Tootsie Roll Industries Inc 10-Q for FY2022 Q3

Tootsie Roll Industries Inc (TR)

10-Q 2022-11-08 For: 2022-09-30

Added on April 07, 2026

About this 10-Q

Tootsie Roll Industries Inc filed this 10-Q on November 8, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $213.17M; up 15.8% from $184.17M a year earlier
Net income: $26.58M; up 7.5% from net income of $24.73M 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		40,293,792
Class B Common Stock, $0.69-4/9 par value		28,622,421


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	8-17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

Part II —	Other Information

Item 1.	Legal Proceedings	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 6.	Exhibits	25

Signatures		26



	September 30, 2022		December 31, 2021		September 30, 2021

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	57,216	$	105,840	$	76,210
Restricted cash		332		386		393
Investments		88,510		39,968		39,491
Accounts receivable trade, less allowances of $2,949, $2,281 and $2,706		82,315		54,921		80,877
Other receivables		4,120		3,920		3,392
Inventories:
Finished goods and work-in-process		48,758		31,431		46,887
Raw materials and supplies		40,797		24,074		24,948
Prepaid expenses		2,018		7,761		5,706
Total current assets		324,066		268,301		277,904

PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		21,673		21,704		21,710
Buildings		130,131		130,158		123,844
Machinery and equipment		446,487		446,777		421,233
Construction in progress		32,409		15,344		39,687
Operating lease right-of-use assets		4,746		7,419		7,617
		635,446		621,402		614,091
Less - accumulated depreciation		424,600		412,496		407,765
Net property, plant and equipment		210,846		208,906		206,326

OTHER ASSETS:
Goodwill		73,237		73,237		73,237
Trademarks		175,024		175,024		175,024
Investments		241,308		291,175		280,326
Prepaid expenses and other assets		480		603		1,614
Deferred income taxes		1,394		1,372		1,010
Total other assets		491,443		541,411		531,211
Total assets	$	1,026,355	$	1,018,618	$	1,015,441



	Quarter Ended				Year to Date Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Net product sales	$	211,888	$	183,090	$	493,260	$	399,445
Rental and royalty revenue		1,285		1,075		3,990		3,407
Total revenue		213,173		184,165		497,250		402,852
Product cost of goods sold		141,243		118,446		328,995		259,959
Rental and royalty cost		388		332		1,153		1,005
Total costs		141,631		118,778		330,148		260,964
Product gross margin		70,645		64,644		164,265		139,486
Rental and royalty gross margin		897		743		2,837		2,402
Total gross margin		71,542		65,387		167,102		141,888
Selling, marketing and administrative expenses		35,957		35,743		83,704		94,930
Earnings from operations		35,585		29,644		83,398		46,958
Other income (loss), net		(1,246)		1,750		(17,399)		11,810
Earnings before income taxes		34,339		31,394		65,999		58,768
Provision for income taxes		7,778		6,675		15,438		13,494
Net earnings		26,561		24,719		50,561		45,274
Less: net loss attributable to noncontrolling interests		(16)		(14)		(32)		(20)
Net earnings attributable to Tootsie Roll Industries, Inc.	$	26,577	$	24,733	$	50,593	$	45,294

Net earnings attributable to Tootsie Roll Industries, Inc. per share	$	0.39	$	0.36	$	0.73	$	0.65
Dividends per share *	$	0.09	$	0.09	$	0.27	$	0.27

Average number of shares outstanding		68,876		69,250		68,952		69,555

Retained earnings at beginning of period	$	8,692	$	6,846	$	39,545	$	32,312
Net earnings attributable to Tootsie Roll Industries, Inc.		26,577		24,733		50,593		45,294
Cash dividends		(6,191)		(6,033)		(18,426)		(18,027)
Stock dividends		-		-		(42,634)		(34,033)
Retained earnings at end of period	$	29,078	$	25,546	$	29,078	$	25,546


