Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nyse  >  Tootsie Roll Industries, Inc.    TR

Delayed Quote. Delayed  - 09/22 10:02:03 pm
37.15 USD   +0.95%
07/27 TOOTSIE ROLL IN : posts 2Q profit
06/15 TOOTSIE ROLL IN : ex-dividend day
04/25 TOOTSIE ROLL IN : posts 1Q profit
SummaryQuotesChartsNewsCalendarCompany 
News SummaryMost relevantAll newsSector newsTweets
The feature you requested does not exist. However, we suggest the following feature:

TOOTSIE ROLL INDUSTRIES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

share with twitter share with LinkedIn share with facebook
share via e-mail
0
08/04/2017 | 10:05pm CEST

This financial review discusses the Company's financial condition, results of operations, liquidity and capital resources and other matters. Dollars are presented in thousands, except per share amounts. This review should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and related notes included in this Form 10-Q and with the Company's Consolidated Financial Statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Form 10-K for the year ended December 31, 2016 (the "2016 Form 10-K").

Net product sales were $104,897 in second quarter 2017 compared to $104,259 in second quarter 2016, an increase of $638 or 0.6%. First half 2017 net product sales were $208,322 compared to $207,621 in first half 2016, an increase of $701 or 0.3%. The timing of sales to certain customers as well as currency translation of foreign sales had some adverse impact on second quarter and first half 2017 sales compared to the prior year corresponding periods.

Product cost of goods sold were $65,259 in second quarter 2017 compared to $65,009 in second quarter 2016, and first half 2017 product cost of goods sold were $130,675 compared to $130,833 in first half 2016. Product cost of goods sold includes $498 and $281 of certain deferred compensation expenses in second quarter 2017 and 2016, respectively, and $1,285 and $294 of certain deferred compensation expenses in first half 2017 and 2016, respectively. These deferred compensation expenses principally result from the changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years and are not reflective of current operating results. Adjusting for the aforementioned, product cost of goods sold increased from $64,728 in second quarter 2016 to $64,761 in second quarter 2017, an increase of $33 or 0.1%; but decreased from $130,539 in first half 2016 to $129,390 in first half 2017, a decrease of $1,149 or 0.9%. As a percentage of net product sales, adjusted product cost of goods sold was 61.7% and 62.1% in second quarter 2017 and 2016, respectively, a favorable decrease of 0.4%; and adjusted product cost of goods sold was 62.1% and 62.9% in first half 2017 and 2016, respectively, a favorable decrease of 0.8%. Adjusted cost of goods sold as a percent of sales benefited from continuing improvements in manufacturing operating efficiencies driven by capital improvements and ongoing cost containment programs. However, adjusted costs of goods sold in prior year second quarter and first half 2016 were adversely affected by higher manufacturing costs relating to uncertainties surrounding certain changes in state and national product labeling. The aforementioned reflects the adverse effects of lower production volumes and inventory reductions which resulted in reduced efficiencies during second quarter and first half 2016.

Selling, marketing and administrative expenses were $26,429 in second quarter 2017 compared to $25,618 in second quarter 2016, and first half 2017 selling, marketing and administrative expenses were $53,027 compared to $49,671 in first half 2016. Selling, marketing and administrative expenses includes $1,319 and $787 of certain deferred compensation expenses in second quarter 2017 and 2016, respectively, and $3,414 and $827 of certain deferred compensation expenses in first half 2017 and 2016, respectively. As discussed above, these expenses principally result from changes in the market value of investments and investment income from trading securities relating to compensation deferred in previous years, and are not reflective of current operating results. Adjusting for the aforementioned, selling, marketing and administrative expenses increased from $24,831 in second quarter 2016 to $25,110 in second quarter 2017, an increase of $279 or 1.1%; and selling, marketing and administrative expenses increased from $48,844 in first half 2016 to $49,613 in first half 2017, an increase of $769 or 1.6%. As a percentage

