---------------- ---------------- ---------------- Earnings from operations............... 110,729 104,519 101,265 Other income, net...................... 7,079 6,928 4,798 ---------------- ---------------- ---------------- Earnings before income taxes........... 117,808 111,447 106,063 Provision for income taxes............. 42,071 40,137 38,537 ---------------- ---------------- ---------------- Net earnings........................... $ 75,737 $ 71,310 $ 67,526 ================ ================ ================ Net earnings........................... $ 75,737 $ 71,310 $ 67,526 Other comprehensive earnings (loss), net of tax Unrealized gains (losses) on securities....................... (856) 930 976 Foreign currency translation adjustments...................... (394) 653 (30) ---------------- ---------------- ---------------- Other comprehensive earnings (loss)........................... (1,250) 1,583 946 ---------------- ---------------- ---------------- Comprehensive earnings................. $ 74,487 $ 72,893 $ 68,472 ================ ================ ================ Retained earnings at beginning of year................................. $158,619 $164,652 $159,124 Net earnings....................... 75,737 71,310 67,526 Cash dividends ($.27, $.23 and $.19 per share)....................... (13,350) (11,654) (9,484) Stock dividends.................... (40,883) (65,689) (52,514) ---------------- ---------------- ---------------- Retained earnings at end of year....... $180,123 $158,619 $164,652 ================ ================ ================ Earnings per share..................... $ 1.53 $ 1.41 $ 1.33 ================ ================ ================ Average common and class B common shares outstanding................... 49,434 50,412 50,920 ================ ================ ================
(The accompanying notes are an integral part of these statements.) - -------------------------------------------------------------------------------- 8 CONSOLIDATED STATEMENT OF FINANCIAL POSITION TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands) - --------------------------------------------------------------------------------
ASSETS December 31, 2000 1999 ---------------- ---------------- CURRENT ASSETS: Cash and cash equivalents............................... $ 60,882 $ 88,504 Investments............................................. 71,605 71,002 Accounts receivable trade, less allowances of $2,147 and $2,032................................................. 23,568 19,032 Other receivables....................................... 1,230 5,716 Inventories: Finished goods and work-in-process.................. 24,984 20,689 Raw materials and supplies.......................... 16,906 14,396 Prepaid expenses........................................ 2,685 3,124 Deferred income taxes................................... 1,351 2,069 ---------------- ---------------- Total current assets............................ 203,211 224,532 ---------------- ---------------- PROPERTY, PLANT AND EQUIPMENT, at cost: Land.................................................... 8,327 7,981 Buildings............................................... 36,937 30,330 Machinery and equipment................................. 183,858 145,789 ---------------- ---------------- 229,122 184,100 Less--Accumulated depreciation.......................... 98,004 88,203 ---------------- ---------------- 131,118 95,897 ---------------- ---------------- OTHER ASSETS: Intangible assets, net of accumulated amortization of $26,917 and $23,497.................................... 121,263 85,137 Investments............................................. 62,548 87,167 Cash surrender value of life insurance and other assets................................................. 44,302 36,683 ---------------- ---------------- 228,113 208,987 ---------------- ---------------- $562,442 $529,416 ================ ================
(The accompanying notes are an integral part of these statements.) - -------------------------------------------------------------------------------- 9 (in thousands except per share data) - --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 2000 1999 ---------------- ---------------- CURRENT LIABILITIES: Accounts payable........................................ $ 10,296 $ 12,845 Dividends payable....................................... 3,436 3,035 Accrued liabilities..................................... 33,336 31,945 Income taxes payable.................................... 10,378 8,284 ---------------- ---------------- Total current liabilities....................... 57,446 56,109 ---------------- ---------------- NONCURRENT LIABILITIES: Deferred income taxes................................... 12,422 9,520 Postretirement health care and life insurance benefits............................................... 6,956 6,557 Industrial development bonds............................ 7,500 7,500 Deferred compensation and other liabilities............. 19,422 19,084 ---------------- ---------------- Total noncurrent liabilities.................... 46,300 42,661 ---------------- ---------------- SHAREHOLDERS' EQUITY: Common stock, $.69-4/9 par value-- 120,000 and 120,000 shares authorized-- 32,986 and 32,854, respectively, issued............... 22,907 22,815 Class B common stock, $.69-4/9 par value-- 40,000 and 40,000 shares authorized-- 16,056 and 15,707, respectively, issued............... 11,150 10,908 Capital in excess of par value.......................... 256,698 249,236 Retained earnings, per accompanying statement........... 180,123 158,619 Accumulated other comprehensive earnings (loss)......... (10,190) (8,940) Treasury stock (at cost)-- 52 shares and 50 shares, respectively................. (1,992) (1,992) ---------------- ---------------- 458,696 430,646 ---------------- ---------------- $562,442 $529,416 ================ ================