										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 June 30, 2022	40,379	$	28,041	28,623	$	19,877	99	$	(1,992)	$	746,026
Issuance of 3% stock dividend	—		—	—		—	—		—		—
Conversion of Class B common shares to common shares	—		—	—		—	—		—		—
Purchase and retirement of common shares and other	(85)		(59)	(1)		—	—		—		(2,942)
Balance at September 30, 2022	40,294	$	27,982	28,622	$	19,877	99	$	(1,992)	$	743,084

Balance at June 30, 2021	39,700	$	27,569	27,821	$	19,320	96	$	(1,992)	$	722,617
Issuance of 3% stock dividend	—		—	—		—	—		—		—
Conversion of Class B common shares to common shares	16		11	(16)		(11)	—		—		—
Purchase and retirement of common shares and other	(384)		(266)	—		—	—		—		(12,737)
Balance at September 30, 2021	39,332	$	27,314	27,805	$	19,309	96	$	(1,992)	$	709,880

Balance at December 31, 2021	39,344	$	27,322	27,793	$	19,300	96	$	(1,992)	$	709,880
Issuance of 3% stock dividend	1,176		817	833		579	3		—		41,068
Conversion of Class B common shares to common shares	4		3	(4)		(3)	—		—		—
Purchase and retirement of common shares and other	(230)		(160)	—		1	—		—		(7,864)
Balance at September 30, 2022	40,294	$	27,982	28,622	$	19,877	99	$	(1,992)	$	743,084

Balance at December 31, 2020	39,073	$	27,134	27,012	$	18,758	93	$	(1,992)	$	706,930
Issuance of 3% stock dividend	1,163		808	809		562	3		—		32,495
Conversion of Class B common shares to common shares	16		11	(16)		(11)	—		—		—
Purchase and retirement of common shares and other	(920)		(639)	—		—	—		—		(29,545)
Balance at September 30, 2021	39,332	$	27,314	27,805	$	19,309	96	$	(1,992)	$	709,880



	Estimated Fair Value September 30, 2022
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	57,216	$	57,216	$	—	$	—
Available for sale securities		262,159		742		261,417		—
Foreign currency forward contracts		(366)		—		(366)		—
Commodity futures contracts		(31)		(31)		—		—
Trading securities		67,659		52,900		14,759		—
Total assets measured at fair value	$	386,637	$	110,827	$	275,810	$	—


	Estimated Fair Value December 31, 2021
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	105,840	$	105,840	$	-	$	—
Available for sale securities		241,407		1,282		240,125		—
Foreign currency forward contracts		426		—		426		—
Commodity futures contracts		124		124		—		—
Trading securities		89,736		76,196		13,540		—
Total assets measured at fair value	$	437,533	$	183,442	$	254,091	$	—


	Estimated Fair Value September 30, 2021
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	76,210	$	76,210	$	-	$	—
Available for sale securities		235,912		2,313		233,599		—
Foreign currency forward contracts		504		—		504		—
Commodity futures contracts		352		352		—		—
Trading securities		83,905		70,762		13,143		—
Total assets measured at fair value	$	396,883	$	149,637	$	247,246	$	—



	September 30, 2022
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	6,782	$	26	$	(392)
Commodity futures contracts		1,009		1		(32)
Total derivatives			$	27	$	(424)

	December 31, 2021
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	6,729	$	426	$	—
Commodity futures contracts		6,012		231		(107)
Total derivatives			$	657	$	(107)

	September 30, 2021
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	3,995	$	504	$	—
Commodity futures contracts		2,730		352		—
Total derivatives			$	856	$	—



	For Quarter Ended September 30, 2022
					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	$	(483)	$	48	$	—
Commodity futures contracts		(59)		73		—
Total	$	(542)	$	121	$	—

	For Quarter Ended September 30, 2021
					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	$	(107)	$	106	$	—
Commodity futures contracts		414		816		—
Total	$	307	$	922	$	—

	For Year to Date Ended September 30, 2022
					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	$	(556)	$	236	$	—
Commodity futures contracts		6		162		—
Total	$	(550)	$	398	$	—