                                       15

--------------------------------------------------------------------------------

Table of Contents

of net product sales, adjusted selling, marketing and administrative expenses increased from 23.8% in second quarter 2016 to 23.9% in 2017, an unfavorable increase of 0.1% as a percent of net sales, and selling, marketing and administrative expenses increased from 23.5% in first half 2016 to 23.8% in first half 2017, an unfavorable increase of 0.3% as a percent of net sales. Additional expenses relating to changes in product labeling requirements contributed to these higher expenses in second quarter and first half 2017. Selling, marketing and administrative expenses include $9,409 and $9,459 for freight, delivery and warehousing expenses in second quarter 2017 and 2016, respectively, and $19,076 and $18,645 for freight, delivery and warehousing expenses in first half 2017 and 2016, respectively. These expenses were 9.0% and 9.1% of net product sales in second quarter 2017 and 2016, respectively, and 9.2% and 9.0% of net product sales in first half 2017 and 2016, respectively.

Earnings from operations were $13,857 in second quarter 2017 compared to $14,297 in second quarter 2016, and were $26,032 in first half 2017 compared to $28,513 in first half 2016. Earnings from operations include $1,817 and $1,068 of certain deferred compensation expenses in second quarter 2017 and 2016, respectively, and include $4,699 and $1,121 of certain deferred compensation expenses in first half 2017 and 2016, respectively, which are discussed above. Adjusting for these deferred compensation costs and expenses, operating earnings were $15,674 and $15,365 in second quarter 2017 and 2016, respectively, an increase of $309 or 2.0%; and adjusted operating earnings were $30,731 and $29,634 in first half 2017 and 2016, respectively, an increase of $1,097 or 3.7%. As a percentage of net product sales, these adjusted operating earnings were 14.9% and 14.7% in second quarter 2017 and 2016, respectively, a favorable increase of 0.2% as a percentage of net product sales; and as a percentage of net product sales, these adjusted operating earnings were 14.8% and 14.3% in first half 2017 and 2016, respectively, a favorable increase of 0.5% as a percentage of net product sales. These increases as a percentage of net product sales principally reflects the benefits of improved plant operating efficiencies and ongoing cost containment programs in second quarter and first half 2017. Increased aggregate operating losses from foreign operations in second quarter and first half 2017 also adversely affected adjusted consolidated operating earnings in second quarter and first half 2017. Management believes the presentation in this and the preceding paragraphs relating to amounts adjusted for deferred compensation expense are more reflective of the underlying operations of the Company.

Other income, net was $2,465 in second quarter 2017 compared to $2,239 in second quarter 2016, a favorable increase of $226; and other income, net, was $4,444 in first half 2017 compared to $2,204 in first half 2016, a favorable increase of $2,240. Other income, net for second quarter 2017 and 2016 includes net gains and investment income of $1,817 and $1,068, respectively, on trading securities which provide an economic hedge of the Company's deferred compensation liabilities; and other income, net for first half 2017 and 2016 includes net gains and investment income of $4,699 and $1,121, respectively, on trading securities relating to these programs. These changes in trading securities were substantially offset by a like amount of deferred compensation expense included in product cost of goods sold and selling, marketing, and administrative expenses in the respective periods as discussed above. Other income, net includes gains (losses) on foreign exchange of $(64) and $645 in second quarter 2017 and 2016, respectively, and $(1,610) and $10 in first half 2017 and 2016, respectively.

The consolidated effective tax rates were 27.4% and 33.0% in second quarter 2017 and 2016, respectively, and 28.3% and 31.9% in first half 2017 and 2016, respectively. The lower effective tax rates in second quarter and first half 2017 compared to second quarter and first half 2016 principally reflect certain benefits resulting from filing amended federal and state income tax returns, including a state income tax carry forward benefit.

