Tootsie Roll Industries Inc 10-Q for FY2020 Q2

Tootsie Roll Industries Inc (TR)

10-Q 2020-08-07 For: 2020-06-30

Added on April 07, 2026

About this 10-Q

Tootsie Roll Industries Inc filed this 10-Q on August 7, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $80.64M; down 24.6% from $106.95M a year earlier
Net income: $7.39M; down 36.1% from net income of $11.56M 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		39,663,934
Class B Common Stock, $0.69-4/9 par value		27,024,933


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	8-16

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	23

Item 4.	Controls and Procedures	23

Part II —	Other Information

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

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

Item 6.	Exhibits	26

Signatures		26



	June 30, 2020		December 31, 2019		June 30, 2019

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	106,289	$	138,960	$	57,857
Restricted cash		380		380		385
Investments		80,096		100,444		82,703
Accounts receivable trade, less allowances of $1,556, $1,949 and $1,652		30,010		45,044		36,824
Other receivables		4,739		3,418		3,224
Inventories:
Finished goods and work-in-process		64,176		35,909		62,333
Raw materials and supplies		30,678		23,179		30,011
Prepaid expenses		6,341		5,996		7,752
Total current assets		322,709		353,330		281,089

PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		21,651		21,740		21,735
Buildings		122,645		122,843		121,841
Machinery and equipment		414,850		416,625		401,153
Construction in progress		10,484		4,427		11,362
Operating lease right-of-use assets		1,265		1,580		1,258
		570,895		567,215		557,349
Less - accumulated depreciation		386,674		378,760		370,619
Net property, plant and equipment		184,221		188,455		186,730

OTHER ASSETS:
Goodwill		73,237		73,237		73,237
Trademarks		175,024		175,024		175,024
Investments		186,057		153,031		195,359
Split dollar officer life insurance		26,042		26,042		26,042
Prepaid expenses and other assets		6,650		8,056		10,507
Deferred income taxes		561		689		536
Total other assets		467,571		436,079		480,705
Total assets	$	974,501	$	977,864	$	948,524



	Quarter Ended				Year to Date Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019

Net product sales	$	79,796	$	106,021	$	182,599	$	207,040
Rental and royalty revenue		845		931		1,803		1,889
Total revenue		80,641		106,952		184,402		208,929
Product cost of goods sold		50,379		65,945		116,822		130,801
Rental and royalty cost		210		276		512		531
Total costs		50,589		66,221		117,334		131,332
Product gross margin		29,417		40,076		65,777		76,239
Rental and royalty gross margin		635		655		1,291		1,358
Total gross margin		30,052		40,731		67,068		77,597
Selling, marketing and administrative expenses		29,559		28,216		45,831		59,324
Earnings from operations		493		12,515		21,237		18,273
Other income (loss), net		9,727		3,053		4,233		9,070
Earnings before income taxes		10,220		15,568		25,470		27,343
Provision for income taxes		2,838		4,024		6,112		6,888
Net earnings		7,382		11,544		19,358		20,455
Less: net earnings (loss) attributable to noncontrolling interests		(6)		(12)		(12)		(56)
Net earnings attributable to Tootsie Roll Industries, Inc.	$	7,388	$	11,556	$	19,370	$	20,511

Net earnings attributable to Tootsie Roll Industries, Inc. per share	$	0.11	$	0.17	$	0.29	$	0.30
Dividends per share *	$	0.09	$	0.09	$	0.18	$	0.18

Average number of shares outstanding		66,671		67,501		66,781		67,664

Retained earnings at beginning of period	$	3,197	$	2,459	$	40,809	$	33,767
Net earnings attributable to Tootsie Roll Industries, Inc.		7,388		11,556		19,370		20,511
Cash dividends		(5,997)		(5,894)		(11,838)		(11,651)
Stock dividends		-		-		(43,753)		(34,506)
Retained earnings at end of period	$	4,588	$	8,121	$	4,588	$	8,121


										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 March 31, 2020	39,769	$	27,617	27,037	$	18,776	93	$	(1,992)	$	729,673
Issuance of 3% stock dividend	—		—	—		—	—		—		—
Conversion of Class B common shares to common shares	12		9	(12)		(9)	—		—		—
Purchase and retirement of common shares and other	(117)		(82)	—		—	—		—		(4,068)
Balance at June 30, 2020	39,664	$	27,544	27,025	$	18,767	93	$	(1,992)	$	725,605

Balance at March 31, 2019	39,418	$	27,374	26,342	$	18,293	90	$	(1,992)	$	719,212
Issuance of 3% stock dividend	—		—	—		—	—		—		—
Conversion of Class B common shares to common shares	40		29	(40)		(29)	—		—		—
Purchase and retirement of common shares and other	(225)		(158)	-		—	—		—		(8,509)
Balance at June 30, 2019	39,233	$	27,245	26,302	$	18,264	90	$	(1,992)	$	710,703