	For Year to Date Ended September 30, 2021
					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	$	66	$	340	$	—
Commodity futures contracts		1,558		2,147		—
Total	$	1,624	$	2,487	$	—



											Accumulated
	Foreign				Foreign				Postretirement		Other
	Currency				Currency		Commodity		and Pension		Comprehensive
	Translation		Investments		Derivatives		Derivatives		Benefits		Earnings (Loss)
Balance at June 30, 2022	$	(24,419)	$	(7,575)	$	124	$	76	$	426	$	(31,368)
Other comprehensive earnings (loss) before reclassifications		120		(2,518)		(365)		(45)		—		(2,808)
Reclassifications from accumulated other comprehensive loss		-		(3)		(37)		(55)		(157)		(252)
Other comprehensive earnings (loss) net of tax		120		(2,521)		(402)		(100)		(157)		(3,060)
Balance at September 30, 2022	$	(24,299)	$	(10,096)	$	(278)	$	(24)	$	269	$	(34,428)

Balance at June 30, 2021	$	(24,388)	$	793	$	543	$	572	$	939	$	(21,541)
Other comprehensive earnings (loss) before reclassifications		(495)		(496)		(82)		313		-		(760)
Reclassifications from accumulated other comprehensive loss		-		(29)		(81)		(618)		(266)		(994)
Other comprehensive earnings (loss) net of tax		(495)		(525)		(163)		(305)		(266)		(1,754)
Balance at September 30, 2021	$	(24,883)	$	268	$	380	$	267	$	673	$	(23,295)

Balance at December 31, 2021	$	(24,882)	$	(1,286)	$	322	$	94	$	739	$	(25,013)
Other comprehensive earnings (loss) before reclassifications		583		(8,799)		(421)		5		—		(8,632)
Reclassifications from accumulated other comprehensive loss		-		(11)		(179)		(123)		(470)		(783)
Other comprehensive earnings (loss) net of tax		583		(8,810)		(600)		(118)		(470)		(9,415)
Balance at September 30, 2022	$	(24,299)	$	(10,096)	$	(278)	$	(24)	$	269	$	(34,428)

Balance at December 31, 2020	$	(24,581)	$	1,992	$	589	$	713	$	1,472	$	(19,815)
Other comprehensive earnings (loss) before reclassifications		(302)		(1,655)		49		1,182		—		(726)
Reclassifications from accumulated other comprehensive loss		-		(69)		(258)		(1,628)		(799)		(2,754)
Other comprehensive earnings (loss) net of tax		(302)		(1,724)		(209)		(446)		(799)		(3,480)
Balance at September 30, 2021	$	(24,883)	$	268	$	380	$	267	$	673	$	(23,295)


Details about Accumulated Other	Quarter Ended				Year to Date Ended				Location of (Gain) Loss
Comprehensive Income Components	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021		Recognized in Earnings
Investments	$	(4)	$	(39)	$	(14)	$	(92)	Other income, net
Foreign currency derivatives		(48)		(106)		(236)		(340)	Other income, net
Commodity derivatives		(73)		(816)		(162)		(2,147)	Product cost of goods sold
Postretirement and pension benefits		(207)		(352)		(620)		(1,055)	Other income, net
Total before tax		(332)		(1,313)		(1,032)		(3,634)
Tax (expense) benefit		80		319		249		880
Net of tax	$	(252)	$	(994)	$	(783)	$	(2,754)



					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

Jul 1 to Jul 31	—	$	—	Not Applicable	Not Applicable

Aug 1 to Aug 31	23,272		35.92	Not Applicable	Not Applicable

Sep 1 to Sep 30	61,892		34.94	Not Applicable	Not Applicable

Total	85,164	$	35.21	Not Applicable	Not Applicable


		TOOTSIE ROLL INDUSTRIES, INC.

Date:	November 8, 2022	BY:	/S/ELLEN R. GORDON

			Ellen R. Gordon
			Chairman and Chief
			Executive Officer

Date:	November 8, 2022	BY:	/S/G. HOWARD EMBER, JR.

