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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 27, 1997 Commission File Number 1 - 1361
TOOTSIE ROLL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 22 - 1318955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7401 South Cicero Avenue
Chicago, Illinois 60629
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (773) 838 - 3400
None
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding
Common Stock, $.69 4/9 par value 15,938,273
Class B Common Stock, $.69 4/9 par value 7,559,528
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
ASSETS Sept 27 Sept 28 Dec. 31
CURRENT ASSETS 1997 1996 1996
<S> <C> <C> <C>
Cash & Cash Equiv. $ 74,478,364 $ 29,853,140 $ 45,658,799
Marketable Securities 33,774,830 64,173,247 98,498,317
Accounts Receivable
Less Allowances of
$3,090,000, $3,027,000 & $1,885,000 64,360,955 67,001,850 21,207,346
Inventories at Cost
(Last-in,First-out):
Finished Goods & Work in Process 20,876,234 19,470,662 20,358,811
Raw Material & Supplies 14,430,165 8,805,635 9,950,294
Prepaid Expenses 4,394,035 4,774,338 3,000,580
Deferred Income Taxes 2,839,000 2,923,000 2,839,000
Total Current Assets 215,153,583 197,001,872 201,513,147
PROPERTY, PLANT & EQUIPMENT,
(at Cost)
Land 6,898,131 6,906,496 6,895,126
Building 28,110,270 28,271,675 29,303,643
Machinery & Equipment 123,423,144 120,780,065 117,130,552
158,431,545 155,958,236 153,329,321
Less-Accumulated Depreciation
and Amortization 78,188,442 70,337,509 71,642,018
80,243,103 85,620,727 81,687,303
OTHER ASSETS
Intangibles 91,225,878 93,932,177 93,255,603
Investments 37,831,852 32,089 26,847
Misc. Other Assets 20,691,430 15,062,282 14,973,178
149,749,160 109,026,548 108,255,628
Total Assets $445,145,846 $391,649,147 $391,456,078
</TABLE>
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<TABLE>
<CAPTION>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS( EQUITY Sept 27 Sept 28 Dec. 31
CURRENT LIABILITIES 1997 1996 1996
<S> <C> <C> <C>
Accounts Payable $ 12,616,824 $ 11,933,589 $ 8,560,080
Dividends Payable 1,938,591 1,667,817 1,667,817
Accrued Liabilities 35,930,926 30,744,448 28,239,763
Fed. & State Income Taxes 16,138,903 15,070,759 9,716,422
Total Current Liabilities 66,625,244 59,416,613 48,184,082
NON-CURRENT LIABILITIES
Ind.Dev.Bonds Ser.1992 7,500,000 7,500,000 7,500,000
Post Retirement Benefits 5,876,858 5,553,315 5,636,085
Deferred Compensation 9,676,731 5,379,856 7,986,782
Deferred Fed.Inc.Taxes 9,487,123 9,461,662 9,268,550
Total Non-Current Liabilities 32,540,712 27,894,833 30,391,417
SHAREHOLDERS( EQUITY
Common Stk., $.69-4/9 par value-
50,000,000 shares author.
15,938,273, 15,604,742 & 15,617,065
respectively, issued 11,068,106 10,836,487 10,845,044
Class B Common Stk., $.69-4/9 par value-
20,000,000 shares author.
