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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 July 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
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 latest practicable date.
Class Outstanding
Common Stock, $.69 4/9 par value 33,432,980
Class B Common Stock, $.69 4/9 par value 16,099,209
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<TABLE>
PART I - FINANCIAL INFORMATION
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
ASSETS July 1, July 3, Dec. 31,
CURRENT ASSETS 2000 1999 1999
<S> <C> <C> <C>
Cash & Cash Equiv. $ 20,593,808 $ 64,416,400 $ 88,503,731
Investments 69,497,283 62,101,985 71,002,420
Trade Accounts Receivable,
Less Allowances of
$2,360,000, $2,110,000 & $2,032,000 23,688,324 15,400,062 19,031,958
Other Receivables 2,956,497 5,885,236 5,716,150
Inventories, at Cost
(Last-in,First-out):
Finished Goods & Work in Process 50,200,214 42,067,331 20,688,894
Raw Material & Supplies 19,919,144 18,695,793 14,395,996
Prepaid Expenses 5,443,076 5,567,276 3,123,428
Deferred Income Taxes 2,069,000 2,584,000 2,069,000
Total Current Assets 194,367,346 216,718,083 224,531,577
PROPERTY, PLANT & EQUIPMENT,
(at cost)
Land 8,320,053 7,774,820 7,981,419
Buildings 32,558,297 22,246,583 30,329,791
Machinery & Equipment 180,225,620 144,524,357 145,789,056
221,103,970 174,545,760 184,100,266
Less-Accumulated Depreciation 93,007,575 84,692,076 88,202,899
128,096,395 89,853,684 95,897,367
OTHER ASSETS
Intangible Assets, net of accumulated
amortization of $25,106,000, $22,144,000 &
$23,497,000 123,102,626 86,489,854 85,136,703
Investments 72,283,495 76,146,068 87,166,551
Cash Surrender Value of Life Insurance and
Other Assets 40,153,550 32,266,776 36,683,965
235,539,671 194,902,698 208,987,219
Total Assets $558,003,412 $501,474,465 $529,416,163
(The accompanying notes are an integral part of these statements)
</TABLE>
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<TABLE>
<CAPTION>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS( EQUITY July 1, July 3, Dec. 31,
CURRENT LIABILITIES 2000 1999 1999
<S> <C> <C> <C>
Notes Payable to Banks $ 16,075,000 $ -- $ --
Accounts Payable 13,824,753 13,026,031 12,845,180
Dividends Payable 3,467,253 3,070,307 3,035,496
Accrued Liabilities 32,521,967 28,478,519 31,944,769
Income Taxes Payable 10,610,010 10,108,155 8,283,501
Total Current Liabilities 76,498,983 54,683,012 56,108,946
NON-CURRENT LIABILITIES
Industrial Development Bonds 7,500,000 7,500,000 7,500,000
Post Retirement Benefits 6,726,792 6,327,717 6,556,860
Deferred Compensation and Other Liabilities 19,986,590 16,716,917 19,084,505
Deferred Income Taxes 9,415,150 8,516,992 9,519,818
Total Non-Current Liabilities 43,628,532 39,061,626 42,661,183
SHAREHOLDERS( EQUITY
Common Stock, $.69-4/9 par value-
120,000,000 shares authorized
33,432,980, 33,241,555 & 32,853,761
respectively, issued 23,217,144 23,084,205 22,814,906
Class B Common Stock, $.69-4/9 par value-
40,000,000 shares authorized
16,099,209, 15,808,093 & 15,706,907
respectively, issued 11,179,908 10,977,743 10,907,476
Capital in Excess of Par Value 275,362,049 264,695,118 249,236,182
Retained Earnings 139,981,837 120,459,556 158,619,140
Accumulated Other Comprehensive Earnings (9,873,638) (9,495,392) (8,940,267)
Treasury Stock (at cost)-
51,500, 51,500 & 51,500, shares
respectively (1,991,403) (1,991,403) (1,991,403)
Total Shareholders( Equity 437,875,897 407,729,827 430,646,034
Total Liabilities and
Shareholders( Equity $558,003,412 $501,474,465 $529,416,163
(The accompanying notes are an integral part of these statements)
</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 26 Weeks Ended
July 1, 2000 & July 3, 1999 July 1, 2000 & July 3,1999
<S> <C> <C> <C> <C>
NET SALES (Note 2) $ 90,376,428 $ 88,265,054 $168,391,237 $162,464,568
Cost of goods sold 42,167,153 42,363,471 79,115,158 77,747,726
