-----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, QV+cAm4HyhXDutkkS7zQa6ta9Wir4mE0Jlt90qM8Jkpaaae9vP7S9quAJvr+zDey D9vTZ2NJWBJ+3nrfjuzD2A== 0000912057-96-005445.txt : 19960329 0000912057-96-005445.hdr.sgml : 19960329 ACCESSION NUMBER: 0000912057-96-005445 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NYSE 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-01361 FILM NUMBER: 96540255 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-K405 1 FORM 10-K405 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, 1995 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: (312) 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. X --- As of March 11, 1996, 15,122,150 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 $353,000,000. As of March 11, 1996, 7,213,950 shares of Class B Common Stock, par value 69-4/9 cents 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 7,213,950 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 11, 1996 (based upon the closing price of the stock on the New York Stock Exchange on such date) would have been approximately $389,000,000. 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, 1995 (the "1995 Report") are incorporated by reference in Parts I and II of this report. 2. Portions of the Company's Definitive Proxy Statement which will be distributed on or before April 30, 1996 in connection with the Company's 1996 Annual Meeting of Shareholders (the "1996 Proxy Statement") is incorporated by reference in Part III of this report. 1 PART I ITEM 1. BUSINESS. Tootsie Roll Industries, Inc. and its consolidated subsidiaries (the "Company") are engaged in the manufacture and sale of candy. This is the only industry segment in which the Company operates and is its only line of business. A majority of the Company's products are sold under the registered trademarks "Tootsie," "Tootsie Roll," or "Tootsie Pop." The principal product of the Company is the familiar "Tootsie Roll," a chocolate-flavored candy of a chewy consistency, which is sold in several sizes and which is also used as a center for other products in the line including "Tootsie Pops," a spherical fruit or chocolate-flavored shell of hard candy with a center of "Tootsie Roll" candy on a paper safety stick. The Company and its predecessors have manufactured the "Tootsie Roll" product to substantially the same formula and sold it under the same name for 100 years. The Company's products also include "Tootsie Roll Flavor Rolls" and "Tootsie Frooties," multiflavored candies of chewy consistency. The Company also manufactures and sells molded candy drop products under the registered trademark "Mason" and "Tootsie," including "Mason Dots," and "Mason Crows." The Company's wholly owned subsidiary, Cella's Confections Inc., produces a chocolate covered cherry under the registered trademark "Cella's." The Company's wholly-owned subsidiary, Charms Company, produces lollipops, including bubble gum-filled lollipops, and hard candy under the registered trademarks "Charms," "Blow-Pop," "Blue Razz," and "Zip-A-Dee-Doo-Da-Pops." In 1993, the Company acquired Cambridge Brands, Inc. which was the former Chocolate/Caramel Division of Warner Lambert. Cambridge Brands, Inc. manufactures various confectionery products under the registered trademarks "Junior Mint," "Charleston Chew," "Sugar Babies," and "Sugar Daddy." The Company's products are marketed in a variety of packages designed to be suitable for display and sale in many different types of retail outlets. They are sold 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, theater distributors and fund-raising 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 TV and cable and spot television in major markets throughout the country. 2 The domestic candy business is highly competitive. The Company competes primarily with other manufacturers of bar candy and candy of the type sold in variety, grocery 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. Sale of candy products may be influenced to some extent by consumer's concerns about dental health, weight and nutritional issues such as the caloric, total fat, saturated fat and cholesterol content of confectionery products. The Company did not have a material backlog of firm orders at the end of the calendar years 1994 or 1995. Packaging materials and ingredients used by the Company are readily obtainable from a number of suppliers at competitive prices. The average cost of these major raw materials increased in 1995 compared to 1994 largely as a result of increased worldwide demand and, in the case of ingredient increases, as a result of adverse weather conditions in the United States and elsewhere in the world. While some analysts see increased demand as an evolving market fundamental that may exert continuing upward cost pressure, a lessening of some of the increases of 1995 has already been seen. The Company has engaged in hedging transactions in sugar and corn 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 on research or development activities. Compliance with Federal, State and local provisions 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 1,750 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 in anticipation of 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 funds in various temporary cash investments. Revenues from a major customer aggregated approximately 16.0%, 16.8% and 13.6% of total net sales during the years ended December 31, 1995, 1994 and 1993, respectively. 3 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 11 of the Notes to Consolidated Financial Statements on Page 15 of the Company's Annual Report to Shareholders for the year ended December 31, 1995 (the "1995 Report") and on Page 4 of the 1995 Report under the section entitled "International." Note 11 and the aforesaid section are incorporated herein by reference. Portions of the 1995 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 2,195,000 square feet. The Company utilizes approximately 1,600,000 square feet for offices, manufacturing and warehousing facilities and leases or has available to lease, the remainder to third parties. In addition to owning the principal plant and warehousing facilities mentioned above, the Company leases manufacturing and warehousing facilities at a second location in Chicago which comprises 80,600 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. Cella's Confections, Inc., a subsidiary, owns a facility in New York City, containing approximately 60,000 square feet. This facility consists of manufacturing, warehousing and office space on four floors. Charms Company, a subsidiary, owns a facility in Covington, Tennessee, containing approximately 285,000 square feet of manufacturing, warehousing and office space. Cambridge Brands, Inc., a subsidiary, owns a facility in Cambridge, Massachusetts, containing approximately 142,000 square feet. The facility consists of manufacturing, warehousing and office space on five floors. The Company also owns property and a plant with manufacturing, warehousing and office space in Mexico City, Mexico, consisting of approximately 57,000 square feet plus parking lot and yard area comprising approximately 25,000 square feet. During 1995, the Company purchased an adjacent building comprising approximately 23,000 square feet of warehousing space. The Company owns the production machinery and equipment located in the plants in Chicago, New York, Covington (Tennessee), Cambridge (Massachusetts) and Mexico City, except for approximately $7 million of equipment in Covington, Tennessee, under an operating lease which the Company repurchased under an option as of January 1, 1996. The Company 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. 4 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 1995. ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT. See the information on Executive Officers set forth in the table in Part III, Item 10, Page 6 of this report, which is incorporated herein by reference. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Shares are traded on the New York Stock Exchange. The Company's Class B Common Shares are subject to restrictions on transfer and no market exists for such shares. The Class B Common Shares are convertible at the option of the holder into Common Shares on a share for share basis. As of March 11, 1996, there were approximately 9,500 holders of record of Common and Class B Common Shares. For information on the market price of, and dividends paid with respect to, the Company's Common Shares, see the section entitled "1995-1994 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Prices and Dividends" which appears on Page 16 of the 1995 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 1995 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 1995 Report. This section is incorporated herein by reference and filed as an exhibit to this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements, together with the report thereon of Price Waterhouse LLP dated February 14, 1996, appearing on Pages 8-15 of the 1995 Report and the Quarterly Financial Data on Page 16 of the 1995 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 1995 Report is not to be deemed filed as part of this report. 5 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 6 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 1996 Annual Meeting of Shareholders (the "1996 Proxy Statement"). Except for the last paragraph of this section relating to the compensation of Directors, this section is incorporated herein by reference. The 1996 Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 1996. 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) 76 Ellen R. Gordon* President and Chief Operating Officer (2) 64 G. Howard Ember Jr. Vice President/Finance 43 John W. Newlin Jr. Vice President/Manufacturing 59 Thomas E. Corr Vice President/Marketing and Sales 47 James M. Hunt Vice President/Distribution 53
