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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 April 1, 2000 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
No Changes
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practible date.
Class Outstanding
Common Stock, $.69 4/9 par value 33,374,436
Class B Common Stock, $.69 4/9 par value 16,157,754
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PART I - FINANCIAL INFORMATION
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
ASSETS April 1, April 3, Dec. 31,
CURRENT ASSETS 2000 1999 1999
<S> <C> <C>
Cash & Cash Equiv. $ 67,000,271 $ 76,565,908 $ 88,503,731
Investments 90,552,973 74,227,270 71,002,420
Trade Accounts Receivable,
Less Allowances of
$2,115,000,$2,082,000 & $2,032,000 19,745,812 18,424,094 19,031,958
Other Receivables 4,583,469 7,882,608 5,716,150
Inventories, at Cost
(Last-in,First-out):
Finished Goods & Work in Process 29,758,001 29,546,106 20,688,894
Raw Material & Supplies 16,517,252 14,856,605 14,395,996
Prepaid Expenses 5,683,560 6,158,831 3,123,428
Deferred Income Taxes 2,069,000 2,584,000 2,069,000
Total Current Assets 235,910,338 230,245,422 224,531,577
PROPERTY, PLANT & EQUIPMENT,
(at cost)
Land 7,981,419 7,773,504 7,981,419
Buildings 29,210,324 22,226,017 30,329,791
Machinery & Equipment 152,353,231 138,638,705 145,789,056
189,544,974 168,638,226 184,100,266
Less-Accumulated Depreciation 90,425,212 82,631,283 88,202,899
99,119,762 86,006,943 95,897,367
OTHER ASSETS
Intangible assets, net of accumulated
amortization of $24,229,000, $21,467,000 &
$23,497,000 89,385,448 87,166,429 85,136,703
Investments 70,656,634 68,507,383 87,166,551
Cash surrender value of Life Insurance and
Other Assets 38,174,893 30,229,651 36,683,965
198,216,975 185,903,463 208,987,219
Total Assets $533,247,075 $502,155,828 $529,416,163
(The accompanying notes are an integral part of the statements)
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<TABLE>
<CAPTION>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS( EQUITY April 1, April 3, Dec. 31,
CURRENT LIABILITIES 2000 1999 1999
<S> <C> <C> <C>
Accounts Payable $ 13,299,139 $ 12,732,737 $ 12,845,180
Dividends Payable 3,150,603 2,693,837 3,035,496
Accrued Liabilities 30,611,016 27,997,577 31,944,769
Income Taxes Payable 14,925,203 13,396,027 8,283,501
Total Current Liabilities 61,985,961 56,820,178 56,108,946
NON-CURRENT LIABILITIES
Ind.Dev.Bonds 7,500,000 7,500,000 7,500,000
Post Retirement Benefits 6,638,699 6,240,390 6,556,860
Deferred Compensation and Other Liabilities 19,994,501 15,844,932 19,084,505
Deferred Income Taxes 9,790,160 8,885,136 9,519,818
Total Non-Current Liabilities 43,923,360 38,470,458 42,661,183
SHAREHOLDERS( EQUITY
Common Stk., $.69-4/9 par value-
120,000,000 shares author.
33,374,436, 33,446,257 & 32,853,761
respectively, issued 23,176,489 23,226,358 22,814,906
Class B Common Stk., $.69-4/9 par value-
40,000,000 shares author.
16,157,754, 15,846,841 & 15,706,907
respectively, issued 11,220,564 11,004,651 10,907,476
Capital in Excess of Par Value 275,362,077 274,577,472 249,236,182
Retained Earnings 127,793,886 108,775,945 158,619,140
Accumulated Other Comprehensive Earnings (8,223,859) (9,746,646) (8,940,267)
Treasury Stock (at cost)-
51,500, 25,750 & 51,500, shares
respectively (1,991,403) (972,588) (1,991,403)
Total Shareholders( Equity 427,337,754 406,865,192 430,646,034
Total Liabilities and
Shareholders( Equity $533,247,075 $502,155,828 $529,416,163
</TABLE>
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<TABLE>
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS (NOTE 1)
(UNAUDITED)
13 Weeks Ended
April 1, 2000 & April 3, 1999
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Net Sales (Note 2) $ 78,014,809 $ 74,199,514
Cost of Goods Sold 36,948,005 35,384,255
Gross Margin 41,066,804 38,815,259
Selling, Marketing and Administrative Expense 22,209,419 20,655,403
Amortization of Intangible Assets 732,084 676,575
Earnings from Operations 18,125,301 17,483,281
Other Income, Net 2,252,818 1,865,487
Earnings before Income Taxes 20,378,119 19,348,768
Provision for Income Taxes 7,315,000 7,024,000
Net Earnings (Note 5) $ 13,063,119 $ 12,324,768
Net Earnings $ 13,063,119 $ 12,324,768
Other Comprehensive Earnings, Net of Tax 716,408 776,120
Comprehensive Earnings $ 13,779,527 $ 13,100,888
Retained Earnings at Beginning of Period $158,619,140 $164,652,120
Net Earnings 13,063,119 12,324,768
Cash Dividends (3,005,218) (2,511,411)
Stock Dividends - 3% (40,883,155) (65,689,532)
Retained Earnings at End of Period $127,793,886 $108,775,945
Net Earnings Per Share (Note 3) $.26 $ .24
Dividends Per Share * $.0625 $ .0525
Average Number of Shares Outstanding
(Notes 3 & 4) 49,730,915 50,704,820
*Does not include 3% Stock Dividend to Shareholders of Record on 3/07/00 and 3/09/99.