Gross Margin 48,209,275 45,901,583 89,276,079 84,716,842
Selling, Marketing and
Administrative Expense 24,707,493 23,853,618 46,916,912 44,509,021
Amortization of Intangible Assets 876,537 676,575 1,608,621 1,353,150
Earnings from Operations 22,625,245 21,371,390 40,750,546 38,854,671
Other Income, Net 1,797,354 1,785,404 4,050,172 3,650,891
Earnings before Income Taxes 24,422,599 23,156,794 44,800,718 42,505,562
Provision for Income Taxes 8,771,000 8,406,000 16,086,000 15,430,000
Net Earnings (Note 5) $ 15,651,599 $ 14,750,794 $ 28,714,718 $ 27,075,562
Net Earnings $ 15,651,599 $ 14,750,794 $ 28,714,718 $ 27,075,562
Other Comprehensive Earnings, Net of Tax (1,649,779) 251,254 (933,371) 1,027,374
Comprehensive Earnings $ 14,001,820 $ 15,002,048 $ 27,781,347 $ 28,102,936
Retained Earnings at Beginning of Period $127,793,886 $108,775,945 $158,619,140 $164,652,120
Net Earnings 15,651,599 14,750,794 28,714,718 27,075,562
Cash Dividends (3,463,648) (3,067,183) (6,468,866) (5,578,594)
Stock Dividends - 3% -- -- (40,883,155) (65,689,532)
Retained Earnings at End of Period $139,981,837 $120,459,556 $139,981,837 $120,459,556
Net Earnings per Share (Note 3) $ .32 $ .29 $ .58 $ .53
Dividends per Share * $ .07 $ .0625 $ .1325 $ .115
Average Number of Shares Outstanding
(Notes 3 & 4) 49,480,689 50,610,594 49,623,675 50,650,976
*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)
</TABLE>
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<TABLE>
TOOTSIE ROLL INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
26 Weeks Ended
July 1, 2000 & July 3, 1999
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
<C> <C>
Net earnings $28,714,718 $27,075,562
Adjustments to reconcile net earnings to
net cash provided by (used in)
operating activities:
Depreciation and amortization 6,313,296 5,358,053
(Increase) decrease in assets
excluding effects from acquisitions:
Accounts receivable (4,758,065) 3,812,043
Other receivables 2,759,653 (2,561,091)
Inventories (29,222,095) (23,938,035)
Prepaid expenses and other assets (6,952,058) (5,547,302)
Increase (decrease) in liabilities
excluding effects from acquisitions:
Accounts payable and accrued liabilities 999,229 (2,304,943)
Income taxes payable and deferred 2,182,023 2,556,483
Postretirement health care and life
insurance benefits 169,932 182,774
Deferred compensation and other liabilities 902,085 1,794,020
Other (278,870) 282,509
Net cash provided by operating activities 829,848 6,710,073
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions acquired, net of
cash and cash equivalents (74,293,419) --
Capital expenditures (7,609,113) (10,955,007)
Purchase of held to maturity securities (97,991,933) (104,311,000)
Maturity of held to maturity securities 109,931,588 110,330,442
Purchase of available for sale securities (46,837,375) (79,297,278)
Sale and maturity of available for
sale securities 52,105,208 77,468,984
Net cash used in investing activities (64,695,044) (6,763,859)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable 38,775,000 --
Repayment of notes payable (22,700,000) --
Purchase of treasury stock -- (1,018,815)
Shares repurchased and retired (13,940,329) (10,051,416)
Dividends paid in cash (6,179,398) (5,203,174)
Net cash used in financing activities (4,044,727) (16,273,405)
Decrease in cash and cash equivalents (67,909,923) (16,327,191)
Cash and cash equivalents-beginning of year 88,503,731 80,743,591
Cash and cash equivalents-end of quarter $20,593,808 $64,416,400
Supplemental cash flow information:
Income taxes paid $13,806,000 $12,688,000
Interest paid $ 429,000 $ 385,000
(The accompanying notes are an integral part of the statements)
</TABLE>
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TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 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 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 July 1, 2000 amounted to
$52,955,000.