*A member of the Board of Directors of the Company. (1) Mr. and Mrs. Gordon and Messrs. Newlin and Corr have served in the positions set forth in the table as their principal occupations for more than the past six years. Mr. Ember has served in his position for the past five years, and in the seven years prior to that, has served the Company in the position of Treasurer and Assistant Vice President of Finance. Mr. Hunt has served in his position for the past three years and in the fifteen years prior to that, has served the Company in the positions of Director of Distribution and Assistant Vice President of Distribution. Mr. and Mrs. Gordon have also served as 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. 7 ITEM 11. EXECUTIVE COMPENSATION. See the information set forth in the section entitled "Executive Compensation and Other Information" of the Company's 1996 Proxy Statement. Except for the "Report on Executive Compensation" and "Performance Graph," this section of the 1996 Proxy Statement is incorporated herein by reference. See the last paragraph of the section entitled "Election of Directors" of the 1996 Proxy Statement, which paragraph is incorporated herein by reference. The 1996 Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. For information with respect to the beneficial ownership of the Company's Common and Class B Common shares 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 1996 Proxy Statement. These sections of the 1996 Proxy Statement are incorporated herein by reference. The 1996 Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 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 and Retained Earnings for each of the three years in the period ended December 31, 1995 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1995 Consolidated Statements of Financial Position at December 31, 1995 and 1994 Notes to Consolidated Financial Statements 8 (2) Financial Statement Schedules: Report of Independent Accountants on Financial Statement Schedules For the three years ended December 31, 1995-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 year ended December 31, 1995. 9 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: S/MELVIN J. GORDON ------------------------- Melvin J. Gordon, Chairman of the Board of Directors and Chief Executive Officer Date: MARCH 28, 1996 ------------------- 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. S/MELVIN J. GORDON Chairman of the Board -------------------- of Directors and Chief Melvin J. Gordon Executive Office (principal executive officer) March 28, 1996 S/ELLEN R. GORDON Director, President, -------------------- and Chief Operating Ellen R. Gordon Officer March 28, 1996 Director March 28, 1996 -------------------- Charles W. Seibert S/WILLIAM TOURETZ Director & Secretary -------------------- William Touretz March 28, 1996 Director -------------------- Lana Jane Lewis-Brent March 28, 1996 G.HOWARD EMBER JR. Vice President, Finance -------------------- (principal financial G. Howard Ember Jr. officer and principal accounting officer) March 28, 1996
10 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders of Tootsie Roll Industries, Inc. Our audits of the consolidated financial statements referred to in our report dated February 14, 1996 appearing on Page 15 of the 1995 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) 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 PRICE WATERHOUSE LLP Chicago, Illinois February 14, 1996 11 FINANCIAL SCHEDULE 12 TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS DECEMBER 31, 1995, 1994 AND 1993
Additions Balance at charged to Balance beginning costs and End of Classification of year expenses Deductions Year - ------------------------------------------------------------------------------- 1995: Reserve for bad debts $1,173,000 563,162 290,162(1) $ 1,446,000 Reserve for cash discounts 293,000 6,163,894 6,128,894(2) 328,000 --------- --------- --------- --------- $1,466,000 $6,727,056 $ 6,419,056 $ 1,774,000 --------- --------- --------- --------- 1994: Reserve for bad debts $1,835,000 350,935 1,012,935(1) $ 1,173,000 Reserve for cash discounts 240,000 5,972,711 5,919,711(2) 293,000 --------- --------- --------- --------- $2,075,000 $6,323,646 $6,932,646 $ 1,466,000 --------- --------- --------- --------- 1993: Reserve for bad debts $1,110,000 $ 894,790 $ 169,790(1) $ 1,835,000 Reserve for cash discounts 109,000 4,962,551 4,831,551(2) 240,000 --------- --------- --------- --------- $1,219,000 $5,857,341 $5,001,341 $ 2,075,000 --------- --------- --------- ---------
(1) Accounts receivable written off net of recoveries and exchange rate movements. (2) Allowances to customers. 13 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 Articles of Incorporation. Incorporated by reference to Exhibit 2.1 to Company's Registration Statement on Form 8-A dated February 29, 1988. 3.1.1 Articles of Amendment of the Articles of Incorporation dated May 2, 1988. Incorporated by reference to Exhibit 3.1.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1988; Commission file No. 1-1361. 3.1.2 Articles of Amendment of the Articles of Incorporation dated May 7, 1990. Incorporated by reference to Exhibit 3.1.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1990; Commission File No. 1-1361. 3.2 By-Laws. Incorporated by reference to Exhibit 2.2 to Company's Registration Statement of Form 8-A dated February 29, 1988. 3.3 Specimen Class B Common Stock Certificate. Incorporated by reference to Exhibit 1.1 to Company's Registration Statement on Form 8-A dated February 29, 1988. 10.5* Consultation Agreement between the Company and William Touretz dated December 21, 1979. Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended December 31, 1992; Commission File No. 1-1361. 10.5.1* Modification Agreement between the Company and William Touretz dated as of December 5, 1984. Incorporated by reference to Exhibit 10.5.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1984; Commission File No. 1-1361. 10.5.2* Modification Agreement between the Company and William Touretz dated as of December 13, 1985. Incorporated by reference to Exhibit 10.5.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1985; Commission File No. 1-1361. 10.5.3* Modification Agreement between the Company and William Touretz dated as of December 17, 1986. Incorporated by reference to Exhibit 10.5.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1986; Commission File No. 1-1361. 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. 14 10.8.2* 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, 1993; Commission File No. 1-1361. 10.12* Split Dollar Agreements (Special Trust and Daughters Revocable Trust) between the Company and trustee of Trust dated July 10, 1993. Incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the year ended December 31, 1993; 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. 13 The following items incorporated by reference herein from the Company's 1995 Annual Report to Shareholders for the year ended December 31, 1995 (the "1995 Report"), are filed as Exhibits to this report: (i)Information under the section entitled "International" set forth on Page 4 of the 1995 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 1995 Report; (iii)Consolidated Statements of Earnings and Retained Earnings for the three years ended December 31, 1995 set forth on Page 8 of the 1995 Report; (iv)Consolidated Statements of Financial Position at December 31, 1995 and 1994 set forth on Pages 9-10 of the 1995 Report; (v)Consolidated Statements of Cash Flow for the three years ended December 31, 1995 set forth on Page 11 of the 1995 Report; (vi)Notes to Consolidated Financial Statements set forth on Pages 12-15 of the 1995 Report; 15 (vii)Report of Independent Accountants set forth on Page 15 of the 1995 Report; (viii)Quarterly Financial Data set forth on Page 16 of the 1995 Report; (ix)Information under the section entitled "1995-1994 Quarterly Summary of Tootsie Roll Industries, Inc. Stock Prices and Dividends" set forth on Page 16 of the 1995 Report; and (x) Information under the section entitled "Five Year Summary of Earnings and Financial Highlights" set forth on Page 17 of the 1995 Report. 