7,559,528, 7,399,311 & 7,386,988
respectively, issued 5,249,606 5,138,344 5,129,787
Capital in Excess of Par Value 192,980,615 171,588,958 171,588,958
Retained Earnings 147,325,412 127,400,589 136,352,123
Cumulative Translation Adjustment (10,878,556) (10,626,677) (11,035,333)
Unrealized Gain on Marketable Securities 234,707 -- --
Total Shareholders( Equity 345,979,890 304,337,701 312,880,579
Total Liabilities and
Shareholders( Equity $445,145,846 $391,649,147 $ 391,456,078
</TABLE>
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<TABLE>
<CAPTION>
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
EARNINGS AND RETAINED EARNINGS (NOTE 1)
(UNAUDITED)
13 Weeks Ended 39 Weeks Ended
Sept. 27, 1997 & Sept. 28, 1996 Sept 27, 1997 & Sept. 28, 1996
<S> <C> <C> <C> <C>
Net Sales (Note 2) $140,645,293 $128,657,228 $289,190,453 $264,433,417
Cost of goods sold 70,899,622 68,241,866 144,739,664 138,039,632
Gross Margin 69,745,671 60,415,362 144,450,789 126,393,785
Operating Expenses:
Marketing, Selling and Advertising 18,243,872 18,412,155 40,542,380 39,755,505
Distribution and Warehousing 7,449,166 7,506,993 18,486,956 17,719,217
General and Administrative 4,819,617 4,122,943 12,906,867 11,520,031
Goodwill amortization 676,575 676,575 2,029,725 2,029,725
31,189,230 30,718,666 73,965,928 71,024,478
Earnings from Operations 38,556,441 29,696,696 70,484,861 55,369,307
Other Income (Expense) Net 749,651 778,794 3,839,387 2,874,262
Earnings before Income Taxes 39,306,092 30,475,490 74,324,248 58,243,569
Provision for Income Taxes 14,611,000 11,333,000 27,371,000 21,656,000
Net Earnings (Note 5) 24,695,092 19,142,490 46,953,248 36,587,569
Retained Earnings at beginning of period 124,568,911 109,925,917 136,352,123 121,476,879
149,264,003 129,068,407 183,305,371 158,064,448
Deduct:
Cash Dividends 1,938,591 1,667,818 5,541,625 4,703,673
Stock Dividends - 3% -- -- 30,438,334 25,960,186
1,938,591 1,667,818 35,979,959 30,663,859
Retained Earnings at end of period $147,325,412 $127,400,589 $147,325,412 $127,400,589
Net Earnings per Share (Note 3) $1.05 $ .81 $1.99 $1.54
Dividends Per Share * $ .0825 $ .0725 $ .2375 $ .2075
Average Number of Shares Outstanding
(Notes 3 & 4) 23,510,301 23,689,801 23,580,501 23,689,801
*Does not include 3% Stock Dividend to Shareholders of Record on 3/11/97 and 3/11/96.
</TABLE>
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<TABLE>
<CAPTION>
TOOTSIE ROLL INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
39 Weeks Ended
September 27, 1997 & September 28, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $46,953,248 $36,587,569
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 8,764,738 8,723,849
(Increase) decrease in assets:
Accounts receivable (43,089,094) (43,297,611)
Inventories (4,915,195) 4,112,483
Prepaid expenses and other assets (11,468,168) (6,120,105)
Increase in liabilities:
Accounts payable and accrued liabilities 11,724,651 15,175,400
Income taxes payable and deferred 6,644,794 9,193,294
Other long term liabilities 1,689,949 852,920
Other 270,453 237,022
Net cash provided by
operating activities 16,575,376 25,464,821
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,124,650) (10,344,941)
Purchase of held to maturity securities (38,722,325) (37,673,985)
Maturity of held to maturity securities 68,358,591 29,426,470
Purchase of available for sale securities (8,464,025) --
Sale and maturity of available for
sale securities 10,171,246 --
Net cash provided by (used in)
investing activities 26,218,837 (18,592,456)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable -- (20,000,000)
Shares repurchased and retired (8,609,811) --
Dividends paid in cash (5,364,837) (4,543,211)
Net cash used in financing activities (13,974,648) (24,543,211)
Increase (decrease)in cash and cash equivalents 28,819,565 (17,670,846)
Cash and cash equivalents-beginning of year 45,658,799 47,523,986
Cash and cash equivalents end of quarter $74,478,364 $29,853,140
Supplemental cash flow information:
Income taxes paid $20,676,000 $12,608,000
Interest paid $ 361,000 $ 944,000
</TABLE>
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TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997
(UNAUDITED)
Note 1 - Foregoing data has been prepared from the unaudited financial
records of the Company and in the opinion of Management all
adjustments necessary for a fair statement of the results for the
interim period have been reflected. All adjustments were of a
normal and recurring nature.
Note 2 - The Company's unshipped orders at September 27, 1997 amounted to
$23,500,000.
Note 3 - Based on Average Shares outstanding adjusted for Stock Dividends.
Note 4 - Includes 3% Stock Dividends distributed on April 22, 1997 and
April 23, 1996.
Note 5 - Results of operations for the period ended September 27, 1997 are
not necessarily indicative of results to be expected for the year to
end December 31, 1997 because of the seasonal nature of the
Company's operations. Historically, the Third Quarter has been the
Company's largest Sales Quarter due to Halloween Sales.
Note 6 - Form 8-K was not required to be filed during the Third Quarter of
1997.
Note 7 - Sales of unregistered Securities - None.
-5-
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management's discussion of the Company's operating results
and analysis of factors which have affected the accompanying Statement of
Earnings:
NET SALES:
Third Quarter, 1997
Third Quarter vs.
