The financial statements of Tootsie Roll are presented below.

timer Asked: Dec 15th, 2014

Question description

Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
 For the year ended December 31,
Net product sales$528,369$517,149$495,592
Rental and royalty revenue4,1364,2993,739
Total revenue532,505521,448499,331
Product cost of goods sold365,225349,334319,775
Rental and royalty cost1,0381,088852
Total costs366,263350,422320,627
Product gross margin163,144167,815175,817
Rental and royalty gross margin3,0983,2112,887
Total gross margin166,242171,026178,704
Selling, marketing and administrative expenses108,276106,316103,755
Impairment charges14,000
Earnings from operations57,96664,71060,949
Other income (expense), net2,9468,3582,100
Earnings before income taxes60,91273,06863,049
Provision for income taxes16,97420,0059,892
Net earnings$43,938$53,063$53,157
Net earnings$43,938$53,063$53,157
Other comprehensive earnings (loss)(8,740)1,1832,845
Comprehensive earnings$35,198$54,246$56,002
Retained earnings at beginning of year.$135,866$147,687$144,949
Net earnings43,93853,06353,157
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 outstanding57,89258,68559,425
(The accompanying notes are an integral part of these statements.)

Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
 AssetsDecember 31,
   2011 2010
  Cash and cash equivalents$78,612 $115,976
  Investments10,895 7,996
  Accounts receivable trade, less allowances of $1,731 and $1,53141,895 37,394
  Other receivables3,391 9,961
  Finished goods and work-in-process42,676 35,416
  Raw materials and supplies29,084 21,236
  Prepaid expenses5,070 6,499
  Deferred income taxes578 689
  Total current assets212,201 235,167
  Land21,939 21,696
  Buildings107,567 102,934
  Machinery and equipment322,993 307,178
  Construction in progress2,598 9,243
   455,097 440,974
  Less—Accumulated depreciation242,935 225,482
  Net property, plant and equipment212,162 215,492
  Goodwill73,237 73,237
  Trademarks175,024 175,024
  Investments96,161 64,461
  Split dollar officer life insurance74,209 74,441
  Prepaid expenses3,212 6,680
  Equity method investment3,935 4,254
  Deferred income taxes7,715 9,203
  Total other assets433,493 407,300
  Total assets$857,856 $857,959
Liabilities and Shareholders’ EquityDecember 31,
  Accounts payable$10,683 $9,791
  Dividends payable4,603 4,529
  Accrued liabilities43,069 44,185
  Total current liabilities58,355 58,505
  Deferred income taxes43,521 47,865
  Postretirement health care and life insurance benefits26,108 20,689
  Industrial development bonds7,500 7,500
  Liability for uncertain tax positions8,345 9,835
  Deferred compensation and other liabilities48,092 46,157
  Total noncurrent liabilities133,566 132,046
  Common stock, $.69-4/9 par value—120,000 shares authorized—36,479 and 36,057 respectively, issued25,333 25,040
  Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued14,601 14,212
  Capital in excess of par value533,677 505,495
  Retained earnings, per accompanying statement114,269 135,866
  Accumulated other comprehensive loss(19,953) (11,213)
  Treasury stock (at cost)—71 shares and 69 shares, respectively(1,992) (1,992)
  Total shareholders’ equity665,935 667,408
  Total liabilities and shareholders’ equity$857,856 $857,959

Cash Flows (in thousands)

   For the year ended December 31,
    2011 20102009
   Net earnings$43,938 $53,063$53,157
   Adjustments to reconcile net earnings to net cash provided by operating activities:
    Depreciation19,229 18,27917,862
    Impairment charges 14,000

 Impairment of equity method investment


 Loss from equity method investment

194 342233

 Amortization of marketable security premiums

1,267 522320

 Changes in operating assets and liabilities:


 Accounts receivable

(5,448) 717(5,899)

 Other receivables

3,963 (2,373)(2,088)


(15,631) (1,447)455

 Prepaid expenses and other assets

5,106 4,9365,203

 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 1,4291,384

 Deferred compensation and other liabilities

2,146 2,5252,960


(708) 310305
   Net cash provided by operating activities50,390 82,80576,994

 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 8,20817,511

 Net cash used in investing activities

(51,157) (16,808)(16,364)

 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) 24,98622,082
 Cash and cash equivalents at beginning of year115,976 90,99068,908
 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.)

Notes to Consolidated Financial Statements ($ in thousands)


Depreciation is computed for financial reporting purposes by use of the straight-line method based on the useful lives of 20 to 35 years for building and 5 to 25 years for machinery and equipment. Depreciation expenses was $19,229, $18,279 and $17,862 in 2011, 2010 and 2009, respectively.

Goodwill and intangible assets:

In accordance with authoritative guidance, goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually unless certain interim triggering events or circumstances require more frequent testing. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. The Company has completed its annual impairment testing of its goodwill and trademarks at December 31 of each of the years presented. As of December 31, 2009, management ascertained that certain trademarks were impaired, and recorded a pre-tax charge of $14,000. No impairments of intangibles were recorded in 2011 and 2010. This determination is made by comparing the carrying value of the asset with its estimated fair value, which is calculated using estimates including discounted projected future cash flows. If the carrying value of goodwill exceeds the fair value, a second step would measure the carrying value and implied fair value of goodwill. Management believes that all assumptions used for the impairment tests are consistent with those utilized by market participants performing similar valuations.
Answer the following questions.


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What were the total cost and book value of property, plant, and equipment at December 31, 2011? (Enter the amounts in thousands.)

Total cost$[img class="answerMarker" id="amarker_res_EAT_1350490965690_0_7033342486784817_1" alt="" src="">
Book value$[img class="answerMarker" id="amarker_res_EAT_1350490965690_0_7033342486784817_003" alt="" src="">


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What was the amount of depreciation expense for each of the 3 years 2009–2011? (Hint: Use the statement of cash flows.) (Enter the amounts in thousands.)

2009$[img class="answerMarker" id="amarker_res_EAT_1350490965690_0_7033342486784817_005" alt="" src="">
2010$[img class="answerMarker" id="amarker_res_EAT_1350490965690_0_7033342486784817_007" alt="" src="">
2011$[img class="answerMarker" id="amarker_res_EAT_1350490965690_0_7033342486784817_009" alt="" src="">


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Using the statement of cash flows, what are the amounts of property, plant, and equipment purchased (capital expenditures) in 2011 and 2010? (Enter the amounts in thousands.)

Property, plant, and equipment purchased[img class="answerMarker" id="amarker_res_EAT_1350490965690_0_7033342486784817_011" alt="" src="">[img class="answerMarker" id="amarker_res_EAT_1350490965690_0_7033342486784817_013" alt="" src="">

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