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 July 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 - On May 12, 2000, the Company acquired the assets of Andes Candies,
Inc. from Brach & Brock Confections, Inc. In February 2000, the
Company acquired the assets of a small confectionery company. The
cost of these acquisitions was $74.3 million in cash, which was
funded through existing cash, and the issuance of $38.8 million of
floating rate short term notes drawn on Company lines of credit due
on 6/30/01. The Company repaid $22.7 million of the notes payable
prior to the end of the quarter. The notes payable are expected to
be repaid no later than December 31, 2000.
The acquisition cost has been allocated to the assets acquired and
liabilities assumed based on their respective appraised values as
follows (in millions):
Current assets $ 6.4
Property, plant and equipment 29.4
Intangible assets - primarily trademarks 39.5
Liabilities 1.0
Total purchase price $74.3
Intangible assets are being amortized over periods ranging from 15
to 40 years on a straight-line basis.
The acquitions were accounted for by the purchase method.
Accordingly, the operating results of the acquired businesses have
been included in the consolidated financial statements since the
date of acquisition. The operating results of the acquired
businesses did not have a material effect on the consolidated
statement of earnings, comprehensive earnings and retained earnings
for the second quarter or first half of 2000.
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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:
Second Quarter, 2000
Second Quarter vs.
2000 1999 Second Quarter, 1999
$90,376,428 $88,265,054 +2.4%
First Half, 2000
First Half vs.
2000 1999 First Half, 1999
$168,391,237 $162,464,568 +3.6%
Second Quarter 2000 net sales of $90,376,000, a record, were up 2.4% from the
Second Quarter 1999 net sales of $88,265,000.
First Half 2000 net sales of $168,391,000 were up 3.6% from First Half 1999
net sales of $162,465,000.
Second Quarter 2000 net sales of $90,376,000 were up 15.8% from First
Quarter 2000 net sales of $78,015,000. This is not considered unusual
as the First Quarter of the year is historically the Company's lowest
sales quarter.
Record sales for the Second Quarter and First Half of 2000 are the
result of successful marketing and promotional programs, new products
from the two businesses acquired in 2000 and product line extensions. The
products from the acquired businesses are marketed under the brands of Andes
Candies and Fluffy Stuff. These record sales are primarily the result of
increased sales volume.
COST OF SALES:
Cost of Sales as a
Second Quarter Percentage of Net Sales
2000 1999 2nd Qtr. 2000 2nd Qtr. 1999
$42,167,153 $42,363,471 46.7% 48.0%
Cost of Sales as a
First Half Percentage of Net Sales
2000 1999 1st Half 2000 1st Half 1999
$79,115,158 $77,747,726 47.0% 47.9%
Cost of sales as a percentage of net sales favorably decreased from 48.0% in
the Second Quarter 1999 to 46.7% in the Second Quarter 2000. First Half cost
of sales also decreased from 47.9% in 1999 to 47.0% in 2000.
NET EARNINGS:
Second Quarter, 2000
Second Quarter vs.
2000 1999 Second Quarter, 1999
$15,651,599 $14,750,794 6.1%
First Half, 2000
First Half vs
2000 1999 First Half, 1999
$28,714,718 $27,075,562 6.1%
Second Quarter 2000 net earnings were $15,652,000, a record, compared to
$14,751,000 in the Second Quarter 1999. Second Quarter 2000 earnings per
share of $.32 were up 10.3% over Second Quarter 1999 earning per share of
$.29.