- -------------------------------------------------------------------------------- 10 CONSOLIDATED STATEMENT OF CASH FLOWS TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands) - --------------------------------------------------------------------------------
For the year ended December 31, 2000 1999 1998 ---------------- ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings....................... $75,737 $71,310 $67,526 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization................. 13,314 9,979 12,807 (Gain) loss on retirement of fixed assets................. (46) (43) 118 Changes in operating assets and liabilities, excluding acquisitions: Accounts receivable........ (4,460) 400 (915) Other receivables.......... 4,486 (2,392) 1,358 Inventories................ (768) 1,592 (106) Prepaid expenses and other assets................... (7,903) (15,672) (7,723) Accounts payable and accrued liabilities...... (1,717) 968 (596) Income taxes payable and deferred................. 5,691 2,232 (625) Postretirement health care and life insurance benefits................. 399 412 241 Deferred compensation and other liabilities........ 337 4,162 5,004 Other...................... (189) (13) 646 ---------------- ---------------- ---------------- Net cash provided by operating activities....................... 84,881 72,935 77,735 ---------------- ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of businesses, net of cash acquired.................... (74,293) -- -- Capital expenditures............... (16,189) (20,283) (14,878) Purchase of held to maturity securities....................... (156,322) (238,949) (259,112) Maturity of held to maturity securities....................... 176,576 235,973 240,195 Purchase of available for sale securities....................... (78,993) (117,694) (217,799) Sale and maturity of available for sale securities.................. 82,754 113,960 216,765 ---------------- ---------------- ---------------- Net cash used in investing activities....................... (66,467) (26,993) (34,829) ---------------- ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of notes payable.......... 43,625 -- 7,000 Repayments of notes payable........ (43,625) -- (7,000) Treasury stock purchases........... -- (1,019) (973) Shares repurchased and retired..... (32,945) (25,850) (12,472) Dividends paid in cash............. (13,091) (11,313) (9,150) ---------------- ---------------- ---------------- Net cash used in financing activities....................... (46,036) (38,182) (22,595) ---------------- ---------------- ---------------- Increase (decrease) in cash and cash equivalents.......................... (27,622) 7,760 20,311 Cash and cash equivalents at beginning of year.............................. 88,504 80,744 60,433 ---------------- ---------------- ---------------- Cash and cash equivalents at end of year................................. $60,882 $88,504 $80,744 ================ ================ ================ Supplemental cash flow information: Income taxes paid.................. $35,750 $38,827 $40,000 ================ ================ ================ Interest paid...................... $ 1,067 $ 453 $ 803 ================ ================ ================
(The accompanying notes are an integral part of these statements.) - -------------------------------------------------------------------------------- 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ IN THOUSANDS EXCEPT PER SHARE DATA) TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: BASIS OF CONSOLIDATION: The consolidated financial statements include the accounts of Tootsie Roll Industries, Inc. and its wholly-owned subsidiaries (the company), which are primarily engaged in the manufacture and sale of candy products. All significant intercompany transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION AND OTHER ACCOUNTING PRONOUNCEMENTS: Revenues are recognized when products are shipped and delivered to customers. Shipping and handling costs of $26,661, $24,260 and $24,342 in 2000, 1999, 1998, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured. The Company adopted Securities and Exchange Commission Staff Accounting Bulletin No. 101, which clarifies the existing guidance on the recognition, presentation and disclosure of revenue in the financial statements, during the fourth quarter of 2000 with no material effect on its financial position or results of operations. As of January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), which was issued by the Financial Accounting Standards Board in 1998. The adoption of SFAS No. 133 will not have a material effect on the Company's results of operations or financial position. CASH AND CASH EQUIVALENTS: The company considers temporary cash investments with an original maturity of three months or less to be cash equivalents. INVESTMENTS: Investments