Tootsie Roll Industries Inc 10-Q for FY2020 Q3

Tootsie Roll Industries Inc (TR)

10-Q 2020-11-13 For: 2020-09-30

Added on April 07, 2026

About this 10-Q

Tootsie Roll Industries Inc filed this 10-Q on November 13, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

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

Revenue: $157.8M; down 13.6% from $182.72M a year earlier
Net income: $24.67M; down 17.4% from net income of $29.85M 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		39,336,109
Class B Common Stock, $0.69-4/9 par value		27,024,737


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



	September 30, 2020		December 31, 2019		September 30, 2019

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	108,264	$	138,960	$	87,400
Restricted cash		397		380		369
Investments		58,265		100,444		76,766
Accounts receivable trade, less allowances of $2,260, $1,949 and $2,728		67,377		45,044		88,241
Other receivables		3,588		3,418		3,616
Inventories:
Finished goods and work-in-process		45,822		35,909		41,627
Raw materials and supplies		25,359		23,179		28,783
Prepaid expenses		5,720		5,996		5,504
Total current assets		314,792		353,330		332,306

PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		21,708		21,740		21,712
Buildings		122,514		122,843		121,802
Machinery and equipment		415,246		416,625		400,885
Construction in progress		15,720		4,427		15,497
Operating lease right-of-use assets		1,062		1,580		1,770
		576,250		567,215		561,666
Less - accumulated depreciation		391,332		378,760		374,924
Net property, plant and equipment		184,918		188,455		186,742

OTHER ASSETS:
Goodwill		73,237		73,237		73,237
Trademarks		175,024		175,024		175,024
Investments		201,698		153,031		178,808
Split dollar officer life insurance		26,042		26,042		26,042
Prepaid expenses and other assets		5,744		8,056		9,411
Deferred income taxes		580		689		522
Total other assets		482,325		436,079		463,044
Total assets	$	982,035	$	977,864	$	982,092



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

Net product sales	$	156,962	$	181,913	$	339,561	$	388,953
Rental and royalty revenue		835		811		2,638		2,700
Total revenue		157,797		182,724		342,199		391,653
Product cost of goods sold		99,187		112,867		216,009		243,668
Rental and royalty cost		213		241		725		772
Total costs		99,400		113,108		216,734		244,440
Product gross margin		57,775		69,046		123,552		145,285
Rental and royalty gross margin		622		570		1,913		1,928
Total gross margin		58,397		69,616		125,465		147,213
Selling, marketing and administrative expenses		32,868		33,578		78,699		92,902
Earnings from operations		25,529		36,038		46,766		54,311
Other income (loss), net		5,863		1,846		10,096		10,916
Earnings before income taxes		31,392		37,884		56,862		65,227
Provision for income taxes		6,729		8,038		12,841		14,926
Net earnings		24,663		29,846		44,021		50,301
Less: net earnings (loss) attributable to noncontrolling interests		(10)		(8)		(22)		(64)
Net earnings attributable to Tootsie Roll Industries, Inc.	$	24,673	$	29,854	$	44,043	$	50,365

Net earnings attributable to Tootsie Roll Industries, Inc. per share	$	0.37	$	0.44	$	0.66	$	0.75
Dividends per share *	$	0.09	$	0.09	$	0.27	$	0.27

Average number of shares outstanding		66,423		67,286		66,657		67,541

Retained earnings at beginning of period	$	4,588	$	8,121	$	40,809	$	33,767
Net earnings attributable to Tootsie Roll Industries, Inc.		24,673		29,854		44,043		50,365
Cash dividends		(5,962)		(5,868)		(17,800)		(17,519)
Stock dividends		-		-		(43,753)		(34,506)
Retained earnings at end of period	$	23,299	$	32,107	$	23,299	$	32,107


										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, 2020	39,664	$	27,544	27,025	$	18,767	93	$	(1,992)	$	725,605
Issuance of 3% stock dividend	—		—	—		—	—		—		—
Conversion of Class B common shares to common shares	—		—	—		—	—		—		—
Purchase and retirement of common shares and other	(328)		(227)	—		—	—		—		(10,319)
Balance at September 30, 2020	39,336	$	27,317	27,025	$	18,767	93	$	(1,992)	$	715,286

Balance at June 30, 2019	39,233	$	27,245	26,302	$	18,264	90	$	(1,992)	$	710,703
Issuance of 3% stock dividend	—		—	—		—	—		—		—
Conversion of Class B common shares to common shares	2		—	(2)		—	—		—		—
Purchase and retirement of common shares and other	(216)		(149)	-		—	—		—		(7,897)
Balance at September 30, 2019	39,019	$	27,096	26,300	$	18,264	90	$	(1,992)	$	702,806

