3 Questions

ACC/291 - 49133250 / Assignment: Week 5 Assignment

Broadening Your Perspective 13-2

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

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

$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

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)

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 in the financial statements, determine each of the following for each company:

The percentage increase (i) in net sales and (ii) in net income from 2010 to 2011. (Round answers to 1

decimal places, e.g. 15.2%. Enter negative amounts using either a negative sign preceding the

number e.g. -15.2% or parentheses e.g. (15.2)%.)

Hershey

Tootsie Roll

Percentage increase (decrease) in net sales

7.23

%

2.17

%

Percentage increase (decrease) in net income

23.37

%

-17.20

%

The percentage increase (i) in total assets and (ii) in total stockholders’ equity from 2010 to 2011. (Round

answers to 1 decimal place, e.g. 15.2%. Enter negative amounts using either a negative sign

preceding the number e.g. -15.2% or parentheses e.g. (15.2)%.)

Hershey

Tootsie Roll

Percentage increase (decrease) in total assets

3.26

%

-0.01

%

Percentage increase (decrease) in total

stockholders’ equity

-6.93

%

-0.22

%

The earnings per share for 2011. (Round answers to 2 decimal places, e.g. 15.25.)

Hershey

Tootsie Roll

Earnings per share

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