21 List of Subsidiaries of the Company. *Executive compensation plan or arrangement. 16 EX-13 2 EXHIBIT 13 OPERATING REPORT - ------------------------------------------------------------------------ Marketing and Sales Sales reached a record high once again in 1995, with strong increases in our core brands. These increases resulted from successful promotions including shippers, combo packs and bonus bags, which are designed to make Tootsie Roll products a compelling value to both the retailer and to the end consumer. As is customary for the company, the third quarter was our highest selling period, again due to successful Halloween and back-to-school promotions. Our bagged goods, including variety packs containing popular assortments of the company's offerings, continued to be well accepted by the trade and helped fuel increased Halloween sales. Sales growth in our core brands was supplemented by a number of new products and line extensions. Also, seasonal packs, where traditional items are presented in festive packaging for special occasions such as Valentines Day, Easter and Christmas, continued to grow in popularity, while distribution gains were made in theaters and other targeted trade classes through focused promotional activities. Other highlights for the year include favorable trade and consumer response to the 50th Anniversary of the Mason Dots brand, which was accented with special anniversary graphics. Our new Caramel Apple Pop, a combination of sour apple hard candy smothered in milk caramel, was introduced in the fall of the year and met with immediate consumer acceptance. Bytes, an extension of our Blow Pop line, was successfully introduced in test markets during 1995 and is set for national roll out in 1996. Also, Black Cherry, the newest flavor in this line, was named New Product of the Year in the high growth non-chocolate category by a leading candy industry publication. Advertising and Public Relations Television was once again the chief media chosen to deliver our advertising to targeted consumers in 1995. Broad audiences of both children and adults were successfully reached through carefully selected spot, network and cable placements which were timed to coincide with the seasonality of our consumers' buying habits. Adults were also targeted throughout the year on leading game and talk shows with the healthful message that Tootsie Rolls contain far less fat than other leading bars. Consumer interest in lowering fat and cholesterol intake was evident in numerous letters we received complimenting this aspect of many of our products. Also, as has happened many times before with service people on foreign soil, we received warm letters from soldiers in Bosnia who found Tootsie Roll and Charms Products in military rations to be comforting and nostalgic reminders of home. Media coverage of Tootsie Roll continued to be favorable in 1995, with many positive and complimentary articles appearing in newspapers and magazines throughout the country. A press kit highlighting the company and its long, colorful history was developed to promote the 100th Anniversary to our consumers throughout 1996. Awareness of our company and brands is being further promoted by a stylish, new catalogue developed in 1995. As our first broad based mail order initiative, the catalogue features dozens of items of clothing and accessories creatively incorporating many of our logo designs. Consumer response to the catalogue has been positive and circulation is expected to expand in 1996. While each mailing of the catalogue constitutes a secondary form of product advertising, further benefits arise when Tootsie fans proudly wear and use these high quality articles bearing our brand names. Manufacturing/Distribution Continuing capital investments and operating improvements were made in 1995 to increase capacity, reduce cost and improve product quality. Significant overhead savings were realized and energy usage was reduced in our major manufacturing facilities through our ongoing operations review process which aggressively identifies areas for improvement. This process requires constant vigilance as operations and processes evolve over time. - -------------------------------------------------------------------------------- 3 - ------------------------------------------------------------------------ In Chicago we completed a project to make, rather than purchase, certain raw material blends. We also completed the installation of new cooking equipment, added new process control technology, initiated the first phase of a project to upgrade our inventory tracking systems and commenced the testing of new, high speed wrapping equipment which our engineers assisted in developing. All of these projects are consistent with our commitment to maintain our competitive stature in the deployment of leading edge manufacturing technology throughout our operations. Additionally, several significant maintenance projects were completed at our Chicago facility. In Tennessee, new processing and packaging equipment was installed to increase efficiency and improve product quality and a new line was added for the test of Blow Pop Bytes. Also, creating the new Caramel Apple Pop was made feasible by the sharing of technology between our Tennessee and Massachusetts plants. Throughout all plant operations, emphasis on a "team" culture, stressing the importance of collective achievement over individual performance, continued to yield significant advances in efficiency, quality and on-time response to customer needs. Purchasing Prices for certain raw materials and packaging came under greater pressure in 1995 than in recent memory. The packaging materials industry had double digit percentage increases in prices for paper, board, plastics, foil and other materials, with certain items increasing by as much as 40%. This trend had been anticipated to some extent in 1994 and was offset to some extent by competitive bidding undertaken at that time to lock in prices for 1995. Corn syrup and soybean oil prices also increased significantly due to lower domestic production stemming from adverse weather conditions in the spring and summer, together with surging world demand, particularly in Asia. As the global economy develops and diets and living standards improve, there will be greater export pressure on U. S. commodities. Continued upward pressure on the price of these commodities is predicted by some analysts, at least in the near term. We will continue to seek productivity improvements and use all other reasonable efforts to offset such cost increases. We were also partially insulated from sharp spot market fluctuations in ingredient costs by our ongoing selective use of futures and options. It continues to be our policy to hedge key purchases at prudent price levels. Information Technology Developing new data processing systems and enhancing existing applications is a continuing priority of the company. It has also become increasingly important as information technology now extends far beyond the automation of office tasks into the areas of process and climate control, production monitoring, inventory and distribution management and EDI communication. We made ongoing strides in these areas by installing leading edge hardware and software in 1995 to ensure that we continue to operate with state of the art business systems. International The results of our Mexican operation, stated in US dollars, declined in 1995 due to the substantial devaluation of the peso at the end of 1994 and throughout 1995. However, unit sales volume increased, reflecting another strong Christmas season in Mexico. The modernization of our manufacturing facility in Mexico City continued in 1995 and plans were developed to attain further production efficiencies and cost savings. The timing of implementing these projects will be dependent, in part, on the peso/dollar exchange rate, as it affects the economics of the investment required to achieve these savings. Also in 1995, we acquired a warehouse facility adjacent to our plant in Mexico to accommodate continuing growth. This facility will produce savings by reducing our use of outside warehousing, and is expected to improve customer service. In Canada, increased sales were achieved through successful initiatives in the mass merchandiser, warehouse club, wholesaler, jobber