consist of various marketable securities with maturities of generally less than one year. In accordance with Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting For Certain Investments in Debt and Equity Securities," the company's debt and equity securities are considered as either held to maturity, available for sale or trading. Held to maturity securities represent those securities that the company has both the positive intent and ability to hold to maturity and are carried at amortized cost. Available for sale securities represent those securities that do not meet the classification of held to maturity, are not actively traded and are carried at fair value. Unrealized gains and losses on these securities are excluded from earnings and are reported as a separate component of shareholders' equity, net of applicable taxes, until realized. Trading securities relate to deferred compensation arrangements and are carried at fair value. INVENTORIES: Inventories are stated at cost, not in excess of market. The cost of domestic inventories ($37,505 and $29,111 at December 31, 2000 and 1999, respectively) has been determined by the last-in, first-out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $2,993 and $5,008 at December 31, 2000 and 1999, respectively. The cost of foreign inventories ($4,385 and $5,974 at December 31, 2000 and 1999, respectively) has been determined by the first-in, first-out (FIFO) method. From time to time, the company enters into commodity futures and option contracts in order to fix the future price of certain key ingredients which may be subject to price volatility (primarily sugar and corn syrup). Gains or losses, if any, resulting from these contracts are considered as a component of the cost of the ingredients being hedged. At December 31, 2000 the company had open contracts to purchase most of its expected 2001 sugar usage. PROPERTY, PLANT AND EQUIPMENT: Depreciation is computed for financial reporting purposes by use of both the straight-line and accelerated methods based on useful lives of 20 to 35 years for buildings and 12 to 20 years for machinery and equipment. For income tax purposes the company uses accelerated methods on all properties. Depreciation expense was $10,069, $7,663 and $10,101 in 2000, 1999 and 1998, respectively. CARRYING VALUE OF LONG-LIVED ASSETS: In the event that facts and circumstances indicate that the company's long-lived assets may be impaired, an evaluation of recoverability would be performed. Such an evaluation entails comparing the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount to determine if a write down to market value or discounted cash flow value is required. The company considers that no circumstances exist that would require such an evaluation. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS: The company provides certain postretirement health care and life insurance benefits. The cost of these postretirement benefits is accrued during employees' working careers. INCOME TAXES: The company uses the liability method of computing deferred income taxes. INTANGIBLE ASSETS: Intangible assets represent the excess of cost over the acquired net tangible assets of operating companies and is amortized on a straight-line basis over a 15 to 40 year period. The company assesses the recoverability of its intangible assets using undiscounted future cash flows. FOREIGN CURRENCY TRANSLATION: During 1997, management determined that the Mexican economy was hyper-inflationary. Accordingly, the US dollar was used as the functional currency for the company's Mexican operations, and translation gains and losses were included in the determination of 1998 earnings. Effective January 1, 1999, management determined that the Mexican economy was no longer hyper-inflationary and designated the local currency as the functional currency. Accordingly, the net effect of translating the Mexican operations' financial statements was reported in a separate component of shareholders' equity beginning on January 1, 1999. COMPREHENSIVE EARNINGS: Comprehensive earnings includes net earnings, foreign currency translation adjustments and unrealized gains/losses on marketable securities. EARNINGS PER SHARE: A dual presentation of basic and diluted earnings per share is not required due to the lack of potentially dilutive securities under the company's simple capital structure. Therefore, all earnings per share amounts represent basic earnings per share. NOTE 2--ACQUISITIONS: During 2000, the company acquired the assets of two confectionery companies for $74,293 in cash, which was funded through existing cash and $38,800 of short term borrowings. The acquisition cost has been allocated to the assets acquired and liabilities assumed based on their respective appraised values as follows: Current assets....................................... $ 6,304 Property, plant and equipment........................ 29,400 Intangible assets, primarily trademarks.............. 39,546 Liabilities.......................................... (957) ------- Total purchase price................................. $74,293 =======
12 The acquisitions were accounted for by the purchase method. Accordingly, the operating results of the acquired businesses have been included in the consolidated financial statements since the date of acquisition. The operating results of the acquired businesses did not have a material effect on the company's financial statements. NOTE 3--ACCRUED LIABILITIES: Accrued liabilities are comprised of the following:
