Tootsie Roll Industries Inc 10-Q for FY2020 Q1

Tootsie Roll Industries Inc (TR)

10-Q 2020-05-08 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Tootsie Roll Industries Inc filed this 10-Q on May 8, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $103.76M; up 1.7% from $101.98M a year earlier
Net income: $11.98M; up 33.8% from net income of $8.96M a year earlier

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Virginia		22-1318955
(State of Incorporation)		(I.R.S. Employer Identification No.)


7401 South Cicero Avenue, Chicago, Illinois		60629
(Address of Principal Executive Offices)		(Zip Code)


Class		Outstanding

Common Stock, $0.69-4/9 par value		39,769,401
Class B Common Stock, $0.69-4/9 par value		27,037,401


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $0.69-4/9 per share	TR	New York Stock Exchange


		Page No.

Part I —	Financial Information

Item 1.	Financial Statements꞉

	Condensed Consolidated Statements of Financial Position	3-4

	Condensed Consolidated Statements of Earnings and Retained Earnings	5

	Condensed Consolidated Statements of Comprehensive Earnings	6

	Condensed Consolidated Statements of Cash Flows	7

	Notes to Condensed Consolidated Financial Statements	8-15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

Part II —	Other Information

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 6.	Exhibits	25

Signatures		25



	March 31, 2020		December 31, 2019		March 31, 2019

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	139,067	$	138,960	$	77,670
Restricted cash		373		380		380
Investments		77,510		100,444		81,986
Accounts receivable trade, less allowances of $1,887, $1,949 and $1,696		36,006		45,044		43,868
Other receivables		3,446		3,418		3,282
Inventories:
Finished goods and work-in-process		46,683		35,909		40,004
Raw materials and supplies		24,974		23,179		25,675
Prepaid expenses		6,231		5,996		7,111
Total current assets		334,290		353,330		279,976

PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		21,627		21,740		21,727
Buildings		122,598		122,843		121,788
Machinery and equipment		414,526		416,625		401,375
Construction in progress		7,669		4,427		7,349
Operating lease right-of-use assets		1,388		1,580		1,370
		567,808		567,215		553,609
Less - accumulated depreciation		381,850		378,760		366,601
Net property, plant and equipment		185,958		188,455		187,008

OTHER ASSETS:
Goodwill		73,237		73,237		73,237
Trademarks		175,024		175,024		175,024
Investments		153,287		153,031		187,218
Split dollar officer life insurance		26,042		26,042		26,042
Prepaid expenses and other assets		7,555		8,056		11,469
Deferred income taxes		534		689		530
Total other assets		435,679		436,079		473,520
Total assets	$	955,927	$	977,864	$	940,504



	Year to Date Ended
	March 31, 2020		March 31, 2019

Net product sales	$	102,803	$	101,019
Rental and royalty revenue		958		958
Total revenue		103,761		101,977
Product cost of goods sold		66,443		64,856
Rental and royalty cost		302		255
Total costs		66,745		65,111
Product gross margin		36,360		36,163
Rental and royalty gross margin		656		703
Total gross margin		37,016		36,866
Selling, marketing and administrative expenses		16,272		31,108
Earnings from operations		20,744		5,758
Other income (loss), net		(5,494)		6,017
Earnings before income taxes		15,250		11,775
Provision for income taxes		3,274		2,864
Net earnings		11,976		8,911
Less: net earnings (loss) attributable to noncontrolling interests		(6)		(44)
Net earnings attributable to Tootsie Roll Industries, Inc.	$	11,982	$	8,955

Net earnings attributable to Tootsie Roll Industries, Inc. per share	$	0.18	$	0.13
Dividends per share *	$	0.09	$	0.09

Average number of shares outstanding		66,875		67,814

Retained earnings at beginning of period	$	40,809	$	33,767
Net earnings attributable to Tootsie Roll Industries, Inc.		11,982		8,955
Cash dividends		(5,841)		(5,757)
Stock dividends		(43,753)		(34,506)
Retained earnings at end of period	$	3,197	$	2,459