and theater classes of trade. Bagged goods and shipper displays were especially strong and the Charleston Chew was introduced to the Canadian market with promising results. In addition, we continue to export some of our well known brands to many foreign countries. - ------------------------------------------------------------------------ 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in thousands except per share, percentage and ratio figures) - -------------------------------------------------------------------------------- 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 beginning on pages 8 and 12, respectively. FINANCIAL CONDITION The sound financial condition in which we entered 1995 was further strengthened by our record results for the year. Working capital grew from $92,626 at the beginning of the year to $109,643 by year end, an increase of $17,017 or 18.4%. This increase is attributable to the investment of cash generated by operations in marketable securities. Inventories also increased to cover anticipated demand during the overhaul of a major production line and to ensure sufficient stock in our ever growing product assortment. Earnings rose from $37,931 in 1994 to $40,368 in 1995, a 6.4% increase. These earnings generated cash flow which was more than adequate to cover capital expenditures of $4,640 and cash dividends of $5,292, which comprised the company's principal non-operating uses of cash in 1995. Cash dividends, paid in 1995 for the fifty-third consecutive year, were increased by 17%. Also, our annual 3% stock dividend was distributed for the thirty-first consecutive year in April, and a two-for-one stock split was distributed to shareholders in July. As a consequence of the successful operations of this past year, our financial position remained strong, providing a healthy base from which to finance future growth opportunities. In this regard, the company remains watchful for acquisitions that would mesh well with our existing operations. Our financial position in 1995 versus 1994, measured by commonly used financial ratios, is as follows: the current ratio fell from 4.5:1 to 3.0:1, and current liabilities to net worth increased from 10.9% to 20.3%, as a $20,000 note payable became current. Debt to equity decreased from 11.4% to 10.1%, reflecting a $31,725 or 13.2% increase in shareholders equity, which ended the year at $272,186. These statistics are indicative of both the company's conservative financial posture and its history of successful operations. RESULTS OF OPERATIONS 1995 vs. 1994 1995 represented the nineteenth consecutive year of record sales achievement. Sales of $312,660 were up 5.3% over 1994 sales of $296,932. The third quarter back-to-school and Halloween sales periods, historically our largest, surpassed levels attained in previous years. Sales throughout the year were favorably impacted by successful promotional programs as we continued to broaden our penetration in mass merchandisers and other select trade classes with our core products. These efforts were augmented by niche marketing strategies including seasonal packs, line extensions and new product offerings. - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- Domestic sales gains were partially offset by declines in US dollar sales of our Mexican subsidiary, resulting from the devaluation of the Mexican peso at the end of 1994 and throughout 1995. However, unit volume there increased over 1994 reflecting another strong Christmas selling season in Mexico. Sales by our Canadian operation were up over 1994. Factors contributing to further sales growth included penetration in the mass merchandiser trade class and the successful introduction of Charleston Chews to that market. Cost of goods sold, as a percentage of sales, increased from 52.4% to 53.3% reflecting higher packaging material costs and increases in the cost of some significant ingredients. These factors were driven by increased world wide demand and, in the case of ingredient increases, by adverse weather conditions in the United States and elsewhere in the world. While some analysts see increased demand as an evolving market fundamental that may exert continuing upward cost pressure, a lessening of some of the increases of 1995 has already been seen. Direct labor remained roughly constant as a percentage of sales while overhead declined somewhat due to modest cost inflation, continuing expense control and increased production volumes in relation to fixed costs. Gross margin dollars grew by 3.2% to $145,922 in 1995, but declined slightly as a percentage of sales to 46.7% from 47.6% due to the factors cited above. Gross margins were lower in the fourth quarter due to the seasonal nature of our business and to the product mix sold at that time of year. Operating expenses, comprised of marketing, selling, advertising, physical distribution, general and administrative expenses and goodwill amortization, as a percentage of sales, declined slightly from 27.4% to 27.1%. Earnings from operations were $61,403, or 19.6% of sales in 1995 versus 20.2% in 1994, reflecting a lower gross margin percentage, partially offset by lower operating costs as a percentage of sales. Other income increased by $1,456, primarily due to increased investment income. The effective tax rate declined slightly from 38.0% to 37.0%. Consolidated net earnings rose 6.4% to a new company record of $40,368, or $1.81 per share from the previous record of $37,931, or $1.70 per share in 1994. Our net earnings as a percentage of sales remained approximately even with 1994 at 12.9%. 1995 was the fourteenth consecutive year of record earnings achievement for the company. 1994 vs. 1993 1994 represented the eighteenth consecutive year of record sales. Reaching $296,932, 1994 net sales were up 14.4% over 1993 sales of $259,593. The highest quarter, both in terms of sales dollars and in terms of dollar and percentage increase over the prior year, was the third quarter with traditionally strong back-to-school and Halloween promotions. The sales increase in 1994 was due largely to the full year impact of the Junior Mints, Charleston Chew, Sugar Daddy and Sugar Babies brands acquired in - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- October, 1993. Sales for these brands were, however, lower than they had been in the twelve months preceding the acquisition, as we kept with our plan of emphasizing profitable sales. Other factors contributing to 1994 sales increases were a strong year in Mexico and growth in other established Tootsie Roll brands, offset by decreases in several newer items which returned to more normal sales levels from their 1993 peaks. Cost of goods sold, as a percentage of sales, increased slightly from 51.6% to 52.4%, reflecting higher ingredient and packaging costs and increased indirect costs. Consequently, gross margin, which was $141,367 or 12.5% higher than 1993, declined slightly as a percentage of sales from 48.4% to 47.6%. Gross margin percentage in the fourth quarter improved somewhat over the prior year due to improved margins in foreign operations and changing sales patterns resulting from the new chocolate/caramel brands. Operating expenses, as a percentage of sales, were 27.4%, a slight decrease versus 1993. While the synergies stemming from the integration of the chocolate/caramel brands caused marketing and administrative costs to decline as a percentage of sales, increased use of refrigerated transportation caused per unit distribution costs to increase. Goodwill amortization was also higher due to the chocolate/caramel brands acquisition. Other income declined by $3,014 due to lower investment income and higher interest expense. These changes resulted from the financing of the chocolate/caramel brands acquisition and the purchase of our Chicago facility, both of which occurred late in 1993. The 1994 effective tax rate was comparable to that of 1993 at 38.0%. Consolidated net earnings rose 7.0% to a new company record of $37,931, or $1.70 per share in 1994 from the previous record of $35,442 or $1.59 per share in 1993. This represented the thirteenth consecutive year of record earnings. Liquidity and Capital Resources The company's liquid resources increased in 1995 with year end cash and marketable securities of $103,450 compared to $62,370 at the end of 1994. Cash flows from operating activities reached $50,851, up from $40,495 in 1994 and $33,397 in 1993. The increase in 1995 is due to higher net income and the timing of income tax payments. In cash flows from investing activities, capital expenditures declined to $4,640 in 1995 from $8,179 in the prior year as several major projects undertaken in 1994 were completed. The much higher level of capital expenditures in 1993 is primarily due to the purchase of our Chicago facility which had previously been leased. Cash flows from financing activities reflect an increase in cash dividends to $4,514 in 1994 and to $5,292 in 1995 due to an increase in the dividend rate per share and due to the effect of the 3% stock dividend. Our successful operating results and financial conservatism are expressed in the following financial statements. - -------------------------------------------------------------------------------- 7 CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data) - --------------------------------------------------------------------------------