December 31, ---------------------- 2000 1999 -------- ------- Compensation.......................................... $10,069 $ 8,993 Other employee benefits............................... 4,107 4,067 Taxes, other than income.............................. 2,174 2,248 Advertising and promotions............................ 9,038 8,508 Other................................................. 7,948 8,129 ------- ------- $33,336 $31,945 ======= =======
NOTE 4--INCOME TAXES: The domestic and foreign components of pretax income are as follows:
2000 1999 1998 --------- -------- -------- Domestic............................... $115,823 $110,052 $106,667 Foreign................................ 1,985 1,395 (604) -------- -------- -------- $117,808 $111,447 $106,063 ======== ======== ========
The provision for income taxes is comprised of the following:
2000 1999 1998 -------- ------- ------- Current: Federal.................................. $33,908 $34,290 $34,373 Foreign.................................. 426 783 618 State.................................... 3,613 4,294 4,286 ------- ------- ------- 37,947 39,367 39,277 ------- ------- ------- Deferred: Federal.................................. 3,500 1,039 (250) Foreign.................................. 346 (388) (479) State.................................... 278 119 (11) ------- ------- ------- 4,124 770 (740) ------- ------- ------- $42,071 $40,137 $38,537 ======= ======= =======
Deferred income taxes are comprised of the following:
December 31, ---------------------- 2000 1999 -------- ------- Workers' compensation................................... $ 405 $ 396 Reserve for uncollectible accounts...................... 455 467 Other accrued expenses.................................. 1,397 1,214 VEBA funding............................................ (370) (347) Other, net.............................................. (536) 339 ------- ------- Net current deferred income tax asset................... $ 1,351 $ 2,069 ======= =======
December 31, ---------------------- 2000 1999 -------- ------- Depreciation........................................... $12,076 $10,563 Postretirement benefits................................ (2,345) (2,220) Deductible goodwill.................................... 7,855 5,647 Deferred compensation.................................. (6,174) (4,947) Accrued commissions.................................... 2,232 2,011 Foreign subsidiary tax loss carryforward............... (521) (1,898) Other, net............................................. (701) 364 ------- ------- Net long-term deferred income tax liability............ $12,422 $ 9,520 ======= =======
At December 31, 2000, gross deferred tax assets and gross deferred tax liabilities were $14,876 and $25,947, respectively. The effective income tax rate differs from the statutory rate as follows:
2000 1999 1998 -------- ----- ----- U.S. statutory rate............................ 35.0% 35.0% 35.0% State income taxes, net........................ 2.2 2.6 2.6 Amortization of intangible assets.............. 0.4 0.4 0.4 Other, net..................................... (1.9) (2.0) (1.7) ---- ---- ---- Effective income tax rate...................... 35.7% 36.0% 36.3% ==== ==== ====
The company has not provided for U.S. federal or foreign withholding taxes on $5,864 of foreign subsidiaries' undistributed earnings as of December 31, 2000 because such earnings are considered to be permanently reinvested. When excess cash has accumulated in the company's foreign subsidiaries and it is advantageous for tax or foreign exchange reasons, subsidiary earnings may be remitted, and income taxes will be provided on such amounts. It is not practicable to determine the amount of income taxes that would be payable upon remittance of the undistributed earnings. NOTE 5--SHARE CAPITAL AND CAPITAL IN EXCESS OF PAR VALUE:
Class B Capital in Common Stock Common Stock Treasury Stock excess ----------------- ----------------- ----------------- of par Shares Amount Shares Amount Shares Amount value ------- ------- ------- ------- ------- ------- ---------- (000's) (000's) (000's) Balance at January 1, 1998.... 15,851 $11,008 7,547 $ 5,241 -- $ -- $187,259 Issuance of 3% stock dividend..................... 473 329 225 156 -- -- 51,780 Purchase of shares for the treasury..................... -- -- -- -- (20) (973) -- Issuance of 2-for-1 stock split........................ 16,305 11,323 7,748 5,381 (5) -- (16,704) Conversion of Class B common shares to common shares...... 98 68 (98) (68) -- -- -- Purchase and retirement of common shares................ (288) (201) -- -- -- -- (12,271) ------ ------- ------ ------- --- ------- -------- Balance at December 31, 1998.. 32,439 22,527 15,422 10,710 (25) (973) 210,064 Issuance of 3% stock dividend..................... 971 674 461 320 (1) -- 64,514 Purchase of shares for the treasury..................... -- -- -- -- (24) (1,019) -- Conversion of Class B common shares to common shares...... 176 122 (176) (122) -- -- -- Purchase and retirement of common shares................ (732) (508) -- -- -- -- (25,342) ------ ------- ------ ------- --- ------- -------- Balance at December 31, 1999.. 32,854 22,815 15,707 10,908 (50) (1,992) 249,236 Issuance of 3% stock dividend..................... 969 673 470 326 (2) -- 39,742 Conversion of Class B common shares to common shares...... 121 84 (121) (84) -- -- -- Purchase and retirement of common shares................ (958) (665) -- -- -- -- (32,280) ------ ------- ------ ------- --- ------- -------- Balance at December 31, 2000.. 32,986 $22,907 16,056 $11,150 (52) $(1,992) $256,698 ====== ======= ====== ======= === ======= ========