Net earnings attributable to Tootsie Roll Industries, Inc. were $11,895 (after $45 net loss attributed to non-controlling interests) in second quarter 2017 compared to $11,136 (after $62 net loss attributed to non-controlling interests) in second quarter 2016, and earnings per share were $0.19 and $0.17 in second quarter 2017 and 2016, respectively, an increase of $0.02 per share, or 12%. First half 2017 net earnings attributable to Tootsie Roll Industries, Inc. were $21,946 (after $85 net loss attributed to non-controlling interests) compared to first half 2016 net earnings of $21,032 (after $102 net earnings attributed to non-controlling interests), and net earnings per share were $0.35 and $0.33 in first half 2017 and first half 2016, respectively, an increase of $0.02 per share or 6%. Higher net earnings for second quarter and first half 2017 were principally the result of lower effective state and federal income tax rates and improved adjusted operating earnings as discussed above, but were adversely affected by unfavorable foreign exchange as discussed above. Earnings per share attributable to Tootsie Roll Industries, Inc. for second quarter and first half 2017 did benefit from the reduction in average shares outstanding resulting from purchases in the open market by the Company of its common stock. Average shares outstanding decreased from 64,274 in second quarter 2016 to 63,270 in second quarter 2017, and from 64,313 in first half 2016 to 63,439 in first half 2017.

                                       16

--------------------------------------------------------------------------------
  Table of Contents


Goodwill and intangibles are assessed annually as of December 31 or whenever events or circumstances indicate that the carrying values may not be recoverable from future cash flows. The Company has not identified any triggering events, as defined, or other adverse information that would indicate a material impairment of its goodwill or intangibles in first half 2017. There were also no impairments in the comparative first half 2016 period or calendar 2016.

Beginning in 2012, the Company received periodic notices from the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union Pension Plan (Plan), a multi-employer defined benefit pension plan for certain Company union employees, that the Plan's actuary certified the Plan to be in "critical status", the "Red Zone", as defined by the Pension Protection Act (PPA) and the Pension Benefit Guaranty Corporation (PBGC), and that a plan of rehabilitation was adopted by the trustees of the Plan in 2012 (and was further amended in 2016). During 2015, the Company received notices that the Plan's status was changed to "critical and declining status", as defined by the PPA and PBGC, for the plan year beginning January 1, 2015, and that the Plan was projected to have an accumulated funding deficiency for the 2017 through 2024 plan years. A designation of "critical and declining status" implies that the Plan is expected to become insolvent in the next 20 years. In April 2017, the Company received new notices that the Plan remains in "critical and declining status" and is projected to become insolvent in 13 years. These notices also advise that the Plan trustees are considering the reduction or elimination of certain retirement benefits and may seek assistance from the PBGC.

Based on these updated notices, the Plan's funded percentages (plan investment assets as a percentage of plan liabilities), as defined, were 57.0%, 62.8% and 65.1% as of January 1, 2016 (most recent valuation date available), 2015, and 2014, respectively (these valuation dates are as of the beginning of each Plan year). These funded percentages are based on actuarial values, as defined, and do not reflect the actual market value of Plan investments as of these dates. If the market value of investments had been used as of January 1, 2016, the funded percentage would be 53.0% (not 57.0%). As of the January 1, 2016 valuation date (most recent valuation available), 20% of Plan participants were current active employees, 51% were retired or separated from service and receiving benefits, and 29% were retired or separated from service and entitled to future benefits. The number of current active employee Plan participants as of January 1, 2016 fell 2% from the previous year and 4% over the past two years. When compared to the Plan valuation date of January 1, 2011 (five years earlier), current active employees participants have declined 31%, whereas participants who were retired or separated from service and receiving benefits increased 6% and participants who were retired or separated from service and entitled to future benefits increased 8%. The bankruptcy of a major participating employer in the Plan contributed to the above discussed Plan results.

The Company has been advised that its withdrawal liability would have been $72,700, $61,000 and $56,400 if it had withdrawn from the Plan during 2016, 2015 and 2014, respectively. The increase from 2015 to 2016 principally reflects poor investment returns of the plan in 2015, a decrease in the PBGC interest rates, and a higher share of the Plan's unfunded vested benefits allocated to the Company. Based on the above, including the Plan's projected insolvency in 13 years, management believes that the Company's withdrawal liability will likely increase further in future years. Based on the Company's actuarial study and certain provisions in ERISA and the law relating to withdrawal liability payments, management believes that the Company's liability would likely be limited to twenty annual payments of $2,914 which have a present value in the range of $34,200 to $44,700. The aforementioned is based on a range of valuation interest rates which management understands is provided under the statute. Should the Company actually withdraw from the Plan at a future date, a withdrawal liability, which could be higher than the above discussed amounts, could be payable to the Plan.