For the year ended December 31, 1995 1994 1993 ------------ ------------ ------------ Net sales................................................................. $312,660 $296,932 $259,593 Cost of goods sold........................................................ 166,738 155,565 133,978 ------------ ------------ ------------ Gross margin.............................................................. 145,922 141,367 125,615 ------------ ------------ ------------ Operating expenses: Marketing, selling and advertising.................................... 46,436 44,974 40,096 Distribution and warehousing.......................................... 22,049 20,682 17,655 General and administrative............................................ 13,328 13,017 12,837 Amortization of the excess of cost over acquired net tangible assets............................................................... 2,706 2,706 1,510 ------------ ------------ ------------ 84,519 81,379 72,098 ------------ ------------ ------------ Earnings from operations.................................................. 61,403 59,988 53,517 Other income, net (Note 8)................................................ 2,635 1,179 4,193 ------------ ------------ ------------ Earnings before income taxes.............................................. 64,038 61,167 57,710 Provision for income taxes (Notes 1 and 4)................................ 23,670 23,236 22,268 ------------ ------------ ------------ Net earnings.............................................................. 40,368 37,931 35,442 Retained earnings at beginning of year.................................... 107,763 96,647 90,285 ------------ ------------ ------------ 148,131 134,578 125,727 ------------ ------------ ------------ Deduct (Note 5): Cash dividends ($.24, $.21 and $.17 per share)........................ 5,383 4,580 3,769 Stock dividends....................................................... 21,271 22,235 25,311 ------------ ------------ ------------ 26,654 26,815 29,080 ------------ ------------ ------------ Retained earnings at end of year.......................................... $121,477 $107,763 $ 96,647 ------------ ------------ ------------ ------------ ------------ ------------ Earnings per share........................................................ $ 1.81 $ 1.70 $ 1.59 ------------ ------------ ------------ ------------ ------------ ------------ Average common and class B common shares outstanding (Note 5)............. 22,343 22,343 22,343 ------------ ------------ ------------ ------------ ------------ ------------
(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, 1995 1994 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents (Notes 1 and 10).............................................. $ 47,524 $ 16,509 Investments held to maturity (Notes 1 and 10)........................................... 55,926 45,861 Accounts receivable, less allowances of $1,774 and $1,466............................... 23,553 22,087 Inventories (Note 1): Finished goods and work-in-process.................................................. 19,585 16,704 Raw materials and supplies.......................................................... 12,625 12,464 Prepaid expenses........................................................................ 2,813 3,094 Deferred income taxes (Notes 1 and 4)................................................... 2,923 2,168 ------------ ------------ Total current assets............................................................ 164,949 118,887 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT, at cost (Note 1): Land.................................................................................... 6,900 6,672 Buildings............................................................................... 28,259 26,988 Machinery and equipment................................................................. 111,660 109,438 ------------ ------------ 146,819 143,098 Less--Accumulated depreciation.......................................................... 64,820 57,450 ------------ ------------ 81,999 85,648 ------------ ------------ OTHER ASSETS: Excess of cost over acquired net tangible assets, net of accumulated amortization of $12,672 and $9,966 (Notes 1 and 2).................................... 95,962 98,668 Other assets............................................................................ 10,906 6,880 ------------ ------------ 106,868 105,548 ------------ ------------ $353,816 $310,083 ------------ ------------ ------------ ------------
(The accompanying notes are an integral part of these statements.) - -------------------------------------------------------------------------------- 9 (in thousands except per share data) - --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 1995 1994 ------------ ------------ CURRENT LIABILITIES: Notes payable to banks (Notes 2, 6 and 10).............................................. $ 20,000 $ -- Accounts payable........................................................................ 5,912 6,124 Dividends payable....................................................................... 1,424 1,219 Accrued liabilities (Note 3)............................................................ 21,532 17,046 Income taxes payable.................................................................... 6,438 1,872 ------------ ------------ Total current liabilities....................................................... 55,306 26,261 ------------ ------------ NONCURRENT LIABILITIES: Deferred income taxes (Notes 1 and 4)................................................... 8,911 7,716 Postretirement health care and life insurance benefits (Notes 1 and 7).................. 5,386 4,993 Industrial Development Bonds (Notes 6 and 10)........................................... 7,500 7,500 Term notes payable (Notes 6 and 10)..................................................... -- 20,000 Other long term liabilities............................................................. 4,527 3,152 ------------ ------------ Total noncurrent liabilities.................................................... 26,324 43,361 ------------ ------------ SHAREHOLDERS' EQUITY (Notes 1 and 5): Common stock, $.69-4/9 par value-- 25,000 shares authorized-- 15,109 and 7,306, respectively, issued................................................ 10,492 5,074 Class B common stock, $.69-4/9 par value-- 10,000 shares authorized-- 7,234 and 3,542, respectively, issued................................................. 5,024 2,459 Capital in excess of par value.......................................................... 146,171 132,997 Retained earnings, per accompanying statement........................................... 121,477 107,763 Foreign currency translation adjustment account (Note 1)................................ (10,978) (7,832) ------------ ------------ 272,186 240,461 ------------ ------------ COMMITMENTS (Note 9)........................................................................ ------------ ------------ $353,816 $310,083 ------------ ------------ ------------ ------------
- -------------------------------------------------------------------------------- 10 CONSOLIDATED STATEMENT OF CASH FLOWS TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands) - --------------------------------------------------------------------------------