The Class B Common Stock has essentially the same rights as Common Stock, except that each share of Class B Common Stock has ten votes per share (compared to one vote per share of Common Stock), is not traded on any exchange, is restricted as to transfer and is convertible on a share-for-share basis, at any time and at no cost to the holders, into shares of Common Stock which are traded on the New York Stock Exchange. Average shares outstanding and all per share amounts included in the financial statements and notes thereto have been adjusted retroactively to reflect annual three percent stock dividends and the two-for-one stock split distributed in 1998. NOTE 6--INDUSTRIAL DEVELOPMENT BONDS: Interest on industrial development bonds is payable at various times during the year based upon the interest calculation option (fixed, variable or floating) selected by the company. As of December 31, 2000 and 1999, interest was calculated under the floating option (4.7% in each of these years) which requires monthly payments of interest. Principal on the bonds is due in its entirety in the year 2027. In connection with the issuance of the bonds, the company entered into a letter of credit agreement with a bank for the amount of principal outstanding plus 48 days' accrued interest. The 13 letter of credit, which expires in January 2002, carries an annual fee of 32 1/2 basis points on the outstanding principal amount of the bonds. NOTE 7--EMPLOYEE BENEFIT PLANS: PENSION PLANS: The company sponsors defined contribution pension plans covering certain nonunion employees with over one year of credited service. The company's policy is to fund pension costs accrued based on compensation levels. Total pension expense for 2000, 1999 and 1998 approximated $2,535, $2,062 and $1,951, respectively. The company also maintains certain profit sharing and savings-investment plans. Company contributions in 2000, 1999 and 1998 to these plans were $754, $616 and $582, respectively. The company also contributes to multi-employer defined benefit pension plans for its union employees. Such contributions aggregated $787, $713 and $680 in 2000, 1999 and 1998, respectively. The relative position of each employer associated with the multi-employer plans with respect to the actuarial present value of benefits and net plan assets is not determinable by the company. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFIT PLANS: The company provides certain postretirement health care and life insurance benefits for corporate office and management employees. Employees become eligible for these benefits if they meet minimum age and service requirements and if they agree to contribute a portion of the cost. The company has the right to modify or terminate these benefits. The company does not fund postretirement health care and life insurance benefits in advance of payments for benefit claims. The changes in the accumulated postretirement benefit obligation at December 31, 2000 and 1999 consist of the following:
December 31, ----------------------- 2000 1999 -------- ------ Benefit obligation, beginning of year............... $6,557 $6,163 Net periodic postretirement benefit cost............ 518 531 Benefits paid....................................... (119) (137) ------ ------ Benefit obligation, end of year..................... $6,956 $6,557 ====== ======
Net periodic postretirement benefit cost included the following components:
2000 1999 1998 -------- ---- ---- Service cost--benefits attributed to service during the period............................. $286 $306 $258 Interest cost on the accumulated postretirement benefit obligation.................................... 341 302 279 Amortization of unrecognized net gain................... (109) (77) (99) ---- ---- ---- Net periodic postretirement benefit cost................ $518 $531 $438 ==== ==== ====
For measurement purposes, an 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2000; the rate was assumed to decrease gradually to 5.5% for 2004 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% at December 31, 2000 and 1999. Increasing or decreasing the health care trend rates by one percentage point in each year would have the following effect:
1% Increase 1% Decrease ------------ ------------ Effect on postretirement benefit obligation....... $800 $(657) Effect on total of service and interest cost components...................................... $109 $ (87)
NOTE 8--OTHER INCOME, NET: Other income (expense) is comprised of the following:
2000 1999 1998 -------- ------ ------ Interest income................................ $7,636 $7,449 $6,934 Interest expense............................... (866) (453) (756) Dividend income................................ 421 611 822 Foreign exchange losses........................ (42) (126) (2,140) Royalty income................................. 225 263 155 Miscellaneous, net............................. (295) (816) (217) ------ ------ ------ $7,079 $6,928 $4,798 ====== ====== ======