The Company's existing labor contract with the local union commits the Company's participation in this Plan through third quarter 2017. The amended rehabilitation plan, which continues, requires that employer contributions include 5% compounded annual surcharge increases each year for an unspecified period of time beginning in 2012 as well as certain plan benefit reductions. The Company's pension expense for this Plan for calendar years 2016 and 2015 was $2,541 and $2,574, respectively. The aforementioned expense includes surcharges of $542 and $447 in calendar years 2016 and 2015, respectively, as required under the plan of rehabilitation as amended. The Company's pension expense for this Plan for first half 2017 and 2016 was $1,368 and $1,186 respectively, which includes surcharges of $343 and $253 respectively.

The Company is currently unable to determine the ultimate outcome of the above discussed matter and therefore, is unable to determine the effects on its consolidated financial statements, but the ultimate outcome or the effects of any

                                       17

--------------------------------------------------------------------------------

Table of Contents

modifications to the current rehabilitation plan could be material to its consolidated results of operations or cash flows in one or more future periods. See also the Company's Consolidated Financial Statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2016 Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows provided by operating activities were $8,379 and $21,648 in first half 2017 and 2016, respectively, a decrease of $13,269. The decrease in first half 2017 cash flows from operating activities principally reflects the timing of sales and collections of account receivables, the effects of higher finished goods inventories reflecting changes in the annual production plans, the timing of payments of income taxes, and changes in other receivables primarily due to increased broker margin deposit requirements on commodity hedges.

Net cash used in investing activities was $39,658 in first half 2017 compared to $34,601 in first half 2016. Cash flows from investing activities reflect $40,622 and $34,826 of purchases of available for sale securities during first half 2017 and 2016, respectively, and $10,985 and $12,777 of sales and maturities of available for sale securities during first half 2017 and 2016, respectively. First half 2017 and 2016 investing activities include capital expenditures of $7,427 and $10,389, respectively. All capital expenditures in 2017 are expected to be funded from the Company's cash flow from operations and internal sources. In addition, Company management has committed approximately $15,000 to a manufacturing plant rehabilitation upgrade and expansion of one of its manufacturing facilities in the U.S.A. Management anticipates capital outlays for this project to approximate $2,000 in 2017, $9,000 in 2018, $2,000 in 2019 and $2,000 in 2020.

The Company's consolidated financial statements include bank borrowings of $334 and $622 at June 30, 2017 and 2016, respectively, all of which relates to its two majority-owned and controlled Spanish companies. The Company had no other outstanding bank borrowings at June 30, 2017.

Financing activities include Company common stock purchases and retirements of $20,140 and $9,166 in first half 2017 and 2016, respectively. Cash dividends of $11,282 and $11,077 were paid in first half 2017 and 2016, respectively.

The Company's current ratio (current assets divided by current liabilities) was 4.1 to 1 at June 30, 2017 compared to 4.7 to 1 at December 31, 2016 and 3.9 to 1 at June 30, 2016. Net working capital was $203,192 at June 30, 2017 compared to $235,739 and $195,016 at December 31, 2016 and June 30, 2016, respectively.

The aforementioned net working capital amounts are principally reflected in aggregate cash and cash equivalents and short-term investments of $129,744 at June 30, 2017 compared to $186,658 and $124,936 at December 31, 2016 and June 30, 2016, respectively. In addition, long term investments, principally debt securities comprising corporate and municipal bonds were $196,308 at June 30, 2017, as compared to $164,665 and $186,931 at December 31, 2016 and June 30, 2016, respectively. Aggregate cash and cash equivalents and short and long-term investments were $326,052, $351,323, and $311,867, at June 30, 2017, December 31, 2016 and June 30, 2016, respectively. The aforementioned includes $75,265, $67,995, and $63,866 at June 30, 2017, December 31, 2016 and June 30, 2016, respectively, relating to trading securities which are used as an economic hedge for the Company's deferred compensation liabilities. Investments in corporate and municipal bonds, variable rate demand notes, and other debt securities that matured during first half 2017 and 2016 were generally used to purchase the Company's common stock or were replaced with debt securities of similar maturities.