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	48		34	(48)		(34)	—		—		—
Purchase and retirement of common shares and other	(377)		(262)	—		—	—		—		(12,697)
Balance at June 30, 2020	39,664	$	27,544	27,025	$	18,767	93	$	(1,992)	$	725,605

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	49		35	(49)		(35)	—		—		—
Purchase and retirement of common shares and other	(510)		(355)	—		—	—		—		(18,831)
Balance at June 30, 2019	39,233	$	27,245	26,302	$	18,264	90	$	(1,992)	$	710,703



	Estimated Fair Value June 30, 2020
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	106,289	$	106,289	$	-	$	-
Available for sale securities		187,868		3,169		184,699		-
Foreign currency forward contracts		428		-		428		-
Commodity futures contracts		(94)		(94)		-		-
Trading securities		78,285		50,664		27,621		-
Total assets measured at fair value	$	372,776	$	160,028	$	212,748	$	-


	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 June 30, 2019
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	57,857	$	57,857	$	-	$	-
Available for sale securities		206,687		3,078		203,609		-
Foreign currency forward contracts		(17)		-		(17)		-
Commodity futures contracts		(112)		(112)		-		-
Trading securities		71,375		45,110		26,265		-
Total assets measured at fair value	$	335,790	$	105,933	$	229,857	$	-



	June 30, 2020
	Notional
	Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	8,574	$	428	$	-
Commodity futures contracts		7,375		170		(264)
Total derivatives			$	598	$	(264)

	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)

	June 30, 2019
	Notional
	Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	11,050	$	-	$	(17)
Commodity futures contracts		6,911		120		(232)
Total derivatives			$	120	$	(249)



	For Quarter Ended June 30, 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	$	352	$	(169)	$	-
Commodity futures contracts		387		-		-
Total	$	739	$	(169)	$	-

	For Quarter Ended June 30, 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	$	180	$	-	$	-
Commodity futures contracts		(123)		(162)		-
Total	$	57	$	(162)	$	-

	For Year to Date Ended June 30, 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	$	147	$	(267)	$	-
Commodity futures contracts		(369)		(155)		-
Total	$	(222)	$	(422)	$	-

	For Year to Date Ended June 30, 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	$	390	$	-	$	-
Commodity futures contracts		217		(258)		-
Total	$	607	$	(258)	$	-



											Accumulated
	Foreign				Foreign				Postretirement		Other
	Currency				Currency		Commodity		and Pension		Comprehensive
	Translation		Investments		Derivatives		Derivatives		Benefits		Earnings (Loss)
Balance at March 31, 2020	$	(27,042)	$	55	$	(71)	$	(364)	$	1,883	$	(25,539)
Other comprehensive earnings (loss) before reclassifications		610		2,592		267		294		-		3,763
Reclassifications from accumulated other comprehensive loss		-		-		128		-		(256)		(128)
Other comprehensive earnings (loss) net of tax		610		2,592		395		294		(256)		3,635
Balance at June 30, 2020	$	(26,432)	$	2,647	$	324	$	(70)	$	1,627	$	(21,904)

Balance at March 31, 2019	$	(23,768)	$	(404)	$	(150)	$	(114)	$	3,918	$	(20,518)
Other comprehensive earnings (loss) before reclassifications		205		898		137		(94)		-		1,146
Reclassifications from accumulated other comprehensive loss		-		-		-		124		(289)		(165)
Other comprehensive earnings (loss) net of tax		205		898		137		30		(289)		981
Balance at June 30, 2019	$	(23,563)	$	494	$	(13)	$	(84)	$	3,629	$	(19,537)

Balance at December 31, 2019	$	(23,368)	$	882	$	10	$	92	$	2,139	$	(20,245)
Other comprehensive earnings (loss) before reclassifications		(3,064)		1,765		112		(280)		-		(1,467)
Reclassifications from accumulated other comprehensive loss		-		-		202		118		(512)		(192)
Other comprehensive earnings (loss) net of tax		(3,064)		1,765		314		(162)		(512)		(1,659)
Balance at June 30, 2020	$	(26,432)	$	2,647	$	324	$	(70)	$	1,627	$	(21,904)

Balance at December 31, 2018	$	(24,159)	$	(1,516)	$	(309)	$	(444)	$	4,206	$	(22,222)
Other comprehensive earnings (loss) before reclassifications		596		2,010		296		164		-		3,066
Reclassifications from accumulated other comprehensive loss		-		-		-		196		(577)		(381)
Other comprehensive earnings (loss) net of tax		596		2,010		296		360		(577)		2,685
Balance at June 30, 2019	$	(23,563)	$	494	$	(13)	$	(84)	$	3,629	$	(19,537)


