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Posted: January 27th, 2016

Broadening Your Perspective 8-1 The financial statements of Tootsie Roll are presented below.

 

Broadening Your Perspective 8-1

The financial statements of Tootsie Roll are presented below.

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
For the year ended December 31,
2011 2010 2009
Net product sales $528,369 $517,149 $495,592
Rental and royalty revenue 4,136 4,299 3,739
Total revenue 532,505 521,448 499,331
Product cost of goods sold 365,225 349,334 319,775
Rental and royalty cost 1,038 1,088 852
Total costs 366,263 350,422 320,627
Product gross margin 163,144 167,815 175,817
Rental and royalty gross margin 3,098 3,211 2,887
Total gross margin 166,242 171,026 178,704
Selling, marketing and administrative expenses 108,276 106,316 103,755
Impairment charges — — 14,000
Earnings from operations 57,966 64,710 60,949
Other income (expense), net 2,946 8,358 2,100
Earnings before income taxes 60,912 73,068 63,049
Provision for income taxes 16,974 20,005 9,892
Net earnings $43,938 $53,063 $53,157
Net earnings $43,938 $53,063 $53,157
Other comprehensive earnings (loss) (8,740 ) 1,183 2,845
Comprehensive earnings $35,198 $54,246 $56,002
Retained earnings at beginning of year. $135,866 $147,687 $144,949
Net earnings 43,938 53,063 53,157
Cash dividends (18,360 ) (18,078 ) (17,790 )
Stock dividends (47,175 ) (46,806 ) (32,629 )
Retained earnings at end of year $114,269 $135,866 $147,687
Earnings per share $0.76 $0.90 $0.89
Average Common and Class B Common shares outstanding 57,892 58,685 59,425
(The accompanying notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF

Financial Position

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
Assets December 31,
2011 2010
CURRENT ASSETS:
Cash and cash equivalents $78,612 $115,976
Investments 10,895 7,996
Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394
Other receivables 3,391 9,961
Inventories:
Finished goods and work-in-process 42,676 35,416
Raw materials and supplies 29,084 21,236
Prepaid expenses 5,070 6,499
Deferred income taxes 578 689
Total current assets 212,201 235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 21,939 21,696
Buildings 107,567 102,934
Machinery and equipment 322,993 307,178
Construction in progress 2,598 9,243
455,097 440,974
Less—Accumulated depreciation 242,935 225,482
Net property, plant and equipment 212,162 215,492
OTHER ASSETS:
Goodwill 73,237 73,237
Trademarks 175,024 175,024
Investments 96,161 64,461
Split dollar officer life insurance 74,209 74,441
Prepaid expenses 3,212 6,680
Equity method investment 3,935 4,254
Deferred income taxes 7,715 9,203
Total other assets 433,493 407,300
Total assets $857,856 $857,959
Liabilities and Shareholders’ Equity December 31,
2011 2010
CURRENT LIABILITIES:
Accounts payable $10,683 $9,791
Dividends payable 4,603 4,529
Accrued liabilities 43,069 44,185
Total current liabilities 58,355 58,505
NONCURRENT LIABILITES:
Deferred income taxes 43,521 47,865
Postretirement health care and life insurance benefits 26,108 20,689
Industrial development bonds 7,500 7,500
Liability for uncertain tax positions 8,345 9,835
Deferred compensation and other liabilities 48,092 46,157
Total noncurrent liabilities 133,566 132,046
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares authorized—36,479 and 36,057 respectively, issued 25,333 25,040
Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued 14,601 14,212
Capital in excess of par value 533,677 505,495
Retained earnings, per accompanying statement 114,269 135,866
Accumulated other comprehensive loss (19,953 ) (11,213 )
Treasury stock (at cost)—71 shares and 69 shares, respectively (1,992 ) (1,992 )
Total shareholders’ equity 665,935 667,408
Total liabilities and shareholders’ equity $857,856 $857,959
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