NOTE 9--COMMITMENTS: Rental expense aggregated $580, $457 and $432 in 2000, 1999 and 1998, respectively. Future operating lease commitments are not significant. NOTE 10--COMPREHENSIVE INCOME: Components of accumulated other comprehensive earnings (loss) are shown as follows:
Accumulated Foreign Unrealized Other Currency Gains (Losses) Comprehensive Items on Securities Earnings/(Loss) --------- -------------- --------------- Balance at January 1, 1998............ $(11,052) $ (417) $(11,469) Change during period.................. (30) 976 946 -------- ------- -------- Balance at December 31, 1998.......... (11,082) 559 (10,523) Change during period.................. 653 930 1,583 -------- ------- -------- Balance at December 31, 1999.......... (10,429) 1,489 (8,940) Change during period.................. (394) (856) (1,250) -------- ------- -------- Balance at December 31, 2000.......... $(10,823) $ 633 $(10,190) ======== ======= ========
The individual tax effects of each component of other comprehensive earnings (loss) for the year ended December 31, 2000 are shown as follows:
Before Tax Tax (Expense) Net-of-Tax Amount Benefit Tax Amount -------- --------- ---------- Foreign currency translation adjustment........ $ (394) $ -- $ (394) Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during 2000................................ (914) 339 (575) Less: reclassification adjustment for gains (losses) realized in earnings.............. 446 (165) 281 ------- ----- ------- Net unrealized gains....................... (1,360) 504 (856) ------- ----- ------- Other comprehensive earnings................... $(1,754) $ 504 $(1,250) ======= ===== =======
NOTE 11--DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS: CARRYING AMOUNT AND FAIR VALUE: The carrying amount approximates fair value of cash and cash equivalents because of the short maturity of those instruments. The fair values of investments are estimated based on quoted market prices. The fair value of the company's industrial development bonds approximates their carrying value because they have a floating interest rate. The carrying amount and estimated fair values of the company's financial instruments are as follows:
2000 1999 --------------------- ------------------- CARRYING FAIR Carrying Fair AMOUNT VALUE Amount Value --------- --------- -------- -------- Cash and cash equivalents........... $ 60,882 $ 60,882 $ 88,504 $ 88,504 Investments held to maturity........ 98,164 100,127 110,245 111,151 Investments available for sale...... 22,565 22,565 37,390 37,390 Investments in trading securities... 13,424 13,424 10,534 10,534 Industrial development bonds........ 7,500 7,500 7,500 7,500
14 A summary of the aggregate fair value, gross unrealized gains, gross unrealized losses and amortized cost basis of the company's investment portfolio by major security type is as follows:
DECEMBER 31, 2000 December 31, 1999 ------------------------------------------------ ------------------------------------------------- UNREALIZED Unrealized AMORTIZED FAIR -------------------- Amortized -------------------- Held to Maturity: COST VALUE GAINS LOSSES Cost Fair Value Gains Losses - ----------------- ---------- --------- -------- -------- ---------- ---------- -------- -------- Unit investment trusts of preferred stocks......... $ 1,462 $ 3,381 $ 1,919 $ -- $ 2,592 $ 4,618 $ 2,026 $ -- Municipal bonds............ 97,744 97,807 63 -- 109,256 108,160 -- (1,096) Unit investment trusts of municipal bonds.......... 941 932 -- (9) 959 935 -- (24) Private export funding securities............... 4,115 4,104 -- (11) 4,933 4,933 -- -- --------- --------- ------- ------- --------- --------- ------- ------- $ 104,262 $ 106,224 $ 1,982 $ (20) $ 117,740 $ 118,646 $ 2,026 $(1,120) ========= ========= ======= ======= ========= ========= ======= ======= Available for Sale: - ------------------- Municipal bonds............ $ 32,487 $ 32,221 $ -- $ (266) $ 40,930 $ 40,603 $ -- $ (327) Mutual funds............... 2,454 3,724 1,270 -- 3,007 5,698 2,691 -- --------- --------- ------- ------- --------- --------- ------- ------- $ 34,941 $ 35,945 $ 1,270 $ (266) $ 43,937 $ 46,301 $ 2,691 $ (327) ========= ========= ======= ======= ========= ========= ======= =======
Held to maturity securities of $6,097 and $7,495 and available for sale securities of $13,380 and $8,911 were included in cash and cash equivalents at December 31, 2000 and 1999, respectively. There were no securities with maturities greater than three years and gross realized gains and losses on the sale of available for sale securities in 2000 and 1999 were not significant. NOTE 12--GEOGRAPHIC AREA AND SALES INFORMATION: SUMMARY OF SALES, NET EARNINGS AND ASSETS BY GEOGRAPHIC AREA