	Quarter Ended
	March 31, 2020		March 31, 2019

Net earnings	$	11,976	$	8,911

Other comprehensive income (loss), before tax:
Foreign currency translation adjustments		(3,674)		391

Pension and postretirement reclassification adjustments:
Unrealized gains (losses) for the period on postretirement and pension benefits		-		-
Less: reclassification adjustment for (gains) losses to net earnings		(338)		(381)
Unrealized gains (losses) on postretirement and pension benefits		(338)		(381)

Investments:
Unrealized gains (losses) for the period on investments		(1,091)		1,467
Less: reclassification adjustment for (gains) losses to net earnings		-		-
Unrealized gains (losses) on investments		(1,091)		1,467

Derivatives:
Unrealized gains (losses) for the period on derivatives		(961)		550
Less: reclassification adjustment for (gains) losses to net earnings		253		96
Unrealized gains (losses) on derivatives		(708)		646

Total other comprehensive income (loss), before tax		(5,811)		2,123
Income tax benefit (expense) related to items of other comprehensive income		517		(419)
Total comprehensive earnings		6,682		10,615
Comprehensive earnings (loss) attributable to noncontrolling interests		(6)		(44)
Total comprehensive earnings attributable to Tootsie Roll Industries, Inc.	$	6,688	$	10,659


										Capital in
				Class B						Excess
	Common Stock			Common Stock			Treasury Stock			of Par
	Shares	Amount		Shares	Amount		Shares	Amount		Value
	(000’s)			(000’s)			(000’s)
Balance at December 31, 2019	38,836	$	26,969	26,287	$	18,254	90	$	(1,992)	$	696,059
Issuance of 3% stock dividend	1,157		803	786		547	3		—		42,243
Conversion of Class B common shares to common shares	36		25	(36)		(25)	—		—		—
Purchase and retirement of common shares and other	(260)		(180)	—		—	—		—		(8,629)
Balance at March 31, 2020	39,769	$	27,617	27,037	$	18,776	93	$	(1,992)	$	729,673

Balance at December 31, 2018	38,544	$	26,767	25,584	$	17,767	88	$	(1,992)	$	696,535
Issuance of 3% stock dividend	1,150		798	767		532	2		—		32,999
Conversion of Class B common shares to common shares	9		6	(9)		(6)	—		—		—
Purchase and retirement of common shares and other	(285)		(197)	—		—	—		—		(10,322)
Balance at March 31, 2019	39,418	$	27,374	26,342	$	18,293	90	$	(1,992)	$	719,212



	Estimated Fair Value March 31, 2020
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	139,067	$	139,067	$	-	$	-
Available for sale securities		162,080		3,441		158,639		-
Foreign currency forward contracts		(93)		-		(93)		-
Commodity futures contracts		(480)		(480)		-		-
Trading securities		68,717		41,692		27,025		-
Total assets measured at fair value	$	369,291	$	183,720	$	185,571	$	-


	Estimated Fair Value December 31, 2019
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	138,960	$	138,960	$	-	$	-
Available for sale securities		177,292		3,588		173,704		-
Foreign currency forward contracts		14		-		14		-
Commodity futures contracts, net		121		121		-		-
Trading securities		76,183		48,260		27,923		-
Total assets measured at fair value	$	392,570	$	190,929	$	201,641	$	-


	Estimated Fair Value March 31, 2019
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	77,670	$	77,670	$	-	$	-
Available for sale securities		199,944		3,041		196,903		-
Foreign currency forward contracts		(197)		-		(197)		-
Commodity futures contracts		(151)		(151)		-		-
Trading securities		69,260		42,866		26,394		-
Total assets measured at fair value	$	346,526	$	123,426	$	223,100	$	-



	March 31, 2020
	Notional
	Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	11,342	$	117	$	(210)
Commodity futures contracts		3,955		1		(481)
Total derivatives			$	118	$	(691)