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	(705)		(489)	—		—	—		—		(23,016)
Balance at September 30, 2020	39,336	$	27,317	27,025	$	18,767	93	$	(1,992)	$	715,286

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	51		35	(51)		(35)	—		—		—
Purchase and retirement of common shares and other	(726)		(504)	—		—	—		—		(26,728)
Balance at September 30, 2019	39,019	$	27,096	26,300	$	18,264	90	$	(1,992)	$	702,806



	Estimated Fair Value September 30, 2020
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	108,264	$	108,264	$	-	$	-
Available for sale securities		193,843		3,173		190,670		-
Foreign currency forward contracts		539		-		539		-
Commodity futures contracts		415		415		-		-
Trading securities		66,120		53,504		12,616		-
Total assets measured at fair value	$	369,181	$	165,356	$	203,825	$	-


	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 September 30, 2019
		Total	Input Levels Used
		Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	87,400	$	87,400	$	-	$	-
Available for sale securities		183,784		3,584		180,200		-
Foreign currency forward contracts		(122)		-		(122)		-
Commodity futures contracts		(108)		(108)		-		-
Trading securities		71,790		44,975		26,815		-
Total assets measured at fair value	$	342,744	$	135,851	$	206,893	$	-



	September 30, 2020
	Notional
	Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	7,483	$	539	$	-
Commodity futures contracts		4,010		415		-
Total derivatives			$	954	$	-

	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)

	September 30, 2019
	Notional
	Amounts		Assets		Liabilities

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	8,294	$	-	$	(122)
Commodity futures contracts		4,726		26		(134)
Total derivatives			$	26	$	(256)



	For Quarter Ended September 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	$	194	$	82	$	-
Commodity futures contracts		416		(92)		-
Total	$	610	$	(10)	$	-

	For Quarter Ended September 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	$	(138)	$	(33)	$	-
Commodity futures contracts		(354)		(357)		-
Total	$	(492)	$	(390)	$	-

	For Year to Date Ended September 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	$	341	$	(185)	$	-
Commodity futures contracts		47		(247)		-
Total	$	388	$	(432)	$	-

	For Year to Date Ended September 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	$	252	$	(33)	$	-
Commodity futures contracts		(137)		(615)		-
Total	$	115	$	(648)	$	-



											Accumulated
	Foreign				Foreign				Postretirement		Other
	Currency				Currency		Commodity		and Pension		Comprehensive
	Translation		Investments		Derivatives		Derivatives		Benefits		Earnings (Loss)
Balance at June 30, 2020	$	(26,432)	$	2,647	$	324	$	(70)	$	1,627	$	(21,904)
Other comprehensive earnings (loss) before reclassifications		328		(350)		146		316		-		440
Reclassifications from accumulated other comprehensive loss		-		-		(62)		69		(255)		(248)
Other comprehensive earnings (loss) net of tax		328		(350)		84		385		(255)		192
Balance at September 30, 2020	$	(26,104)	$	2,297	$	408	$	315	$	1,372	$	(21,712)

Balance at June 30, 2019	$	(23,563)	$	494	$	(13)	$	(84)	$	3,629	$	(19,537)
Other comprehensive earnings (loss) before reclassifications		(353)		278		(105)		(268)		-		(448)
Reclassifications from accumulated other comprehensive loss		-		26		25		270		(288)		33
Other comprehensive earnings (loss) net of tax		(353)		304		(80)		2		(288)		(415)
Balance at September 30, 2019	$	(23,916)	$	798	$	(93)	$	(82)	$	3,341	$	(19,952)

Balance at December 31, 2019	$	(23,368)	$	882	$	10	$	92	$	2,139	$	(20,245)
Other comprehensive earnings (loss) before reclassifications		(2,736)		1,415		258		36		-		(1,027)
Reclassifications from accumulated other comprehensive loss		-		-		140		187		(767)		(440)
Other comprehensive earnings (loss) net of tax		(2,736)		1,415		398		223		(767)		(1,467)
Balance at September 30, 2020	$	(26,104)	$	2,297	$	408	$	315	$	1,372	$	(21,712)

Balance at December 31, 2018	$	(24,159)	$	(1,516)	$	(309)	$	(444)	$	4,206	$	(22,222)
Other comprehensive earnings (loss) before reclassifications		243		2,288		191		(104)		-		2,618
Reclassifications from accumulated other comprehensive loss		-		26		25		466		(865)		(348)
Other comprehensive earnings (loss) net of tax		243		2,314		216		362		(865)		2,270
Balance at September 30, 2019	$	(23,916)	$	798	$	(93)	$	(82)	$	3,341	$	(19,952)