2000 1999 -------------------------------------- ----------------------------------- MEXICO Mexico UNITED AND CONSOLI- United and Consoli- STATES CANADA DATED States Canada dated --------- -------- --------- -------- ------- -------- Sales to unaffiliated customers.... $394,545 $32,509 $427,054 $365,975 $30,775 $396,750 ======== ======== Sales between geographic areas..... 3,626 3,343 3,787 1,794 -------- ------- -------- ------- $398,171 $35,852 $369,762 $32,569 ======== ======= ======== ======= Net earnings....................... $ 73,929 $ 1,808 $ 75,737 $ 69,917 $ 1,393 $ 71,310 Total assets....................... $540,697 $21,745 $562,442 $505,152 $24,264 $529,416 Net assets......................... $439,685 $19,011 $458,696 $409,160 $21,486 $430,646 1998 ----------------------------------- Mexico United and Consoli- States Canada dated -------- ------- -------- Sales to unaffiliated customers.... $363,569 $25,090 $388,659 ======== Sales between geographic areas..... 2,805 4,374 -------- ------- $366,374 $29,464 ======== ======= Net earnings....................... $ 68,521 $ (995) $ 67,526 Total assets....................... $467,265 $20,158 $487,423 Net assets......................... $378,892 $17,565 $396,457
Total assets are those assets associated with or used directly in the respective geographic area, excluding intercompany advances and investments. MAJOR CUSTOMER Revenues from a major customer aggregated approximately 17.8%, 17.9% and 17.2% of total net sales during the years ended December 31, 2000, 1999 and 1998, respectively. - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS [LOGO] To the Board of Directors and Shareholders of Tootsie Roll Industries, Inc. In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of earnings, comprehensive earnings and retained earnings and of cash flows present fairly, in all material respects, the financial position of Tootsie Roll Industries, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion expressed above. [SIGNATURE] Chicago, Illinois February 12, 2001 15 QUARTERLY FINANCIAL DATA (UNAUDITED) TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
(Thousands of dollars except per share data) 2000 First Second Third Fourth Total ------------------------------------------------------------------------------------------------------------------------ Net sales................................ $78,015 $90,376 $165,873 $92,790 $427,054 Gross margin............................. 41,067 48,209 83,225 47,453 219,954 Net earnings............................. 13,063 15,652 31,514 15,508 75,737 Net earnings per share................... .26 .32 .64 .31 1.53 1999 ------------------------------------------------------------------------------------------------------------------------ Net sales................................ $74,200 $88,265 $152,667 $81,618 $396,750 Gross margin............................. 38,815 45,902 77,651 41,821 204,189 Net earnings............................. 12,325 14,751 29,283 14,951 71,310 Net earnings per share................... .24 .29 .58 .30 1.41 1998 ------------------------------------------------------------------------------------------------------------------------ Net sales................................ $69,701 $85,931 $144,230 $88,797 $388,659 Gross margin............................. 36,966 45,133 73,251 45,692 201,042 Net earnings............................. 11,217 13,910 27,216 15,183 67,526 Net earnings per share................... .22 .28 .53 .30 1.33 Net earnings per share is based upon average outstanding shares as adjusted for 3% stock dividends issued during the second quarter of each year. ------------------------------------------------------------------------------------------------------------------------
2000-1999 QUARTERLY SUMMARY OF TOOTSIE ROLL INDUSTRIES, INC. STOCK PRICE AND DIVIDENDS PER SHARE
STOCK PRICES* DIVIDENDS 2000 1999 ----------------------------------------------------------------------------------- HIGH LOW High Low 2000 ----------------------------------------------------------------------------------- ---------------------------- 1st Qtr..... 32-7/8 28-5/16 46-15/16 39-3/4 1st Qtr............ $.0608 2nd Qtr..... 38 30-3/8 46-3/4 38-1/8 2nd Qtr............ $.0700 3rd Qtr..... 42-7/16 34-7/8 39-7/16 30 3rd Qtr............ $.0700 4th Qtr..... 47-13/16 35-5/8 33-7/16 29-13/16 4th Qtr............ $.0700 *NYSE -- Composite Quotations Estimated Number of shareholders at December 31, 2000 ....................... 9,500 DIVIDENDS 1999 ------------ --------------------- 1st Qtr..... $.0495 2nd Qtr..... $.0607 3rd Qtr..... $.0608 4th Qtr..... $.0608 NOTE: In addition to the above cash dividends, a 3% stock dividend was issued on April 19, 2000 and April 21, 1999. Cash dividends are restated to reflect 3% stock dividends.
18 FIVE YEAR SUMMARY OF EARNINGS AND FINANCIAL HIGHLIGHTS TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (Thousands of dollars except per share, percentage and ratio figures) - --------------------------------------------------------------------------------
(See Management's Comments starting on page 5) 2000 1999 1998 1997 ----------- ----------- ----------- ----------- Sales and Earnings Data Net sales................. $ 427,054 $ 396,750 $ 388,659 $ 375,594 Gross margin.............. 219,954 204,189 201,042 187,281 Interest expense.......... 866 453 756 483 Provision for income taxes................... 42,071 40,137 38,537 34,679 Net earnings.............. 75,737 71,310 67,526 60,682 % of sales............ 17.7% 18.0% 17.4% 16.2% % of shareholders' equity.............. 16.5% 16.6% 17.0% 17.3% Per Common Share Data (1) Net sales................. $ 8.64 $ 7.87 $ 7.63 $ 7.34 Net earnings.............. 1.53 1.41 1.33 1.19 Shareholders' equity...... 9.36 8.62 7.82 6.88 Cash dividends declared... .27 .23 .19 .15 Stock dividends........... 3% 3% 3% 3% Additional Financial Data Working capital........... $ 145,765 $ 168,423 $ 175,155 $ 153,355 Net cash provided by operating activities.... 