	December 31, 2019
	Notional
	Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	5,533	$	14	$	—
Commodity futures contracts		7,147		205		(84)
Total derivatives			$	219	$	(84)

	March 31, 2019
	Notional
	Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	11,050	$	-	$	(197)
Commodity futures contracts		7,158		213		(364)
Total derivatives			$	213	$	(561)



	For Quarter Ended March 31, 2020
					Gain (Loss)
			Gain (Loss)		on Amount Excluded
	Gain (Loss)		Reclassified from		from Effectiveness
	Recognized		Accumulated OCI		Testing Recognized
	in OCI		into Earnings		in Earnings

Foreign currency forward contracts	$	(205)	$	(98)	$	-
Commodity futures contracts		(756)		(155)		-
Total	$	(961)	$	(253)	$	-

	For Quarter Ended March 31, 2019
					Gain (Loss)
			Gain (Loss)		on Amount Excluded
	Gain (Loss)		Reclassified from		from Effectiveness
	Recognized		Accumulated OCI		Testing Recognized
	in OCI		into Earnings		in Earnings

Foreign currency forward contracts	$	210	$	-	$	-
Commodity futures contracts		340		(96)		-
Total	$	550	$	(96)	$	-



											Accumulated
	Foreign				Foreign				Postretirement		Other
	Currency				Currency		Commodity		and Pension		Comprehensive
	Translation		Investments		Derivatives		Derivatives		Benefits		Earnings (Loss)
Balance at December 31, 2019	$	(23,368)	$	882	$	10	$	92	$	2,139	$	(20,245)
Other comprehensive earnings (loss) before reclassifications		(3,674)		(827)		(155)		(574)		-		(5,230)
Reclassifications from accumulated other comprehensive loss		-		-		74		118		(256)		(64)
Other comprehensive earnings (loss) net of tax		(3,674)		(827)		(81)		(456)		(256)		(5,294)
Balance at March 31, 2020	$	(27,042)	$	55	$	(71)	$	(364)	$	1,883	$	(25,539)

Balance at December 31, 2018	$	(24,159)	$	(1,516)	$	(309)	$	(444)	$	4,206	$	(22,222)
Other comprehensive earnings (loss) before reclassifications		391		1,112		159		258		-		1,920
Reclassifications from accumulated other comprehensive loss		-		-		-		72		(288)		(216)
Other comprehensive earnings (loss) net of tax		391		1,112		159		330		(288)		1,704
Balance at March 31, 2019	$	(23,768)	$	(404)	$	(150)	$	(114)	$	3,918	$	(20,518)


Details about Accumulated Other	Quarter Ended				Location of (Gain) Loss
Comprehensive Income Components	March 31, 2020		March 31, 2019		Recognized in Earnings
Foreign currency derivatives	$	98	$	-	Other income, net
Commodity derivatives		155		96	Product cost of goods sold
Postretirement and pension benefits		(338)		(381)	Other income, net
Total before tax		(85)		(285)
Tax (expense) benefit		21		69
Net of tax	$	(64)	$	(216)



					Approximate Dollar
	(a) Total			Shares	Value of Shares that
	Number of	(b) Average		Purchased as Part of	May Yet Be Purchased
	Shares	Price Paid per		Publicly Announced Plans	Under the Plans
Period	Purchased	Share		Or Programs	or Programs

Jan 1 to Jan 31	30,610	$	34.27	Not Applicable	Not Applicable

Feb 1 to Feb 29	74,842		34.31	Not Applicable	Not Applicable

Mar 1 to Mar 31	154,846		33.47	Not Applicable	Not Applicable

Total	260,298	$	33.80	Not Applicable	Not Applicable



	March 31, 2020		December 31, 2019		March 31, 2019

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	15,991	$	12,720	$	13,520
Bank loans		781		747		755
Dividends payable		160		5,861		176
Accrued liabilities		38,424		41,611		37,302
Postretirement health care benefits		598		598		580
Operating lease liabilities		1,063		1,062		716
Deferred compensation		16,751		16,945		-
Income taxes payable		3,418		-		-
Total current liabilities		77,186		79,544		53,049