For the year ended December 31, 1995 1994 1993 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings.......................................................... $40,368 $37,931 $35,442 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization..................................... 10,794 10,478 8,814 Loss on retirement of fixed assets................................ 8 190 34 Changes in operating assets and liabilities: Accounts receivable........................................... (3,740) (5,158) (7,941) Inventories................................................... (3,829) (1,091) (2,727) Prepaid expenses and other assets............................. (3,915) (3,952) (2,827) Accounts payable and accrued liabilities...................... 4,389 (107) 3,179 Income taxes payable and deferred............................. 5,122 1,075 214 Postretirement health care and life insurance benefits........ 393 495 522 Other long-term liabilities................................... 1,375 778 (432) Other......................................................... (114) (144) (881) ------------ ------------ ------------ Net cash provided by operating activities............................. 50,851 40,495 33,397 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Cambridge Brands....................................... -- -- (81,317) Capital expenditures.................................................. (4,640) (8,179) (27,992) Investment purchases.................................................. (45,313) (72,394) (22,854) Investment sales...................................................... 35,409 81,650 61,096 ------------ ------------ ------------ Net cash provided by (used in) investing activities................... (14,544) 1,077 (71,067) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Issuances of notes payable............................................ -- 25,000 92,000 Repayments of notes payable........................................... -- (47,000) (50,000) Borrowings under line of credit agreements, net of repayments......... -- (535) 348 Dividends paid in cash................................................ (5,292) (4,514) (3,687) ------------ ------------ ------------ Net cash provided by (used in) financing activities................... (5,292) (27,049) 38,661 ------------ ------------ ------------ Increase in cash and cash equivalents..................................... 31,015 14,523 991 Cash and cash equivalents at beginning of year............................ 16,509 1,986 995 ------------ ------------ ------------ Cash and cash equivalents at end of year.................................. $47,524 $16,509 $ 1,986 ------------ ------------ ------------ ------------ ------------ ------------ Supplemental cash flow information: Income taxes paid..................................................... $18,573 $22,817 $22,111 ------------ ------------ ------------ ------------ ------------ ------------ Interest paid......................................................... $ 1,548 $ 1,798 $ 653 ------------ ------------ ------------ ------------ ------------ ------------
(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: Revenues are recognized when products are shipped. Accounts receivable are unsecured. Cash and cash equivalents: The company considers temporary cash investments with a maturity of three months or less to be cash equivalents. Investments: Investments consist of various marketable securities that have maturities of less than one year. As of January 1, 1994, the company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting For Certain Investments in Debt and Equity Securities" which requires the company to classify each of its debt and equity securities into one of three categories: held to maturity, available for sale or trading. The company has concluded that its investments should be classified as held to maturity due to the existence of positive intent and ability to hold these securities to maturity. Accordingly, all investments have been measured at amortized cost in the statement of financial position. There was no effect on the company's consolidated financial statements from adoption of this statement. Inventories: Inventories are stated at cost, not in excess of market. The cost of domestic inventories ($28,641 and $26,571 at December 31, 1995 and 1994, respectively) has been determined by the last-in, first-out (LIFO) method. The excess of current cost over LIFO cost of inventories approximates $4,739 and $4,005 at December 31, 1995 and 1994, respectively. The cost of foreign inventories ($3,569 and $2,597 at December 31, 1995 and 1994, 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 price, on a short-term basis, of certain future ingredient purchases which are integral to the company's manufacturing process and 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. Open contracts at December 31, 1995 and 1994 were not material. 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 5 to 35 years for both buildings and machinery and equipment. For income tax purposes the company uses accelerated methods on all properties. 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 in accordance with SFAS No. 106, "Employers' Accounting for Postretirement Benefits other than Pensions." Income taxes: The company uses the liability method of computing deferred income taxes in accordance with SFAS No. 109 "Accounting For Income Taxes." Excess of cost over acquired net tangible assets: The excess of cost over the acquired net tangible assets of operating companies is amortized on a straight-line basis over a 40 year period. The company assesses the recoverability of its intangible assets using undiscounted future cash flows. Foreign currency translation: Management has designated the local currency as the functional currency for the Company's Mexican operations. Accordingly, the net effect of translating the Mexican operation's financial statements is reported in a separate component of shareholders' equity. NOTE 2--ACQUISITION: On October 15, 1993, the company purchased certain tangible and intangible assets of a candy manufacturer (Cambridge Brands) for approximately $81,300. Funds for the acquisition were provided from $9,300 of the company's own funds and $72,000 in bank borrowings (Note 6). The acquisition was accounted for as a purchase and the net assets and the results of operations and cash flows of Cambridge Brands have been included in the company's consolidated financial statements since October 15, 1993. The following unaudited pro forma information shows the results of the company's operations for the year ended December 31, 1993 as though the purchase of Cambridge Brands had been consummated as of the beginning of 1993:
1993 --------- Net sales......................................................... $ 306,584 Net earnings...................................................... 36,592 Net earnings per common share..................................... 1.64
The pro forma results of operations are not necessarily indicative of the actual results of operations that would have occurred had the purchase actually been made at the beginning of the period presented or of future operations. NOTE 3--ACCRUED LIABILITIES: Accrued liabilities are comprised of the following:
December 31, -------------------- 1995 1994 --------- --------- Compensation and employee benefits.................... $ 6,027 $ 5,512 Commissions........................................... 1,017 736 Advertising and promotions............................ 7,346 4,766 Workers' compensation................................. 1,409 1,271 Other................................................. 5,733 4,761 --------- --------- $ 21,532 $ 17,046 --------- --------- --------- ---------
NOTE 4--INCOME TAXES: The domestic and foreign components of pretax income are as follows:
1995 1994 1993 --------- --------- --------- Domestic................................... $ 61,894 $ 58,439 $ 56,159 Foreign.................................... 2,144 2,728 1,551 --------- --------- --------- $ 64,038 $ 61,167 $ 57,710 --------- --------- --------- --------- --------- ---------
12 The provision for income taxes is comprised of the following:
1995 1994 1993 --------- --------- --------- Current: Federal.................................. $ 19,849 $ 18,096 $ 19,052 Foreign.................................. 844 1,455 534 State.................................... 2,425 2,407 2,406 --------- --------- --------- 23,118 21,958 21,992 --------- --------- --------- Deferred: Federal.................................. 517 1,972 514 Foreign.................................. (25) (963) (281) State.................................... 60 269 43 --------- --------- --------- 552 1,278 276 --------- --------- --------- $ 23,670 $ 23,236 $ 22,268 --------- --------- --------- --------- --------- ---------
Deferred income taxes are comprised of the following:
December 31, -------------------- 1995 1994 --------- --------- Workers' compensation................................... $ 484 $ 435 Reserve for returns..................................... 407 438 Reserve for uncollectible accounts...................... 361 174 Other accrued expenses.................................. 1,846 1,842 VEBA funding............................................ (530) (756) Other, net.............................................. 355 35 --------- --------- Net current deferred income tax asset................... $ 2,923 $ 2,168 --------- --------- --------- ---------
