The financial statements of Tootsie Roll are presented below.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
For the year ended December 31,
2011 2010 2009
Net product sales $528,369 $517,149 $495,592
Rental and royalty revenue 4,136 4,299 3,739
Total revenue 532,505 521,448 499,331
Product cost of goods sold 365,225 349,334 319,775
Rental and royalty cost 1,038 1,088 852
Total costs 366,263 350,422 320,627
Product gross margin 163,144 167,815 175,817
Rental and royalty gross margin 3,098 3,211 2,887
Total gross margin 166,242 171,026 178,704
Selling, marketing and administrative expenses 108,276 106,316 103,755
Impairment charges - - 14,000
Earnings from operations 57,966 64,710 60,949
Other income (expense), net 2,946 8,358 2,100
Earnings before income taxes 60,912 73,068 63,049
Provision for income taxes 16,974 20,005 9,892
Net earnings $43,938 $53,063 $53,157
Net earnings $43,938 $53,063 $53,157
Other comprehensive earnings (loss) (8,740) 1,183 2,845
Comprehensive earnings $35,198 $54,246 $56,002
Retained earnings at beginning of year. $135,866 $147,687 $144,949
Net earnings 43,938 53,063 53,157
Cash dividends (18,360) (18,078) (17,790)
Stock dividends (47,175) (46,806) (32,629)
Retained earnings at end of year $114,269 $135,866 $147,687
Earnings per share $0.76 $0.90 $0.89
Average Common and Class B Common shares outstanding 57,892 58,685 59,425
(The accompanying notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
Assets December 31,
2011 2010
CURRENT ASSETS:
Cash and cash equivalents $78,612 $115,976
Investments 10,895 7,996
Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394
Other receivables 3,391 9,961
Inventories:
Finished goods and working process
42,676 35,416
Raw materials and supplies 29,084 21,236
Prepaid expenses 5,070 6,499
Deferred income taxes 578 689
Total current assets 212,201 235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 21,939 21,696
Buildings 107,567 102,934
Machinery and equipment 322,993 307,178
Construction in progress 2,598 9,243
455,097 440,974
Less-Accumulated depreciation 242,935 225,482
Net property, plant and equipment 212,162 215,492
OTHER ASSETS:
Goodwill 73,237 73,237
Trademarks 175,024 175,024
Investments 96,161 64,461
Split dollar officer life insurance 74,209 74,441
Prepaid expenses 3,212 6,680
Equity method investment 3,935 4,254
Deferred income taxes 7,715 9,203
Total other assets 433,493 407,300
Total assets $857,856 $857,959
Liabilities and Shareholders' Equity December 31,
2011 2010
CURRENT LIABILITIES:
Accounts payable $10,683 $9,791
Dividends payable 4,603 4,529
Accrued liabilities 43,069 44,185
Total current liabilities 58,355 58,505
NONCURRENT LIABILITES:
Deferred income taxes 43,521 47,865
Postretirement health care and life insurance benefits 26,108 20,689
Industrial development bonds 7,500 7,500
Liability for uncertain tax positions 8,345 9,835
Deferred compensation and other liabilities 48,092 46,157
Total noncurrent liabilities 133,566 132,046
SHAREHOLDERS' EQUITY:
Common stock, $.694/
9 par value-120,000 shares authorized-36,479 and
36,057 respectively, issued 25,333 25,040
Class B common stock, $.694/
9 par value-40,000 shares authorized-
21,025 and 20,466 respectively, issued 14,601 14,212
Capital in excess of par value 533,677 505,495
Retained earnings, per accompanying statement 114,269 135,866
Accumulated other comprehensive loss (19,953) (11,213)
Treasury stock (at cost)-71 shares and 69 shares, respectively (1,992) (1,992)
Total shareholders' equity 665,935 667,408
Total liabilities and shareholders' equity $857,856 $857,959
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)
For the year ended December
31,
2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $43,938 $53,063 $53,157
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation 19,229 18,279 17,862
Impairment charges - - 14,000
Impairment of equity method investment - - 4,400
Loss from equity method investment 194 342 233
Amortization of marketable security premiums 1,267 522 320
Changes in operating assets and liabilities:
Accounts receivable (5,448) 717 (5,899)
Other receivables 3,963 (2,373) (2,088)
Inventories (15,631) (1,447) 455
Prepaid expenses and other assets 5,106 4,936 5,203
Accounts payable and accrued liabilities 84 2,180 (2,755)
Income taxes payable and deferred (5,772) 2,322 (12,543)
Postretirement health care and life insurance benefits 2,022 1,429 1,384
Deferred compensation and other liabilities 2,146 2,525 2,960
Others (708) 310 305
Net cash provided by operating activities 50,390 82,805 76,994
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (16,351) (12,813) (20,831)
Net purchase of trading securities (3,234) (2,902) (1,713)
Purchase of available for sale securities (39,252) (9,301) (11,331)
Sale and maturity of available for sale securities 7,680 8,208 17,511
Net cash used in investing activities (51,157) (16,808) (16,364)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares repurchased and retired (18,190) (22,881) (20,723)
Dividends paid in cash (18,407) (18,130) (17,825)
Net cash used in financing activities (36,597) (41,011) (38,548)
Increase (decrease) in cash and cash equivalents (37,364) 24,986 22,082
Cash and cash equivalents at beginning of year 115,976 90,990 68,908
Cash and cash equivalents at end of year $78,612 $115,976 $90,990
Supplemental cash flow information
Income taxes paid $16,906 $20,586 $22,364
Interest paid $38 $49 $182
Stock dividend issued $47,053 $46,683 $32,538
(The accompanying notes are an integral part of these statements.)
Notes to Consolidated Financial Statements ($ in thousands)
PROPERTY, PLANT AND EQUIPMENT:
Depreciation is computed for financial reporting purposes by use of the straightline
method based on the
useful lives of 20 to 35 years for building and 5 to 25 years for machinery and equipment. Depreciation
expenses was $19,229, $18,279 and $17,862 in 2011, 2010 and 2009, respectively.
Goodwill and intangible assets:
In accordance with authoritative guidance, goodwill and intangible assets with indefinite lives are not
amortized, but rather tested for impairment at least annually unless certain interim triggering events or
circumstances require more frequent testing. All trademarks have been assessed by management to have
indefinite lives because they are expected to generate cash flows indefinitely. The Company has completed
its annual impairment testing of its goodwill and trademarks at December 31 of each of the years
presented. As of December 31, 2009, management ascertained that certain trademarks were impaired, and
recorded a pretax
charge of $14,000. No impairments of intangibles were recorded in 2011 and 2010. This
determination is made by comparing the carrying value of the asset with its estimated fair value, which is
calculated using estimates including discounted projected future cash flows. If the carrying value of goodwill
exceeds the fair value, a second step would measure the carrying value and implied fair value of goodwill.
Management believes that all assumptions used for the impairment tests are consistent with those utilized
by market participants performing similar valuations.
Answer the following questions.
What were the total cost and book value of property, plant, and equipment at December 31,
2011? (Enter the amounts in thousands.)
Total cost
$
Book value
$
What was the amount of depreciation expense for each of the 3 years 2009-2011? (Hint: Use the
statement of cash flows.) (Enter the amounts in thousands.)
Depreciation
2009
$
2010
$
2011
$