First Half 2000 net earnings were $28,715,000 compared to prior year's
First Half 1999 net earnings of $27,076,000. First Half 2000 earnings
per share of $.58 were up 9.4% over First Half 1999 earnings per share of
$.53.
Second Quarter 2000 net earnings of $15,652,000 increased $2,589,000
or 19.8% from First Quarter 2000 net earnings of $13,063,000.
The increase in net earnings for the Second Quarter and First Half of
2000 reflects higher sales, improved gross profit margins and ongoing cost
control programs. Other income in the Second Quarter and First Half benefited
from increased investment income and capital gains.
The consolidated effective income tax rate favorably decreased from
36.3% in the First Half of 1999 to 35.9% in the First Half of 2000.
This improvement generally reflects increased tax-free investment income.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's current ratio (current assets divided by current liabilities) is
in excess of 2.5 to 1 as of the end of the Second Quarter 2000 as compared to
4.0 to 1 as of the Second Quarter 1999 and 4.0 to 1 as of the Fourth Quarter
1999. Net working Capital was $117,868,000 as of the end of the Second
Quarter 2000 as compared to $162,035,000 as of the Second Quarter 1999 and
$168,423,000 at the end of the Fourth Quarter 1999 reflecting the acquisition
of Andes Candies, Inc. 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.
In the first half of 2000, the Company repurchased 467,000 shares of its
common stock for $13.9 million.
On May 12, 2000, the Company acquired the assets of Andes Candies, Inc. from
Brach & Brock Confections, Inc. In February 2000, the Company acquired the
assets of a small confectionery company. The cost of these acquisitions was
$74.3 million in cash, which was funded through existing cash, and the
issuance of $38.8 million of floating rate short term notes drawn on Company
lines of credit due on 6/30/01. The Company repaid $22.7 million of the notes
payable prior to the end of the quarter. The notes payable are expected to be
repaid no later than December 31, 2000.
Debt securities that matured during the quarters ended July 1, 2000 and July
3, 1999 were replaced with debt securities of similar maturities, or used to
fund the businesses aquired as discussed above.
QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK:
The Company is exposed to various market risks, including fluctuations in
sugar, corn, edible oils, cocoa and packaging costs. The Company also invests
in securities with maturities of up to three years, the majority of which are
held to maturity, which limits the Company's exposure to interest rate
fluctuations. There has been no material change in the Company's market risks
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
Item 4. Submission of Matters to a Vote of Security-Holders
At the Annual Meeting of Shareholders of the Company, held on May 1, 2000, the
following number of votes were cast for the matters indicated:
1. For the election of four Directors of the Company by the holders of Common
Shares and Class B Common Shares voting together:
Broker
Nominee For Withheld Abstain Non-vote
Melvin J. Gordon 182,365,464 234,086 -0- -0-
Ellen R. Gordon 182,373,789 225,761 -0- -0-
Lana Jane Lewis-Brent 182,437,033 162,517 -0- -0-
Charles W. Siebert 182,402,876 196,674 -0- -0-
2. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
auditors for the fiscal year 2000:
Broker
For Withheld Abstain Non-vote
Common Shares and Class B
Common Shares voting together 180,370,234 2,155,049 74,267 -0-
No other matters were submitted to a vote by ballot at the 2000 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
The Company filed two reports on Form 8-K during the quarter for
which this report is filed.
The Company filed a Form 8-K Current Report dated April 21,
2000, which reported under item 5 that the Company had entered
into an agreement to acquire the assets of Andes Candies, Inc.
No financial statements were filed as part of the report.
The Company filed a Form 8-K Current Report dated May 18, 2000,
which reported under item 5 that the Company had completed the
acquisition of Andes Candies, Inc. No financial statements were
filed as part of the report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly causedthis report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOOTSIE ROLL INDUSTRIES, INC.
Date: August 11,2000 BY:
Melvin J. Gordon
Chairman of the Board
BY:
G. Howard Ember
Vice President - Finance