December 31, -------------------- 1995 1994 --------- --------- Depreciation............................................ $ 8,696 $ 7,229 Post employment benefits................................ (1,847) (1,709) Deductible goodwill..................................... 2,844 2,071 Deferred compensation................................... (1,237) (739) DISC commissions........................................ 1,183 849 Other, net.............................................. (728) 15 --------- --------- Net long-term deferred income tax liability............. $ 8,911 $ 7,716 --------- --------- --------- ---------
The effective income tax rate differs from the statutory rate as follows:
1995 1994 1993 ---------- ---------- ---------- U.S. statutory rate............................ 35.0% 35.0% 35.0% State income taxes, net........................ 2.6 2.8 2.8 Amortization of excess of cost over acquired net tangible assets........................... 0.7 0.7 0.7 Other, net..................................... (1.3) (0.5) 0.1 --- --- --- Effective income tax rate...................... 37.0% 38.0% 38.6% --- --- --- --- --- ---
The company has not provided for U.S. federal or foreign withholding taxes on $880 of foreign subsidiaries' undistributed earnings as of December 31, 1995 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 are 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 Common Stock Common Stock Capital in -------------------- ------------------------ excess of Amount Amount par value Shares --------- ----------- ----------- --------- Shares (000's) ----------- (000's) Balance at January 1, 1993......... 6,834 $ 4,746 3,395 $ 2,357 $ 86,162 Issuance of 3% stock dividend.......... 204 142 101 70 24,946 Conversion of Class B common shares to common shares.................. 31 21 (31) (21) -- --------- --------- ----- ----------- ----------- Balance at December 31, 1993....... 7,069 4,909 3,465 2,406 111,108 Issuance of 3% stock dividend.......... 211 147 103 71 21,889 Conversion of Class B common shares to common shares.................. 26 18 (26) (18) -- --------- --------- ----- ----------- ----------- Balance at December 31, 1994....... 7,306 5,074 3,542 2,459 132,997 Issuance of 3% stock dividend.......... 218 152 105 73 20,932 Issuance of 2-for-1 stock split............. 7,542 5,237 3,630 2,521 (7,758) Conversion of Class B common shares to common shares........... 43 29 (43) (29) -- --------- --------- ----- ----------- ----------- Balance at December 31, 1995....... 15,109 $ 10,492 7,234 $ 5,024 $ 146,171 --------- --------- ----- ----------- ----------- --------- --------- ----- ----------- -----------
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 the three percent stock dividend and the two for one stock split distributed in 1995. NOTE 6--NOTES PAYABLE AND INDUSTRIAL DEVELOPMENT BONDS: In 1993, the company entered into two 3-year term notes aggregating $20,000 the proceeds of which were used to purchase the company's Chicago manufacturing facility and headquarters. These term notes bear interest payable monthly at 3.55% and mature in 1996. At December 31, 1995, the company had outstanding an interest rate swap agreement with a notional amount of $20,000. Under the agreement, which expires in August, 1996, the company exchanged a fixed rate of 4.24% for a variable rate adjusted monthly based upon 30 day LIBOR (5.69% at December 31, 1995). The company anticipates the counterparty to the swap agreement (a large financial institution) will fully perform on its obligations. The company accounts for the agreement using hedge accounting, and does not anticipate any circumstances, such as the early repayment of the underlying debt, which would cause a change in the accounting method used. During 1992, the company entered into an industrial development bond agreement with the City of Covington, Tennessee. The bond proceeds of $7.5 million were used to finance the expansion of the company's existing facilities. Interest 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, 13 1995 and 1994, interest was calculated under the floating option (5.1% and 4.1%, respectively) 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 letter of credit, which expires in March 1998, 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 1995, 1994 and 1993 approximated $1,524, $1,426 and $1,202, respectively. The company also maintains certain profit sharing and savings-investment plans. Company contributions in 1995, 1994 and 1993 to these plans were $441, $420 and $321, respectively. The company also contributes to multi-employer defined benefit pension plans for its union employees. Such contributions aggregated $416, $352 and $407 in 1995, 1994 and 1993, 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 accrual for the accumulated postretirement benefit obligation at December 31, 1995 and 1994 consists of the following:
December 31, -------------------- 1995 1994 --------- --------- Retirees............................................ $ 1,372 $ 1,287 Active employees.................................... 4,017 3,706 --------- --------- $ 5,389 $ 4,993 --------- --------- --------- ---------
Net periodic postretirement benefit cost for 1995, 1994 and 1993 included the following components:
1995 1994 1993 --------- --------- --------- Service cost--benefits attributed to service during the period.............................. $ 273 $ 318 $ 241 Interest cost on the accumulated postretirement benefit obligation..................................... 250 291 259 --------- --------- --------- Net periodic postretirement benefit cost................. $ 523 $ 609 $ 500 --------- --------- --------- --------- --------- ---------
For measurement purposes, a 9.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1995; 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. To illustrate, increasing the assumed health care cost trend rates by 1 percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by approximately $518 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by approximately $171. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% and 8% at December 31, 1995 and 1994, respectively. NOTE 8--OTHER INCOME, NET: Other income (expense) is comprised of the following:
1995 1994 1993 --------- --------- --------- Interest income................................ $ 3,161 $ 1,288 $ 1,975 Interest expense............................... (1,515) (1,649) (642) Dividend income................................ 1,753 1,509 1,992 Foreign exchange losses........................ (654) (225) (4) Royalty income................................. 214 149 634 Miscellaneous, net............................. (324) 107 238 --------- --------- --------- $ 2,635 $ 1,179 $ 4,193 --------- --------- --------- --------- --------- ---------
NOTE 9--COMMITMENTS: During 1993 and 1994, the company entered into operating leases for certain manufacturing equipment which provided the company with the option to terminate the lease in 1996 and to purchase the equipment at its fair market value. The company exercised this option and purchased the equipment for $5,401 on January 2, 1996. Rental expense aggregated $2,538, $2,314 and $1,015 in 1995, 1994 and 1993, respectively. NOTE 10--DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and cash equivalents and investments 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. Notes payable and industrial development bonds The fair values of the company's notes payable and industrial development bonds are estimated based on the quoted market prices for the same or similar issues. Interest rate swap agreement The fair value of the company's interest rate swap agreement is calculated using a valuation model based on well recognized financial principles and current market information to provide a reasonable approximation of fair value. Fair value The estimated fair values of the company's financial instruments are as follows:
1995 1994 ------------------------ ------------------------ Carrying Carrying Amount Fair Value Amount Fair Value ----------- ----------- ----------- ----------- Cash and cash equivalents............. $ 47,524 $ 47,524 $ 16,509 $ 16,509 Investments held to maturity.......... 55,926 57,730 45,861 47,073 Notes payable and industrial development bonds........ 27,500 27,500 27,500 27,500 Interest rate swap agreement.......... -- (181) -- (1,214)
14 A summary of the aggregate fair value, gross unrealized holding gains, gross unrealized losses and amortized cost basis of the company's investments held to maturity by major security type is as follows:
December 31, 1995 ---------------------------------------------- Unrealized Amortized Fair ---------------------- Cost Value Gains Losses ----------- --------- --------- ----------- Unit investment trusts of preferred stocks.................................. $ 6,744 $ 7,943 $ 1,206 ($ 7) Tax-free commercial paper................ Municipal bonds.......................... 33,099 33,133 42 (8) Unit investment trusts of municipal bonds................................... 2,873 3,451 624 (46) US gov't/gov't agency obligations........ 12,680 12,673 1 (8) Other.................................... 17 17 -- -- Private export funding securities........ 513 513 -- -- ----------- --------- --------- ----------- $ 55,926 $ 57,730 $ 1,873 ($ 69) ----------- --------- --------- ----------- ----------- --------- --------- -----------