			G. Howard Ember, Jr.
			Vice President Finance and
			Chief Financial Officer



	September 30, 2022		December 31, 2021		September 30, 2021

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	30,728	$	14,969	$	24,512
Bank loans		949		939		956
Dividends payable		6,200		6,042		6,042
Accrued liabilities		60,330		53,896		57,597
Postretirement health care benefits		616		616		544
Operating lease liabilities		833		1,072		1,102
Income taxes payable		1,863		2,434		3,884
Total current liabilities		101,519		79,968		94,637

NONCURRENT LIABILITIES:
Deferred income taxes		41,351		45,461		45,441
Postretirement health care benefits		12,609		12,619		12,971
Industrial development bonds		7,500		7,500		7,500
Liability for uncertain tax positions		3,540		3,415		3,177
Operating lease liabilities		3,936		6,347		6,515
Deferred compensation and other liabilities		72,577		94,511		88,684
Total noncurrent liabilities		141,513		169,853		164,288

TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value - 120,000 shares authorized; 40,294, 39,344 and 39,332, respectively, issued		27,982		27,322		27,314
Class B common stock, $.69-4/9 par value - 40,000 shares authorized; 28,622, 27,793 and 27,805, respectively, issued		19,877		19,300		19,309
Capital in excess of par value		743,084		709,880		709,880
Retained earnings		29,078		39,545		25,546
Accumulated other comprehensive loss		(34,428)		(25,013)		(23,295)
Treasury stock (at cost) - 99, 96 and 96 shares, respectively		(1,992)		(1,992)		(1,992)
Total Tootsie Roll Industries, Inc. shareholders’ equity		783,601		769,042		756,762
Noncontrolling interests		(278)		(245)		(246)
Total equity		783,323		768,797		756,516
Total liabilities and shareholders’ equity	$	1,026,355	$	1,018,618	$	1,015,441



	Year to Date Ended
	September 30, 2022		September 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	50,561	$	45,274
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		13,250		12,793
Deferred income taxes		(921)		(1,444)
Amortization of marketable security premiums		4,313		2,645
Changes in operating assets and liabilities:
Accounts receivable		(27,489)		(39,947)
Other receivables		(823)		(291)
Inventories		(34,012)		(12,440)
Prepaid expenses and other assets		5,886		3,980
Accounts payable and accrued liabilities		22,126		22,182
Income taxes payable		(446)		(83)
Postretirement health care benefits		(630)		(1,026)
Deferred compensation and other liabilities		(1,219)		510
Net cash provided by operating activities		30,596		32,153
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(17,552)		(22,930)
Repayment of premiums on split dollar life insurance policies		—		2,514
Purchases of trading securities		(1,292)		(2,108)
Sales of trading securities		2,567		582
Purchase of available for sale securities		(75,125)		(87,060)
Sale and maturity of available for sale securities		38,439		34,510
Net cash used in investing activities		(52,963)		(74,492)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired		(8,024)		(30,184)
Dividends paid in cash		(18,438)		(18,100)
Proceeds from bank loans		3,240		2,970
Repayment of bank loans		(3,102)		(2,798)
Net cash used in financing activities		(26,324)		(48,112)
Effect of exchange rate changes on cash		13		(202)
Decrease in cash and cash equivalents		(48,678)		(90,653)
Cash, cash equivalents and restricted cash at beginning of year		106,226		167,256
Cash, cash equivalents and restricted cash at end of quarter	$	57,548	$	76,603
Supplemental cash flow information:
Income taxes paid/(received), net	$	15,580	$	15,237


Dated:	November 8, 2022	/S/ELLEN R. GORDON
		Ellen R. Gordon
		Chairman and Chief
		Executive Officer


Dated:	November 8, 2022	/S/G. HOWARD EMBER, JR.
		G. Howard Ember, Jr.
		Vice President Finance and
		Chief Financial Officer