Details about Accumulated Other	Quarter Ended				Year to Date Ended				Location of (Gain) Loss
Comprehensive Income Components	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019		Recognized in Earnings
Foreign currency derivatives	$	169	$	-	$	267	$	-	Other income, net
Commodity derivatives		-		162		155		258	Product cost of goods sold
Postretirement and pension benefits		(337)		(380)		(675)		(761)	Other income, net
Total before tax		(168)		(218)		(253)		(503)
Tax (expense) benefit		40		53		61		122
Net of tax	$	(128)	$	(165)	$	(192)	$	(381)



					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

Apr 1 to Apr 30	5,000	$	37.05	Not Applicable	Not Applicable

May 1 to May 31	43,435		34.96	Not Applicable	Not Applicable

Jun 1 to Jun 30	69,500		35.14	Not Applicable	Not Applicable

Total	117,935	$	35.15	Not Applicable	Not Applicable


		TOOTSIE ROLL INDUSTRIES, INC.

Date:	August 7, 2020	BY:	/S/ELLEN R. GORDON

			Ellen R. Gordon
			Chairman and Chief
			Executive Officer

Date:	August 7, 2020	BY:	/S/G. HOWARD EMBER, JR.

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



	June 30, 2020		December 31, 2019		June 30, 2019

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	12,935	$	12,720	$	14,326
Bank loans		864		747		686
Dividends payable		6,005		5,861		5,901
Accrued liabilities		40,235		41,611		38,077
Postretirement health care benefits		598		598		580
Operating lease liabilities		1,063		1,062		717
Deferred compensation		17,139		16,945		-
Income taxes payable		5,353		-		-
Total current liabilities		84,192		79,544		60,287

NONCURRENT LIABILITIES:
Deferred income taxes		47,174		47,295		45,001
Postretirement health care benefits		13,247		13,145		12,030
Industrial development bonds		7,500		7,500		7,500
Liability for uncertain tax positions		3,811		4,240		4,001
Operating lease liabilities		202		518		541
Deferred compensation and other liabilities		65,984		65,973		76,539
Total noncurrent liabilities		137,918		138,671		145,612

TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value - 120,000 shares authorized; 39,664, 38,836 and 39,233, respectively, issued		27,544		26,969		27,245
Class B common stock, $.69-4/9 par value - 40,000 shares authorized; 27,025, 26,287 and 26,302, respectively, issued		18,767		18,254		18,264
Capital in excess of par value		725,605		696,059		710,703
Retained earnings		4,588		40,809		8,121
Accumulated other comprehensive loss		(21,904)		(20,245)		(19,537)
Treasury stock (at cost) - 93, 90 and 90 shares, respectively		(1,992)		(1,992)		(1,992)
Total Tootsie Roll Industries, Inc. shareholders’ equity		752,608		759,854		742,804
Noncontrolling interests		(217)		(205)		(179)
Total equity		752,391		759,649		742,625
Total liabilities and shareholders’ equity	$	974,501	$	977,864	$	948,524



	Year to Date Ended
	June 30, 2020		June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	19,358	$	20,455
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation		9,219		9,334
Deferred income taxes		(568)		393
Amortization of marketable security premiums		557		694
Changes in operating assets and liabilities:
Accounts receivable		14,333		13,038
Other receivables		(1,208)		(242)
Inventories		(36,863)		(37,692)
Prepaid expenses and other assets		1,183		1,529
Accounts payable and accrued liabilities		40		(167)
Income taxes payable		5,033		2,750
Postretirement health care benefits		(573)		(602)
Deferred compensation and other liabilities		369		1,531
Net cash provided by operating activities		10,880		11,021
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(6,410)		(9,945)
Purchases of trading securities		(2,438)		(2,641)
Sales of trading securities		380		362
Purchase of available for sale securities		(53,269)		(33,558)
Sale and maturity of available for sale securities		44,466		12,120
Net cash from (used in) investing activities		(17,271)		(33,662)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired		(12,959)		(19,186)
Dividends paid in cash		(11,853)		(11,699)
Proceeds from bank loans		2,133		1,911
Repayment of bank loans		(2,019)		(1,594)
Net cash used in financing activities		(24,698)		(30,568)
Effect of exchange rate changes on cash		(1,582)		164
Increase (Decrease) in cash and cash equivalents		(32,671)		(53,045)
Cash, cash equivalents and restricted cash at beginning of year		139,340		111,287
Cash, cash equivalents and restricted cash at end of quarter	$	106,669	$	58,242
Supplemental cash flow information:
Income taxes paid/(received), net	$	1,035	$	4,226
Interest paid	$	49	$	65


Dated:	August 7, 2020	/S/ELLEN R. GORDON
		Ellen R. Gordon
		Chairman and Chief
		Executive Officer


Dated:	August 7, 2020	/S/G. HOWARD EMBER, JR.
		G. Howard Ember, Jr.
		Vice President Finance and
		Chief Financial Officer