The Company periodically contributes to a VEBA trust, managed and controlled by the Company, to fund the estimated future costs of certain employee health, welfare and other benefits. The Company is currently using these VEBA funds to pay the actual cost of such benefits through a portion of 2017. The VEBA trust held $1,305, $3,027 and $4,635 of aggregate cash and cash equivalents at June 30, 2017, December 31, 2016 and June 30, 2016, respectively. This asset value is included in prepaid expenses in the Company's Consolidated Statement of Financial Position. These assets are categorized as Level 1 within the fair value hierarchy. The Company is planning to make a contribution to this VEBA in the range of $10,000 to $15,000 in fourth quarter 2017. This contribution would result in the prepayment of these employee benefits.

                                       18

--------------------------------------------------------------------------------
  Table of Contents

ACCOUNTING PRONOUNCEMENTS


See Note 1 of the Company's condensed consolidated financial statements.


RISK FACTORS


There were no material changes to the risk factors disclosed in the Company's 2016 Form 10-K.



FORWARD-LOOKING STATEMENTS



This discussion and certain other sections contain forward-looking statements that are based largely on the Company's current expectations and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as "anticipated," "believe," "expect," "intend," "estimate," "project," "plan" and other words of similar meaning in connection with a discussion of future operating or financial performance and are subject to certain factors, risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in the forward-looking statements. Such factors, risks, trends and uncertainties, which in some instances are beyond the Company's control, include the overall competitive environment in the Company's industry, changes in assumptions and judgments discussed above under the heading "Significant Accounting Policies and Estimates," and factors identified and referred to above under the heading "Risk Factors."

The risk factors identified and referred to above are believed to be significant factors, but not necessarily all of the significant factors that could cause actual results to differ from those expressed in any forward-looking statement. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made only as of the date of this report. The Company undertakes no obligation to update such forward-looking statements.

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on TOOTSIE ROLL INDUSTRIES, I
08/04 TOOTSIE ROLL INDUSTRIES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL COND..
07/27 TOOTSIE ROLL INDUSTRIES : posts 2Q profit
06/15 TOOTSIE ROLL INDUSTRIES, INC. : ex-dividend day
05/05 TOOTSIE ROLL INDUSTRIES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL COND..
05/04 TOOTSIE ROLL INDUSTRIES INC : Submission of Matters to a Vote of Security Holder..
04/26 TOOTSIE ROLL INDUSTRIES INC : Results of Operations and Financial Condition, Fin..
04/25 TOOTSIE ROLL INDUSTRIES : posts 1Q profit
03/20 TOOTSIE ROLL INDUSTRIES : Form 3 - Filing - S Green
03/03 TOOTSIE ROLL INDUSTRIES, INC. : ex-dividend day
03/03 TOOTSIE ROLL INDUSTRIES, INC. : 3% Stock Dividend; 3% Stock Dividend
More news
News from SeekingAlpha
08/25 Will Mondelez lay a finger on Butterfinger?
07/31 Can General Mills Get Back To Growth?
07/26 TOOTSIE ROLL INDUSTRIES : A Very Safe Dividend King With Iconic Brands
07/17 54 Stocks Selected For Growth, Value, And Income
07/10 Smucker Remains A Top Pick In Consumer Staples
Chart TOOTSIE ROLL INDUSTRIES, I
Duration : Period :
Tootsie Roll Industries, I Technical Analysis Chart | TR | US8905161076 | 4-Traders
Technical analysis trends TOOTSIE ROLL INDUSTRIES, I
Short TermMid-TermLong Term
TrendsNeutralNeutralNeutral
Managers
NameTitle
Ellen R. Gordon Chairman & Chief Executive Officer
G. Howard Ember CFO, Principal Accounting Officer & VP-Finance
Barre A. Seibert Independent Director
Lana Jane Lewis-Brent Independent Director
Paula M. Wardynski Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
TOOTSIE ROLL INDUSTRIES, INC.-5.91%2 333
LINDT & SPRUENGLI9.35%15 391
BARRY CALLEBAUT15.49%8 181
MORINAGA & CO., LTD.27.59%3 009
KOTOBUKI SPIRITS CO LTD36.85%1 063
CLOETTA AB-8.01%951