Cash Flows (in thousands)
For the year ended December 31,
2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings $43,938 $53,063 $53,157
  Adjustments to reconcile net earnings to net cash provided by operating activities:
    Depreciation 19,229 18,279 17,862
    Impairment charges — — 14,000
    Impairment of equity method investment
 — — 4,400
    Loss from equity method investment
 194 342 233
    Amortization of marketable security premiums
 1,267 522 320
    Changes in operating assets and liabilities:
    Accounts receivable
 (5,448 ) 717 (5,899 )
    Other receivables
 3,963 (2,373 ) (2,088 )
    Inventories
 (15,631 ) (1,447 ) 455
    Prepaid expenses and other assets
 5,106 4,936 5,203
    Accounts payable and accrued liabilities
 84 2,180 (2,755 )
    Income taxes payable and deferred
 (5,772 ) 2,322 (12,543 )
    Postretirement health care and life insurance benefits
 2,022 1,429 1,384
    Deferred compensation and other liabilities
 2,146 2,525 2,960
    Others
 (708 ) 310 305
  Net cash provided by operating activities 50,390 82,805 76,994
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures
 (16,351 ) (12,813 ) (20,831 )
  Net purchase of trading securities
 (3,234 ) (2,902 ) (1,713 )
  Purchase of available for sale securities
 (39,252 ) (9,301 ) (11,331 )
  Sale and maturity of available for sale securities
 7,680 8,208 17,511
  Net cash used in investing activities
 (51,157 ) (16,808 ) (16,364 )
  CASH FLOWS FROM FINANCING ACTIVITIES:
    Shares repurchased and retired
 (18,190 ) (22,881 ) (20,723 )
    Dividends paid in cash
 (18,407 ) (18,130 ) (17,825 )
    Net cash used in financing activities
 (36,597 ) (41,011 ) (38,548 )
Increase (decrease) in cash and cash equivalents (37,364 ) 24,986 22,082
Cash and cash equivalents at beginning of year 115,976 90,990 68,908
Cash and cash equivalents at end of year $78,612 $115,976 $90,990
Supplemental cash flow information
  Income taxes paid
 $16,906 $20,586 $22,364
  Interest paid
 $38 $49 $182
  Stock dividend issued
 $47,053 $46,683 $32,538
(The accompanying notes are an integral part of these statements.)
Five Year Summary of Earning and Financial Hightlights

TOOTISE ROLL. INDUSTRY, INC. AND SUBSIDIARIES

(Thousands of dollars except per share, percentage and ratio figures)
2011 2010 2009 2008 2007
Sales and Earnings Data
  Net product sales $528,369 $517,149 $495,592 $492,051 $492,742
  Product gross margin 163,144 167,815 175,817 158,055 165,456
  Interest expenses 121 142 243 378 535
  Provision for income taxes 16,974 20,005 9,892 16,347 25,401
  Net earnings 43,938 53,063 53,157 38,880 52,175
    % of net product sales 8.3 % 10.3 % 10.7 % 7.9 % 10.6 %
    % of shareholders’ equity 6.6 % 8.0 % 8.1 % 6.1 % 8.1 %
Per Common Share Data
  Net earnings $0.76 $0.90 $0.89 $0.65 $0.85
  Cash dvidends declared 0.32 0.32 0.32 0.32 0.32
  Stock dividends 3 % 3 % 3 % 3 % 3 %
Additional Financial Data
  Working capital $153,846 $176,662 $154,409 $129,694 $142,163
  Net cash provided by opreating activities 50,390 82,805 76,994 57,333 90,148
  Net cash provided by (used by) investing activities (51,157 ) (16,808 ) (16,364 ) (7,565 ) (43,429 )
  Net cash used in financing activities (36,597 ) (41,011 ) (38,548 ) (38,666 ) (44,842 )
  Property, plant & equipment additions 16,351 12,813 20,831 34,355 14,767
  Net property, plant & equipment 212,162 215,492 220,721 217,628 201,401
  Total assets 857,856 857,959 836,844 813,252 813,134
  Long-term debt 7,500 7,500 7,500 7,500 7,500
  Shareholders’ equity 665,935 667,408 654,244 636,847 640,204
  Average shares outstanding 57,892 58,685 59,425 60,152 61,580

Notes to Consolidated Financial Statements ($ in thousands)

Revenue recognition:

Products are sold to customers based on accepted purchase orders which include quantity, sales price and other relevant terms of sale. Revenue, net of applicable provisions for discounts, returns, allowances and certain advertising and promotional costs, is recognized when products are delivered to customers and collectability is reasonably assured. Shipping and handling costs of $45,850, $43,034, and $38,628 in 2011, 2010 and 2009, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured. Revenues from a major customer aggregated approximately 23.3%, 21.4% and 22.9% of net product sales during the years ended December 31, 2011, 2010 and 2009, respectively.

SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates as a single reportable segments encompassing the manufacturing and sale of confectionery products. Its principal manufacturing operations are located in the United States and Canada, and its principal market is in the United States. The Company also manufactures and sells confectionery products in Mexico, and exports products to Canada and countries worldwide.
The following geographic data includes net product sales summarized on the basis of the customer location and long-lived assets based on their location:
2011 2010 2009
Net product sales:
United states $487,185 $471,714 $455,517
Foreign 41,184 45,435 40,075
$528,369 $517,149 $495,592
Long-lived assets:
United states $170,173 $172,087 $176,044
Foreign 41,989 43,405 44,677
$212,162 $215,492 $220,721

Calculate the accounts receivable turnover and average collection period for 2011. (Use “Net Product Sales.” Assume all sales were credit sales.) (Round answers to 1 decimal place, e.g. 15.2.)

Accounts receivable turnover times
Average collection period days

 

 

 

Broadening Your Perspective 8-2

The financial statements of The Hershey Company and Tootsie Roll are presented below.

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2011 2010 2009
In thousands of dollars except per share amounts
Net Sales $6,080,788 $5,671,009 $5,298,668
Costs and Expenses:
  Cost of sales 3,548,896 3,255,801 3,245,531
  Selling, marketing and administrative 1,477,750 1,426,477 1,208,672
  Business realignment and impairment (credits) charges, net (886 ) 83,433 82,875
    Total costs and expenses 5,025,760 4,765,711 4,537,078
Income before Interest and Income Taxes 1,055,028 905,298 761,590
  Interest expense, net 92,183 96,434 90,459
Income before Income Taxes 962,845 808,864 671,131
  Provision for income taxes 333,883 299,065 235,137
Net Income $628,962 $509,799 $435,994
Net Income Per Share—Basic—Class B Common Stock $2.58 $2.08 $1.77
Net Income Per Share—Diluted—Class B Common Stock $2.56 $2.07 $1.77
Net Income Per Share—Basic—Common Stock $2.85 $2.29 $1.97
Net Income Per Share—Diluted—Common Stock $2.74 $2.21 $1.90
Cash Dividends Paid Per Share:
  Common Stock $1.3800 $1.2800 $1.1900
  Class B Common Stock 1.2500 1.1600 1.0712
The notes to consolidated financial statements are an integral part of these statements and are included in the Hershey’s 2011 Annual Report, available at www.thehersheycompany.com.
THE HERSHEY COMPANY