(The accompanying notes are an integral part of the statements)
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<TABLE>
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
13 Weeks Ended
April 1, 2000 & April 3, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $13,063,119 $12,324,768
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 2,854,396 2,680,685
(Increase) decrease in assets:
Accounts receivable (664,005) 768,921
Other receivables 1,132,681 (4,558,463)
Inventories (11,090,575) (7,724,917)
Prepaid expenses and other assets (4,557,455) (4,099,897)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (902,429) (3,041,243)
Income taxes payable and deferred 6,936,522 6,180,958
Postretirement health care and life
insurance benefits 81,839 95,447
Deferred compensation and other liabilities 909,996 922,035
Other 159,817 140,138
Net cash provided by operating activities 7,923,906 3,688,432
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of cash and
cash equivalents acquired (6,475,419) --
Capital expenditures (3,950,117) (5,047,473)
Purchase of held to maturity securities (40,756,173) (41,033,294)
Maturity of held to maturity securities 39,569,558 40,024,101
Purchase of available for sale securities (12,771,357) (55,899,440)
Sale and maturity of available for
sale securities 11,928,842 56,602,453
Net cash used in investing activities (12,454,666) (5,353,653)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid in cash (3,032,371) (2,512,462)
Shares repurchased and retired (13,940,329) --
Net cash used in financing activities (16,972,700) (2,512,462)
Decrease in cash and cash equivalents (21,503,460) (4,177,683)
Cash and cash equivalents-beginning of year 88,503,731 80,743,591
Cash and cash equivalents end of quarter $67,000,271 $76,565,908
Supplemental cash flow information:
Income taxes paid $ 475,000 $ 1,265,000
Interest paid $ 172,000 $ 170,000
(The accompanying notes are an integral part of the statements)
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TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 1, 2000
(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. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the related notes included in the Company's 1999
Annual Report on Form 10-K.
Note 2 - The Company's unshipped orders at April 1, 2000 amounted to
$14,800,000.
Note 3 - Based on Average Shares outstanding adjusted for Stock Dividends.
Note 4 - Includes 3% stock dividends distributed on April 19, 2000 and
April 21, 1999.
Note 5 - Results of operations for the period ended April 1, 2000 are
not necessarily indicative of results to be expected for the
year to end December 31, 2000 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 First Quarter of
2000.
Note 7 - Sales of unregistered Securities - None.
Note 8 - In February 2000 the Company acquired the assets of a confectionery
company for cash. The acquisition was accounted for as a purchase.
The operating results of the acquired business have been included in
the consolidated financial statements since the date of acquisition.
On April 18, 2000, the Company announced that it entered into an
agreement to purchase the assets of Andes Candies, Inc. from Brach's
Confections Inc. (the "Transaction"). The agreement is subject to
certain customary conditions, and has received approval under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Tootsie Roll expects the Transaction to close in the second quarter
of 2000. Andes Candies, Inc. had 1999 sales of approximately
$34 million. The acquisition of Andes Candies, Inc. will be
accounted for as a purchase
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
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.
This discussion, the information contained in the preceding notes to the
financial statements and the information contained in "Quantitative and
Qualitative Disclosures About Market Risk," contain certain forward-looking
statements that are based largely on the Company's current expectations.
Forward-looking statements are subject to certain risks, trends and
uncertainties that could cause actual results and achievements to differ
materially from those expressed in the forward-looking statements. Such
risks, trends and uncertainties, which in some instances are beyond the
Company's control, include changes in demand; raw material prices;
competition; the effect of acquisitions on the Company's results of operations
and financial condition; and the Company's reliance on third-party vendors for
various services. The words "believe," "expect," "anticipate," "estimate,"
"intend," and similar expressions generally identify forward-looking
statements. Readers are cautioned not to place undue reliance on such
forward-looking statements, which are as of the date of this filing.
