<PAGE>
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
---
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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
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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
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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
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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
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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
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
6
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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:
<TABLE>
<CAPTION>
NAME POSITION (1) AGE
---- -------- ---
<S> <C> <C>
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
</TABLE>
*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
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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
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(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
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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.
<TABLE>
<S> <C> <C>
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
</TABLE>
10
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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
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FINANCIAL SCHEDULE
12
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TOOTSIE ROLL INDUSTRIES, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance
beginning costs and End of
Classification of year expenses Deductions Year
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
--------- --------- --------- ---------
</TABLE>
(1) Accounts receivable written off net of recoveries and exchange rate
movements.
(2) Allowances to customers.
13
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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
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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
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(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
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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
<PAGE>
- ------------------------------------------------------------------------
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
<PAGE>
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
CONSOLIDATED STATEMENT OF
EARNINGS AND RETAINED EARNINGS
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
(The accompanying notes are an integral part of these statements.)
- --------------------------------------------------------------------------------
8
<PAGE>
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS December 31,
1995 1994
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
(The accompanying notes are an integral part of these statements.)
- --------------------------------------------------------------------------------
9
<PAGE>
(in thousands except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY December 31,
1995 1994
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
CONSOLIDATED STATEMENT OF
CASH FLOWS
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
(The accompanying notes are an integral part of these statements.)
- --------------------------------------------------------------------------------
11
<PAGE>
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:
<TABLE>
<CAPTION>
1993
---------
<S> <C>
Net sales......................................................... $ 306,584
Net earnings...................................................... 36,592
Net earnings per common share..................................... 1.64
</TABLE>
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:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
NOTE 4--INCOME TAXES:
The domestic and foreign components of pretax income are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Domestic................................... $ 61,894 $ 58,439 $ 56,159
Foreign.................................... 2,144 2,728 1,551
--------- --------- ---------
$ 64,038 $ 61,167 $ 57,710
--------- --------- ---------
--------- --------- ---------
</TABLE>
12
<PAGE>
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
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
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes are comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
The effective income tax rate differs from the statutory rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
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%
--- --- ---
--- --- ---
</TABLE>
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:
<TABLE>
<CAPTION>
Class B
Common Stock Common Stock Capital in
-------------------- ------------------------ excess of
Amount Amount par value
Shares --------- ----------- -----------
--------- Shares
(000's) -----------
(000's)
<S> <C> <C> <C> <C> <C>
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
--------- --------- ----- ----------- -----------
--------- --------- ----- ----------- -----------
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Retirees............................................ $ 1,372 $ 1,287
Active employees.................................... 4,017 3,706
--------- ---------
$ 5,389 $ 4,993
--------- ---------
--------- ---------
</TABLE>
Net periodic postretirement benefit cost for 1995, 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
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
--------- --------- ---------
--------- --------- ---------
</TABLE>
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:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
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
--------- --------- ---------
--------- --------- ---------
</TABLE>
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:
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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)
</TABLE>
14
<PAGE>
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:
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------
Unrealized
Amortized Fair ----------------------
Cost Value Gains Losses
----------- --------- --------- -----------
<S> <C> <C> <C> <C>
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)
----------- --------- --------- -----------
----------- --------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------
Unrealized
Amortized Fair ----------------------
Cost Value Gains Losses
----------- --------- --------- -----------
<S> <C> <C> <C> <C>
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)
----------- --------- --------- -----------
----------- --------- --------- -----------
</TABLE>
NOTE 11--GEOGRAPHIC AREA AND SALES INFORMATION:
Summary of sales, net earnings and assets by geographic area
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------ ------------------------------ ------------------------------
Mexico Mexico Mexico
United and Consoli- United and Consoli- United and Consoli-
States Canada dated States Canada dated States Canada dated
--------- -------- --------- --------- -------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE>
QUARTERLY FINANCIAL DATA
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Thousands of dollars except per share data)
1995 First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
1995-1994 QUARTERLY SUMMARY OF TOOTSIE ROLL INDUSTRIES, INC. STOCK PRICE
AND DIVIDENDS PER SHARE
<TABLE>
<CAPTION>
STOCK PRICES* DIVIDENDS**
1995 1994
- ------------------------------------------------------
Hi Lo Hi Lo 1995 1994
- ------------------------------------------------------ -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
16
<PAGE>
FIVE YEAR SUMMARY OF EARNINGS AND FINANCIAL HIGHLIGHTS
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
(Thousands of dollars except per share, percentage and ratio figures)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(See Management's Comments starting on page 5) 1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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
<FN>
(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.
</TABLE>
- --------------------------------------------------------------------------------
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 47,524
<SECURITIES> 55,926
<RECEIVABLES> 25,327
<ALLOWANCES> 1,774
<INVENTORY> 32,210
<CURRENT-ASSETS> 164,949
<PP&E> 146,819
<DEPRECIATION> 64,820
<TOTAL-ASSETS> 353,816
<CURRENT-LIABILITIES> 55,306
<BONDS> 7,500
0
0
<COMMON> 15,516
<OTHER-SE> 256,670
<TOTAL-LIABILITY-AND-EQUITY> 353,816
<SALES> 312,660
<TOTAL-REVENUES> 312,660
<CGS> 166,738
<TOTAL-COSTS> 84,519
<OTHER-EXPENSES> (2,635)
<LOSS-PROVISION> 563
<INTEREST-EXPENSE> 1,515
<INCOME-PRETAX> 64,038
<INCOME-TAX> 23,670
<INCOME-CONTINUING> 40,368
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,368
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
</TABLE>