Details about Accumulated Other	Quarter Ended				Year to Date Ended				Location of (Gain) Loss
Comprehensive Income Components	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		Recognized in Earnings
Investments	$	-	$	34	$	-	$	34	Other income, net
Foreign currency derivatives		(82)		33		185		33	Other income, net
Commodity derivatives		92		357		247		615	Product cost of goods sold
Postretirement and pension benefits		(338)		(380)		(1,013)		(1,141)	Other income, net
Total before tax		(328)		44		(581)		(459)
Tax (expense) benefit		80		(11)		141		111
Net of tax	$	(248)	$	33	$	(440)	$	(348)



					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	112,000	$	33.13	Not Applicable	Not Applicable

Aug 1 to Aug 31	138,321		31.84	Not Applicable	Not Applicable

Sep 1 to Sep 30	77,700		31.12	Not Applicable	Not Applicable

Total	328,021	$	32.11	Not Applicable	Not Applicable


		TOOTSIE ROLL INDUSTRIES, INC.

Date:	November 13, 2020	BY:	/S/ELLEN R. GORDON

			Ellen R. Gordon
			Chairman and Chief
			Executive Officer

Date:	November 13, 2020	BY:	/S/G. HOWARD EMBER, JR.

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



	September 30, 2020		December 31, 2019		September 30, 2019

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	15,880	$	12,720	$	18,020
Bank loans		933		747		768
Dividends payable		5,970		5,861		5,876
Accrued liabilities		47,051		41,611		44,982
Postretirement health care benefits		598		598		580
Operating lease liabilities		948		1,062		1,061
Deferred compensation		-		16,945		-
Income taxes payable		6,694		-		6,122
Total current liabilities		78,074		79,544		77,409

NONCURRENT LIABILITIES:
Deferred income taxes		47,382		47,295		44,867
Postretirement health care benefits		13,312		13,145		12,129
Industrial development bonds		7,500		7,500		7,500
Liability for uncertain tax positions		3,402		4,240		3,537
Operating lease liabilities		114		518		709
Deferred compensation and other liabilities		71,513		65,973		77,801
Total noncurrent liabilities		143,223		138,671		146,543

TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value - 120,000 shares authorized; 39,336, 38,836 and 39,019, respectively, issued		27,317		26,969		27,096
Class B common stock, $.69-4/9 par value - 40,000 shares authorized; 27,025, 26,287 and 26,300, respectively, issued		18,767		18,254		18,264
Capital in excess of par value		715,286		696,059		702,806
Retained earnings		23,299		40,809		32,107
Accumulated other comprehensive loss		(21,712)		(20,245)		(19,952)
Treasury stock (at cost) - 93, 90 and 90 shares, respectively		(1,992)		(1,992)		(1,992)
Total Tootsie Roll Industries, Inc. shareholders’ equity		760,965		759,854		758,329
Noncontrolling interests		(227)		(205)		(189)
Total equity		760,738		759,649		758,140
Total liabilities and shareholders’ equity	$	982,035	$	977,864	$	982,092



	Year to Date Ended
	September 30, 2020		September 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	44,021	$	50,301
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation		13,777		14,112
Deferred income taxes		(319)		279
Amortization of marketable security premiums		965		976
Changes in operating assets and liabilities:
Accounts receivable		(22,875)		(38,516)
Other receivables		281		(702)
Inventories		(13,001)		(15,867)
Prepaid expenses and other assets		2,742		3,384
Accounts payable and accrued liabilities		9,462		10,635
Income taxes payable		5,964		9,863
Postretirement health care benefits		(845)		(883)
Deferred compensation and other liabilities		(16,084)		2,594
Net cash provided by operating activities		24,088		36,176
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(11,425)		(14,151)
Purchases of trading securities		(2,718)		(2,835)
Sales of trading securities		17,673		362
Purchase of available for sale securities		(82,862)		(49,999)
Sale and maturity of available for sale securities		67,215		51,580
Net cash from (used in) investing activities		(12,117)		(15,043)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares purchased and retired		(23,505)		(27,232)
Dividends paid in cash		(17,850)		(17,592)
Proceeds from bank loans		3,048		2,662
Repayment of bank loans		(2,900)		(2,233)
Net cash used in financing activities		(41,207)		(44,395)
Effect of exchange rate changes on cash		(1,443)		(256)
Increase (Decrease) in cash and cash equivalents		(30,679)		(23,518)
Cash, cash equivalents and restricted cash at beginning of year		139,340		111,287
Cash, cash equivalents and restricted cash at end of quarter	$	108,661	$	87,769
Supplemental cash flow information:
Income taxes paid/(received), net	$	6,904	$	5,182
Interest paid	$	53	$	95


Dated:	November 13, 2020	/S/ELLEN R. GORDON
		Ellen R. Gordon
		Chairman and Chief
		Executive Officer


Dated:	November 13, 2020	/S/G. HOWARD EMBER, JR.
		G. Howard Ember, Jr.
		Vice President Finance and
		Chief Financial Officer