NET SALES:
First Quarter, 2000
First Quarter vs.
2000 1999 First Quarter, 1990
$78,014,809 $74,199,514 +5.1%
First Quarter 2000 net sales of $78,015,000, were up 5.1% from First Quarter
1999 net sales of $74,200,000. Sales rose as a result of successful marketing
and promotional programs, as well as new products and product line extensions.
These record sales principally reflect sales gains of the Company's core
brands.
First Quarter 2000 net sales of $78,015,000 were down from Fourth Quarter 1999
net sales of $81,618,000. This is not considered unusual as the First Quarter
of the year is historically the company's lowest sales quarter.
COST OF SALES:
Cost of Sales as a
First Quarter Percentage of Net Sales
2000 1999 1st Qtr. 2000 1st Qtr. 1999
$36,948,005 $35,384,255 47.4% 47.7%
Cost of sales as a percentage of net sales decreased slightly from 47.7% for
First Quarter 1999 to 47.4% for First Quarter 2000.
NET EARNINGS:
First Quarter, 2000
First Quarter vs.
2000 1999 First Quarter, 1999
$13,063,119 $12,324,768 +6.0%
First Quarter 2000 net earnings were $13,063,000 compared to First Quarter
1999 net earnings of $12,325,000. First Quarter 2000 earnings per share were
$0.26 an increase of $.02 or 8.0% over First Quarter 1999 earning per share of
$.24. The increase in net earnings reflects higher sales and on-going cost
control programs. Other income in First Quarter 2000 benefited from increased
investment income.
The consolidated effective income tax rate favorably decreased from 36.3% in
the First Quarter of 1999 to 35.9% in the First Quarter of 2000. This
improvement generally reflects increased tax-free investment income.
First Quarter 2000 net earnings were $13,063,000 compared to Fourth Quarter of
1999 net earnings of $14,952,000, which reflects the lower level of sales in
the First Quarter 2000 compared to the Fourth Quarter 1999. This is
consistent with historical trends.
As discussed in Note 8, the Company has acquired the assets of a confectionery
business and has entered into an agreement to purchase the assets of Andes
Candies, Inc. during the First Quarter.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's current ratio (current assets divided by current liabilities) is
in excess of 3.8 to 1 as of the end of the First Quarter 2000 as compared to
4.1 to 1 as of the First Quarter 1999 and 4.0 to 1 as of the Fourth Quarter
1999. Net working Capital was $173,924,000 as of the end of the First Quarter
2000 as compared to $173,425,000 as of the First Quarter 1999 and $168,423,000
at the end of the Fourth Quarter 1999. Capital expenditures for 2000 are
anticipated to be generally in line with historical spending and are to be
funded from the Company's cash flow from operations and internal sources.
Debt securities that matured during the quarters ended April 1, 2000 and April
3, 1999 were replaced with debt securities of similar maturities.
QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK:
The Company is exposed to various market risks, including fluctuations in
sugar, corn, syrup, edible oils, cocoa and packaging costs. The Company also
invests in securities with maturities of up to three years, the majority of
which are held to maturity, which limits the Company's exposure to interest
rate fluctuations. There has been no material change in the Company's market
risks that would significantly affect the disclosures made in the Form 10-K
for the year ended December 31, 1999.
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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: May 8, 2000 BY:
Melvin J. Gordon
Chairman of the Board
BY:
G. Howard Ember
Vice President - Finance
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<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>
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Apr-01-2000
<PERIOD-TYPE> 3-MOS
<CASH> 67,000
<SECURITIES> 90,553
<RECEIVABLES> 26,444
<ALLOWANCES> 2,115
<INVENTORY> 36,275
<CURRENT-ASSETS> 235,910
<PP&E> 189,545
<DEPRECIATION> 90,425
<TOTAL-ASSETS> 533,247
<CURRENT-LIABILITIES> 61,986
<BONDS> 7,500
0
0
<COMMON> 34,397
<OTHER-SE> 392,941
<TOTAL-LIABILITY-AND-EQUITY> 533,247
<SALES> 78,015
<TOTAL-REVENUES> 78,015
<CGS> 36,948
<TOTAL-COSTS> 22,942
<OTHER-EXPENSES> 2,423
<LOSS-PROVISION> 57
<INTEREST-EXPENSE> 171
<INCOME-PRETAX> 20,378
<INCOME-TAX> 7,315
<INCOME-CONTINUING> 13,063
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,063
<EPS-BASIC> .26
<EPS-DILUTED> .26
</TABLE>