1997 1996 Third Quarter, 1996
$140,645,293 $128,657,228 9.3%
Nine Months, 1997
Nine Months vs.
1997 1996 Nine Months, 1996
$289,190,453 $264,433,417 9.4%
Third Quarter 1997 net sales of $140,645,293, were up 9.3% from Third Quarter
1996 net sales of $128,657,228.
Nine Months of 1997 net sales of $289,190,453 were up 9.4% from Nine Months of
1996 net sales of $264,433,417.
Third Quarter 1997 net sales of $140,645,293 were up 70.9% from Second
Quarter 1997 net sales of $82,287,560. Historically the third quarter
includes pre-Halloween sales and is the Company's largest quarterly sales
period of the year.
Record sales for the Third Quarter and Nine Months of 1997 are principally
attributable to effective promotional programs, including pre-Halloween sales
programs, as well as new products and product line extensions. Sales
increases were achieved in all of the Company's core brands. Consolidated
sales were also favorably affected by improved results in Mexico and Canada.
COST OF SALES:
Cost of Sales as a
Third Quarter Percentage of Net Sales
1997 1996 3rd Qtr. 1997 3rd Qtr. 1996
$70,899,622 $68,241,866 50.4% 53.0%
Cost of Sales as a
Nine Months Percentage of Net Sales
1997 1996 9 Months 1997 9 Months 1996
$144,739,664 $138,039,632 50.0% 52.2%
(6)
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Cost of sales as a percentage of net sales decreased from 53.0% for the Third
Quarter of 1996 to 50.4% in the Third Quarter of 1997. Nine Months cost of
sales also decreased from 52.2% in 1996 to 50.0% for the same period in 1997.
This improvement reflects lower prices in certain ingredients and packaging
materials, and the benefits of higher sales volumes against relatively fixed
factory overhead costs.
NET EARNINGS:
Third Quarter, 1997
Third Quarter vs.
1997 1996 Third Quarter, 1996
$24,695,092 $19,142,490 29.0%
Nine Months, 1997
Nine Months vs.
1997 1996 Nine Months, 1996
$46,953,248 $36,587,569 28.3%
Third Quarter 1997 net earnings were $24,695,092 compared to $19,142,490 for
the Third Quarter of 1996, and third quarter earnings per share increased to
$1.05 from $.81, a 30% increase.
Nine Months 1997 net earnings were $46,953,248 compared to the prior year's
Nine Months net earnings of $36,587,569 and nine month per share earnings
increased to $1.99 from $1.54, a 29% increase.
Net earnings for the Third Quarter of 1997 of $24,695,092 increased
$12,187,733 or 97.4% from Second Quarter of 1997 net earnings of $12,507,359
The increase in net earnings for the Third Quarter and Nine Months of 1997
reflects higher sales, improved gross profit margins and effective on-going
cost control programs which resulted in higher income from operations.
Increased investment income and decreased interest expense also contributed to
the overall increase in net earnings.
The consolidated effective income tax rate decreased from 37.2% in the Nine
Months of 1996 to 36.8% in the Nine Months of 1997. This favorable decrease
reflects increased tax-free investment income as well as certain other state
and foreign tax benefits.
(6A)
<PAGE> 9
PART II - OTHER INFORMATION
TOOTSIE ROLL INDUSTRIES, INC
AND SUBSIDIARIES
- NONE -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOOTSIE ROLL INDUSTRIES, INC.
Date: November 4, 1997 BY:
Melvin J. Gordon
Chairman of the Board
BY:
G. Howard Ember, Jr.
Vice President - Finance
-7-
<TABLE> <S> <C>
<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.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-27-1997
<PERIOD-TYPE> 9-MOS
<CASH> 74,478
<SECURITIES> 33,775
<RECEIVABLES> 67,451
<ALLOWANCES> 3,090
<INVENTORY> 35,306
<CURRENT-ASSETS> 215,154
<PP&E> 158,432
<DEPRECIATION> 78,188
<TOTAL-ASSETS> 445,146
<CURRENT-LIABILITIES> 66,625
<BONDS> 7,500
0
0
<COMMON> 16,318
<OTHER-SE> 329,662
<TOTAL-LIABILITY-AND-EQUITY> 445,146
<SALES> 289,190
<TOTAL-REVENUES> 289,190
<CGS> 144,740
<TOTAL-COSTS> 73,966
<OTHER-EXPENSES> (4,115)
<LOSS-PROVISION> 245
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> 74,324
<INCOME-TAX> 27,371
<INCOME-CONTINUING> 46,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,953
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.99
</TABLE>