CONSOLIDATED BALANCE SHEETS
December 31, 2011 2010
In thousands of dollars
ASSETS
Current Assets:
  Cash and cash equivalents $693,686 $884,642
  Accounts receivable—trade 399,499 390,061
  Inventories 648,953 533,622
  Deferred income taxes 136,861 55,760
  Prepaid expenses and other 167,559 141,132
    Total current assets 2,046,558 2,005,217
Property, Plant and Equipment, Net 1,559,717 1,437,702
Goodwill 516,745 524,134
Other Intangibles 111,913 123,080
Deferred Income Taxes 38,544 21,387
Other Assets 138,722 161,212
    Total assets $4,412,199 $4,272,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
  Accounts payable $420,017 $410,655
  Accrued liabilities 612,186 593,308
  Accrued income taxes 1,899 9,402
  Short-term debt 42,080 24,088
  Current portion of long-term debt 97,593 261,392
    Total current liabilities 1,173,775 1,298,845
Long-term Debt 1,748,500 1,541,825
Other Long-term Liabilities 617,276 494,461
    Total liabilities 3,539,551 3,335,131
Commitments and Contingencies — —
Stockholders’ Equity:
  The Hershey Company Stockholders’ Equity
    Preferred Stock, shares issued: none in 2011 and 2010 — —
    Common Stock, shares issued: 299,269,702 in 2011 and 299,195,325 in 2010 299,269 299,195
    Class B Common Stock, shares issued: 60,632,042 in 2011 and 60,706,419 in 2010 60,632 60,706
    Additional paid-in capital 490,817 434,865
    Retained earnings 4,699,597 4,374,718
    Treasury—Common Stock shares, at cost: 134,695,826 in 2011 and 132,871,512 in 2010 (4,258,962 ) (4,052,101 )
    Accumulated other comprehensive loss (442,331 ) (215,067 )
      The Hershey Company stockholders’ equity 849,022 902,316
  Noncontrolling interests in subsidiaries 23,626 35,285
      Total stockholders’ equity 872,648 937,601
      Total liabilities and stockholders’equity $4,412,199 $4,272,732
THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2011 2010 2009
In thousands of dollars
Cash Flows Provided from (Used by) Operating Activities
Net income $628,962 $509,799 $435,994
Adjustments to reconcile net income to net cash provided from operations:
Depreciation and amortization 215,763 197,116 182,411
Stock-based compensation expense, net of tax of $15,127, $17,413 and $19,223, respectively 28,341 32,055 34,927
Excess tax benefits from stock-based compensation (13,997 ) (1,385 ) (4,455 )
Deferred income taxes 33,611 (18,654 ) (40,578 )
Gain on sale of trademark licensing rights, net of tax of $5,962 (11,072 ) — —
Business realignment and impairment charges, net of tax of $18,333, $20,635 and $38,308, respectively 30,838 77,935 60,823
Contributions to pension plans (8,861 ) (6,073 ) (54,457 )
Changes in assets and liabilities, net of effects from business acquisitions and divestitures:
Accounts receivable—trade (9,438 ) 20,329 46,584
Inventories (115,331 ) (13,910 ) 74,000
Accounts payable 7,860 90,434 37,228
Other assets and liabilities (205,809 ) 13,777 293,272
Net Cash Provided from Operating Activities 580,867 901,423 1,065,749
Cash Flows Provided from (Used by) Investing Activities
Capital additions (323,961 ) (179,538 ) (126,324 )
Capitalized software additions (23,606 ) (21,949 ) (19,146 )
Proceeds from sales of property, plant and equipment 312 2,201 10,364
Proceeds from sales of trademark licensing rights 20,000 — —
Business acquisitions (5,750 ) — (15,220 )
Net Cash (Used by) Investing Activities (333,005 ) (199,286 ) (150,326 )
Cash Flows Provided from (Used by) Financing Activities
Net change in short-term borrowings 10,834 1,156 (458,047 )
Long-term borrowings 249,126 348,208 —
Repayment of long-term debt (256,189 ) (71,548 ) (8,252 )
Proceeds from lease financing agreement 47,601 — —
Cash dividends paid (304,083 ) (283,434 ) (263,403 )
Exercise of stock options 184,411 92,033 28,318
Excess tax benefits from stock-based compensation 13,997 1,385 4,455
Contributions from noncontrolling interests in subsidiaries — 10,199 7,322
Repurchase of Common Stock (384,515 ) (169,099 ) (9,314 )
Net Cash (Used by) Financing Activities (438,818 ) (71,100 ) (698,921 )
(Decrease) Increase in Cash and Cash Equivalents (190,956 ) 631,037 216,502
Cash and Cash Equivalents as of January 1 884,642 253,605 37,103
Cash and Cash Equivalents as of December 31 $693,686 $884,642 $253,605
Interest Paid $97,892 $97,932 $91,623
Income Taxes Paid 292,315 350,948 252,230
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
For the year ended December 31,
2011 2010 2009
Net product sales $528,369 $517,149 $495,592
Rental and royalty revenue 4,136 4,299 3,739
Total revenue 532,505 521,448 499,331
Product cost of goods sold 365,225 349,334 319,775
Rental and royalty cost 1,038 1,088 852
Total costs 366,263 350,422 320,627
Product gross margin 163,144 167,815 175,817
Rental and royalty gross margin 3,098 3,211 2,887
Total gross margin 166,242 171,026 178,704
Selling, marketing and administrative expenses 108,276 106,316 103,755
Impairment charges — — 14,000
Earnings from operations 57,966 64,710 60,949
Other income (expense), net 2,946 8,358 2,100
Earnings before income taxes 60,912 73,068 63,049
Provision for income taxes 16,974 20,005 9,892
Net earnings $43,938 $53,063 $53,157
Net earnings $43,938 $53,063 $53,157
Other comprehensive earnings (loss) (8,740 ) 1,183 2,845
Comprehensive earnings $35,198 $54,246 $56,002
Retained earnings at beginning of year. $135,866 $147,687 $144,949
Net earnings 43,938 53,063 53,157
Cash dividends (18,360 ) (18,078 ) (17,790 )
Stock dividends (47,175 ) (46,806 ) (32,629 )
Retained earnings at end of year $114,269 $135,866 $147,687
Earnings per share $0.76 $0.90 $0.89
Average Common and Class B Common shares outstanding 57,892 58,685 59,425
(The accompanying notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF

Financial Position

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
Assets December 31,
2011 2010
CURRENT ASSETS:
Cash and cash equivalents $78,612 $115,976
Investments 10,895 7,996
Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394
Other receivables 3,391 9,961
Inventories:
Finished goods and work-in-process 42,676 35,416
Raw materials and supplies 29,084 21,236
Prepaid expenses 5,070 6,499
Deferred income taxes 578 689
Total current assets 212,201 235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 21,939 21,696
Buildings 107,567 102,934
Machinery and equipment 322,993 307,178
Construction in progress 2,598 9,243
455,097 440,974
Less—Accumulated depreciation 242,935 225,482
Net property, plant and equipment 212,162 215,492
OTHER ASSETS:
Goodwill 73,237 73,237
Trademarks 175,024 175,024
Investments 96,161 64,461
Split dollar officer life insurance 74,209 74,441
Prepaid expenses 3,212 6,680
Equity method investment 3,935 4,254
Deferred income taxes 7,715 9,203
Total other assets 433,493 407,300
Total assets $857,856 $857,959
Liabilities and Shareholders’ Equity December 31,
2011 2010
CURRENT LIABILITIES:
Accounts payable $10,683 $9,791
Dividends payable 4,603 4,529
Accrued liabilities 43,069 44,185
Total current liabilities 58,355 58,505
NONCURRENT LIABILITES:
Deferred income taxes 43,521 47,865
Postretirement health care and life insurance benefits 26,108 20,689
Industrial development bonds 7,500 7,500
Liability for uncertain tax positions 8,345 9,835
Deferred compensation and other liabilities 48,092 46,157
Total noncurrent liabilities 133,566 132,046
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares authorized—36,479 and 36,057 respectively, issued 25,333 25,040
Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued 14,601 14,212
Capital in excess of par value 533,677 505,495
Retained earnings, per accompanying statement 114,269 135,866
Accumulated other comprehensive loss (19,953 ) (11,213 )
Treasury stock (at cost)—71 shares and 69 shares, respectively (1,992 ) (1,992 )
Total shareholders’ equity 665,935 667,408
Total liabilities and shareholders’ equity $857,856 $857,959
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

Cash Flows (in thousands)
For the year ended December 31,
2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings $43,938 $53,063 $53,157
  Adjustments to reconcile net earnings to net cash provided by operating activities:
    Depreciation 19,229 18,279 17,862
    Impairment charges — — 14,000
    Impairment of equity method investment
 — — 4,400
    Loss from equity method investment
 194 342 233
    Amortization of marketable security premiums
 1,267 522 320
    Changes in operating assets and liabilities:
    Accounts receivable
 (5,448 ) 717 (5,899 )
    Other receivables
 3,963 (2,373 ) (2,088 )
    Inventories
 (15,631 ) (1,447 ) 455
    Prepaid expenses and other assets
 5,106 4,936 5,203
    Accounts payable and accrued liabilities
 84 2,180 (2,755 )
    Income taxes payable and deferred
 (5,772 ) 2,322 (12,543 )
    Postretirement health care and life insurance benefits
 2,022 1,429 1,384
    Deferred compensation and other liabilities
 2,146 2,525 2,960
    Others
 (708 ) 310 305
  Net cash provided by operating activities 50,390 82,805 76,994
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures
 (16,351 ) (12,813 ) (20,831 )
  Net purchase of trading securities
 (3,234 ) (2,902 ) (1,713 )
  Purchase of available for sale securities
 (39,252 ) (9,301 ) (11,331 )
  Sale and maturity of available for sale securities
 7,680 8,208 17,511
  Net cash used in investing activities
 (51,157 ) (16,808 ) (16,364 )
  CASH FLOWS FROM FINANCING ACTIVITIES:
    Shares repurchased and retired
 (18,190 ) (22,881 ) (20,723 )
    Dividends paid in cash
 (18,407 ) (18,130 ) (17,825 )
    Net cash used in financing activities
 (36,597 ) (41,011 ) (38,548 )
Increase (decrease) in cash and cash equivalents (37,364 ) 24,986 22,082
Cash and cash equivalents at beginning of year 115,976 90,990 68,908
Cash and cash equivalents at end of year $78,612 $115,976 $90,990
Supplemental cash flow information
  Income taxes paid
 $16,906 $20,586 $22,364
  Interest paid
 $38 $49 $182
  Stock dividend issued
 $47,053 $46,683 $32,538
(The accompanying notes are an integral part of these statements.)

Based on the information contained in these financial statements, compute the following 2011 values for each company. (Round answers to 1 decimal place, e.g. 15.2.)

(1) Accounts receivable turnover. (For Tootsie Roll, use “Net product sales.” Assume all sales were credit sales.)
(2) Average collection period for accounts receivable.
Tootsie Roll Hershey Company
Accounts receivable turnover times times
Average collection period days days

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