December 31, 1994 ---------------------------------------------- Unrealized Amortized Fair ---------------------- Cost Value Gains Losses ----------- --------- --------- ----------- Unit investment trusts of preferred stocks.................................. $ 7,836 $ 8,653 $ 849 ($ 32) Tax-free commercial paper................ 9,996 10,000 4 -- Municipal bonds.......................... 11,773 11,711 1 (63) Unit investment trusts of municipal bonds................................... 4,547 5,033 546 (60) US gov't/gov't agency obligations........ 9,901 9,872 -- (29) Private export funding securities........ 1,808 1,804 -- (4) ----------- --------- --------- ----------- $ 45,861 $ 47,073 $ 1,400 ($ 188) ----------- --------- --------- ----------- ----------- --------- --------- -----------
NOTE 11--GEOGRAPHIC AREA AND SALES INFORMATION: Summary of sales, net earnings and assets by geographic area
1995 1994 1993 ------------------------------ ------------------------------ ------------------------------ Mexico Mexico Mexico United and Consoli- United and Consoli- United and Consoli- States Canada dated States Canada dated States Canada dated --------- -------- --------- --------- -------- --------- --------- -------- --------- Sales to unaffiliated customers... $290,590 $22,070 $312,660 $268,582 $28,350 $296,932 $234,460 $25,133 $259,593 --------- --------- --------- --------- --------- --------- Sales between geographic areas.... 1,747 2,055 1,382 2,204 2,186 3,219 --------- -------- --------- -------- --------- -------- $292,337 $24,125 $269,964 $30,554 $236,646 $28,352 --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- Net earnings...................... $ 39,044 $ 1,324 $ 40,368 $ 36,139 $ 1,792 $ 37,931 $ 34,144 $ 1,298 $ 35,442 Total assets...................... $339,718 $14,098 $353,816 $297,981 $12,102 $310,083 $288,506 $15,434 $303,940 Net assets........................ $260,273 $11,913 $272,186 $229,066 $11,395 $240,461 $199,862 $12,481 $212,343
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 16.0%, 16.8% and 13.6% of total net sales during the years ended December 31, 1995, 1994 and 1993, respectively. - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS 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 statement of 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 the opinion expressed above. Chicago, Illinois February 14, 1996 15 QUARTERLY FINANCIAL DATA TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
(Thousands of dollars except per share data) 1995 First Second Third Fourth Total - ----------------------------------------------------------------------------------------------------------------------- Net sales....................................................... $60,269 $68,774 $116,472 $67,145 $312,660 Gross margin.................................................... 29,566 33,056 52,517 30,783 145,922 Net earnings.................................................... 7,319 8,326 16,232 8,491 40,368 Net earnings per share.......................................... .33 .37 .73 .38 1.81 1994 - ----------------------------------------------------------------------------------------------------------------------- Net sales....................................................... $56,370 $62,891 $111,014 $66,657 $296,932 Gross margin.................................................... 28,121 31,306 51,195 30,745 141,367 Net earnings.................................................... 6,962 7,860 15,386 7,723 37,931 Net earnings per share.......................................... .31 .35 .69 .35 1.70 1993 - ----------------------------------------------------------------------------------------------------------------------- Net sales....................................................... $50,017 $53,923 $93,239 $62,414 $259,593 Gross margin.................................................... 25,281 27,232 45,318 27,784 125,615 Net earnings.................................................... 6,696 7,345 14,380 7,021 35,442 Net earnings per share.......................................... .30 .33 .64 .32 1.59 Net earnings per share is based upon average outstanding shares as adjusted for 3% stock dividends issued during the second quarter of each year and the 2 for 1 stock split effective July 11, 1995. - -----------------------------------------------------------------------------------------------------------------------
1995-1994 QUARTERLY SUMMARY OF TOOTSIE ROLL INDUSTRIES, INC. STOCK PRICE AND DIVIDENDS PER SHARE
STOCK PRICES* DIVIDENDS** 1995 1994 - ------------------------------------------------------ Hi Lo Hi Lo 1995 1994 - ------------------------------------------------------ ------------------------------------------------- 1st Qtr... 33-1/2 30-1/16 38-1/4 34-5/8 1st Qtr........ $ .0534 $ .0448 2nd Qtr... 35-1/8 31-3/8 35 29-9/16 2nd Qtr........ $ .0625 $ .0534 3rd Qtr... 40-1/8 34-1/8 31-7/8 29-3/4 3rd Qtr........ $ .0625 $ .0534 4th Qtr... 39-3/4 34-1/8 31-7/8 27-1/16 4th Qtr........ $ .0625 $ .0534 NOTE: In addition to the above cash dividends, a 3% stock dividend was issued on 4/21/95 and 4/22/94. **Cash dividends are restated to reflect 3% stock dividends and the 2-for-1 stock split. *NYSE -- Composite Quotations adjusted for the 2-for-1 stock split effective July 11, 1995. Estimated Number of shareholders at 12/31/95 ... 9,500
16 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) 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- Sales and Earnings Data Net sales........................................ $ 312,660 $ 296,932 $ 259,593 $ 245,424 $ 207,875 Gross margin..................................... 145,922 141,367 125,615 118,301 100,595 Interest expense................................. 1,515 1,649 642 440 196 Provision for income taxes....................... 23,670 23,236 22,268 19,890 17,641 Earnings before cumulative effect of accounting changes......................................... 40,368 37,931 35,442 32,032 26,533 Cumulative effect of accounting changes (1)...... -- -- -- -- (1,038) Net earnings..................................... 40,368 37,931 35,442 32,032 25,495 % of sales................................... 12.9% 12.8% 13.7% 13.1% 12.3% % of shareholders' equity.................... 14.8% 15.8% 16.7% 17.6% 16.7% Per Common Share Data (2) Net sales........................................ $ 13.99 $ 13.29 $ 11.62 $ 10.98 $ 9.30 Earnings before cumulative effect of accounting changes......................................... 1.81 1.70 1.59 1.43 1.19 Cumulative effect of accounting changes (1)...... -- -- -- -- (.05) Net earnings..................................... 1.81 1.70 1.59 1.43 1.14 Shareholders' equity............................. 12.18 10.76 9.50 8.13 6.84 Cash dividends................................... .24 .21 .17 .13 .11 Stock dividends.................................. 3% 3% 3% 3% 3% Additional Financial Data Working capital.................................. $ 109,643 $ 92,626 $ 61,052 $ 110,714 $ 80,569 Current ratio.................................... 3.0 4.5 2.2 5.9 4.8 Net cash provided by operating activities........ 50,851 40,495 33,397 35,623 35,826 Property, plant & equipment additions (3)........ 4,640 8,179 52,492 10,956 3,985 Net property, plant & equipment.................. 81,999 85,648 86,699 40,257 34,019 Total assets..................................... 353,816 310,083 303,940 224,470 184,427 Long term debt................................... 7,500 27,500 27,500 7,500 -- Shareholders' equity............................. 272,186 240,461 212,343 181,704 152,759 Average shares outstanding (2)................... 22,343 22,343 22,343 22,343 22,343 (1) Reflects adoption of new accounting standards for income taxes and postretirement health care and life insurance benefits (see Note 1 to financial statements). (2) Adjusted for stock dividends and the 2-for-1 stock split effective July 11, 1995. (3) 1993 includes $44,500 relating to the Cambridge Brands acquisition and the purchase of the Chicago office and plant facilities.
- -------------------------------------------------------------------------------- 17 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AND CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 47,524 55,926 25,327 1,774 32,210 164,949 146,819 64,820 353,816 55,306 7,500 0 0 15,516 256,670 353,816 312,660 312,660 166,738 84,519 (2,635) 563 1,515 64,038 23,670 40,368 0 0 0 40,368 1.81 1.81
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