84,881 72,935 77,735 68,176 Net cash used in investing activities.............. 66,467 26,993 34,829 31,698 Net cash used in financing activities.............. 46,036 38,182 22,595 21,704 Property, plant & equipment additions..... 16,189 20,283 14,878 8,611 Net property, plant & equipment............... 131,118 95,897 83,024 78,364 Total assets.............. 562,442 529,416 487,423 436,742 Long term debt............ 7,500 7,500 7,500 7,500 Shareholders' equity...... 458,696 430,646 396,457 351,163 Average shares outstanding (1)..................... 49,434 50,412 50,920 51,163 1996 ----------- Sales and Earnings Data Net sales................. $ 340,909 Gross margin.............. 162,420 Interest expense.......... 1,498 Provision for income taxes................... 27,891 Net earnings.............. 47,207 % of sales............ 13.8% % of shareholders' equity.............. 15.1% Per Common Share Data (1) Net sales................. $ 6.64 Net earnings.............. .92 Shareholders' equity...... 6.10 Cash dividends declared... .12 Stock dividends........... 3% Additional Financial Data Working capital........... $ 153,329 Net cash provided by operating activities.... 76,710 Net cash used in investing activities.............. 52,364 Net cash used in financing activities.............. 26,211 Property, plant & equipment additions..... 9,791 Net property, plant & equipment............... 81,687 Total assets.............. 391,456 Long term debt............ 7,500 Shareholders' equity...... 312,881 Average shares outstanding (1)..................... 51,310
(1) Adjusted for annual 3% stock dividends and the 2-for-1 stock split effective July 13, 1998. 17 BOARD OF DIRECTORS Melvin J. Gordon(1) Chairman of the Board and Chief Executive Officer Ellen R. Gordon(1) President and Chief Operating Officer Charles W. Seibert(2)(3) Retired Banker Lana Jane President, Paul Brent Designer, Inc. Lewis-Brent(2)(3) Richard P. Retired Senior Vice President, Bestfoods Bergeman(2)(3) (1)Member of the Executive Committee (2)Member of the Audit Committee (3)Member of the Compensation Committee OFFICERS Melvin J. Gordon Chairman of the Board and Chief Executive Officer Ellen R. Gordon President and Chief Operating Officer G. Howard Ember, Jr. Vice President, Finance & Asst. Secy. John W. Newlin, Jr. Vice President, Manufacturing Thomas E. Corr Vice President, Marketing & Sales James M. Hunt Vice President, Physical Distribution Barry P. Bowen Treasurer & Asst. Secy. Daniel P. Drechney Controller OFFICES, PLANTS Executive Offices 7401 S. Cicero Ave. Chicago, Illinois 60629 www.tootsie.com Plants Illinois Tennessee Massachusetts Wisconsin Maryland New York Mexico City Foreign Sales Offices Mexico City, Mexico Mississauga, Ontario
SUBSIDIARIES Andes Candies L.P. Tootsie Roll of Canada Ltd. Andes Manufacturing LLC Tootsie Roll Central Europe Ltd. Andes Services LLC The Tootsie Roll Company, Inc. C.C. L.P., Inc. Tootsie Roll Management, Inc. C.G.C. Corporation Tootsie Roll Mfg., Inc. C.G.P., Inc. Tootsie Rolls--Latin America, Cambridge Brands, Inc. Inc. Cambridge Brands Mfg., Inc. Tootsie Roll Worldwide Ltd. Cambridge Brands Services, Inc. The Sweets Mix Company, Inc. Cella's Confections, Inc. TRI de Latino America S.A. de Charms Company C.V. Charms L.P. TRI Finance, Inc. Charms Marketing Company TRI International Co. Henry Eisen Advertising Agency, Inc. TRI-Mass., Inc. J.T. Company, Inc. TRI Sales Co. O'Tec Industries, Inc. Tutsi S.A. de C.V. World Trade & Marketing Ltd.
OTHER INFORMATION Stock Exchange New York Stock Exchange, Inc. (Since 1922) Stock Identification Ticker Symbol: TR CUSIP No. 890516 10-7 Stock Transfer Agent Mellon Investor Services LLC and Stock Registrar Overpeck Centre 85 Challenger Road Ridgefield Park, NJ 07660 1-800-851-9677 www.mellon-investor.com Independent PricewaterhouseCoopers LLP Accountants 200 East Randolph Drive Chicago, IL 60601 General Counsel Becker Ross Stone DeStefano & Klein 317 Madison Avenue New York, NY 10017 Annual Meeting May 7, 2001 Mutual Building, Room 1200 909 East Main Street [LOGO] Richmond, VA 23219
M Printed on recycled paper. 18 EX-21 3 a2043218zex-21.txt SUBSIDIARIES EXHIBIT 21 LIST OF SUBSIDIARIES OF THE COMPANY
NAME JURISDICTION OF INCORPORATION - ---- ----------------------------- Andes Candies L.P. Illinois Andes Manufacturing LLC Illinois Andes Services LLC Illinois C.C. L.P., Inc. Delaware C.G.C. Corporation Delaware C.G.P., Inc. Delaware Cambridge Brands, Inc. Delaware Cambridge Brands Mfg., Inc. Delaware Cambridge Brands Services, Inc. Delaware Cella's Confections, Inc. Virginia Charms Company Delaware Charms L.P. Delaware Charms Marketing Company Illinois Henry Elsen Advertising Agency, Inc. New Jersey J.T. Company, Inc. Delaware O'Tec Industries, Inc. Delaware Tootsie Roll of Canada Ltd. Canada Tootsie Roll Central Europe Ltd. Delaware The Tootsie Roll Company, Inc. Illinois Tootsie Roll Management, Inc. Illinois Tootsie Roll Mfg., Inc. Illinois Tootsie Rolls - Latin America, Inc. Delaware Tootsie Roll Worldwide Ltd. Illinois The Sweets Mix Company, Inc. Illinois TRI de Latino America S.A. de C.V. Mexico TRI Finance, Inc. Delaware TRI International Co. Illinois TRI-Mass., Inc. Massachusetts TRI Sales Co. Delaware Tutsi S.A. de C.V. Mexico World Trade & Marketing Ltd. British West Indies
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