NONCURRENT LIABILITIES:
Deferred income taxes		45,755		47,295		44,553
Postretirement health care benefits		13,206		13,145		11,954
Industrial development bonds		7,500		7,500		7,500
Liability for uncertain tax positions		3,697		4,240		3,901
Operating lease liabilities		325		518		654
Deferred compensation and other liabilities		56,737		65,973		74,233
Total noncurrent liabilities		127,220		138,671		142,795

TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value - 120,000 shares authorized; 39,769, 38,836 and 39,418, respectively, issued		27,617		26,969		27,374
Class B common stock, $.69-4/9 par value - 40,000 shares authorized; 27,037, 26,287 and 26,342, respectively, issued		18,776		18,254		18,293
Capital in excess of par value		729,673		696,059		719,212
Retained earnings		3,197		40,809		2,459
Accumulated other comprehensive loss		(25,539)		(20,245)		(20,518)
Treasury stock (at cost) - 93, 90 and 90 shares, respectively		(1,992)		(1,992)		(1,992)
Total Tootsie Roll Industries, Inc. shareholders’ equity		751,732		759,854		744,828
Noncontrolling interests		(211)		(205)		(168)
Total equity		751,521		759,649		744,660
Total liabilities and shareholders’ equity	$	955,927	$	977,864	$	940,504



	Year to Date Ended
	March 31, 2020		March 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	11,976	$	8,911
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation		4,647		4,666
Deferred income taxes		(1,013)		149
Amortization of marketable security premiums		217		353
Changes in operating assets and liabilities:
Accounts receivable		8,205		5,927
Other receivables		(197)		(267)
Inventories		(13,676)		(11,100)
Prepaid expenses and other assets		172		983
Accounts payable and accrued liabilities		1,422		(2,770)
Income taxes payable		2,983		2,930
Postretirement health care benefits		(276)		(150)
Deferred compensation and other liabilities		121		924
Net cash provided by operating activities		14,581		10,556
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(3,737)		(4,683)
Purchases of trading securities		(2,287)		(2,360)
Sales of trading securities		380		362
Purchase of available for sale securities		(21,312)		(20,919)
Sale and maturity of available for sale securities		35,217		5,379
Net cash from (used in) investing activities		8,261		(22,221)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired		(8,809)		(10,519)
Dividends paid in cash		(11,703)		(11,530)
Proceeds from bank loans		928		941
Repayment of bank loans		(880)		(544)
Net cash used in financing activities		(20,464)		(21,652)
Effect of exchange rate changes on cash		(2,278)		80
Increase (Decrease) in cash and cash equivalents		100		(33,237)
Cash, cash equivalents and restricted cash at beginning of year		139,340		111,287
Cash, cash equivalents and restricted cash at end of quarter	$	139,440	$	78,050
Supplemental cash flow information:
Income taxes paid/(received), net	$	794	$	(20)
Interest paid	$	23	$	31


		TOOTSIE ROLL INDUSTRIES, INC.

Date:	May 8, 2020	BY:	/S/ELLEN R. GORDON
			Ellen R. Gordon
			Chairman and Chief
			Executive Officer

Date:	May 8, 2020	BY:	/S/G. HOWARD EMBER, JR.
			G. Howard Ember, Jr.
			Vice President Finance and
			Chief Financial Officer


	Date:	May 8, 2020

	By:	/S/ELLEN R. GORDON
		Ellen R. Gordon
		Chairman and Chief
		Executive Officer


Dated:	May 8, 2020	/S/ELLEN R. GORDON
		Ellen R. Gordon
		Chairman and Chief
		Executive Officer


Dated:	May 8, 2020	/S/G. HOWARD EMBER, JR.
		G. Howard Ember, Jr.
		Vice President Finance and
		Chief Financial Officer