ACC/290 – 48007779 / Assignment: Week 2 Assignment
Broadening Your Perspective 3-2
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
$6,080,788
$5,671,009 $5,298,668
Net Sales
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
(886)
83,433
82,875
Business realignment and impairment (credits) charges, net
5,025,760
4,765,711
4,537,078
Total costs and expenses
Income before Interest and Income Taxes
1,055,028
905,298
761,590
92,183
96,434
90,459
Interest expense, net
Income before Income Taxes
962,845
808,864
671,131
333,883
299,065
235,137
Provision for income taxes
$628,962
$509,799
$435,994
Net Income
$2.58
$2.08
$1.77
Net Income Per Share—Basic—Class B Common Stock
$2.56
$2.07
$1.77
Net Income Per Share—Diluted—Class B Common Stock
$2.85
$2.29
$1.97
Net Income Per Share—Basic—Common Stock
$2.74
$2.21
$1.90
Net Income Per Share—Diluted—Common Stock
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,
In thousands of dollars
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable—trade
Inventories
Deferred income taxes
Prepaid expenses and other
Total current assets
Property, Plant and Equipment, Net
Goodwill
Other Intangibles
Deferred Income Taxes
Other Assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued liabilities
Accrued income taxes
Short-term debt
Current portion of long-term debt
Total current liabilities
Long-term Debt
Other Long-term Liabilities
Total liabilities
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
Class B Common Stock, shares issued: 60,632,042 in 2011 and 60,706,419 in 2010
Additional paid-in capital
Retained earnings
Treasury—Common Stock shares, at cost: 134,695,826 in 2011 and 132,871,512 in 2010
Accumulated other comprehensive loss
The Hershey Company stockholders’ equity
Noncontrolling interests in subsidiaries
Total stockholders’ equity
Total liabilities and stockholders’equity
2011
2010
$693,686
399,499
648,953
136,861
167,559
2,046,558
1,559,717
516,745
111,913
38,544
138,722
$4,412,199
$884,642
390,061
533,622
55,760
141,132
2,005,217
1,437,702
524,134
123,080
21,387
161,212
$4,272,732
$420,017
612,186
1,899
42,080
97,593
1,173,775
1,748,500
617,276
3,539,551
—
$410,655
593,308
9,402
24,088
261,392
1,298,845
1,541,825
494,461
3,335,131
—
—
299,269
60,632
490,817
4,699,597
(4,258,962)
(442,331)
849,022
23,626
872,648
$4,412,199
—
299,195
60,706
434,865
4,374,718
(4,052,101)
(215,067)
902,316
35,285
937,601
$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
Cash and Cash Equivalents as of December 31
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
$43,938
$53,063
$53,157
Net earnings
Net earnings
Other comprehensive earnings (loss)
Comprehensive earnings
Retained earnings at beginning of year.
Net earnings
Cash dividends
Stock dividends
Retained earnings at end of year
$43,938
(8,740)
$35,198
$135,866
43,938
(18,360)
(47,175)
$114,269
$53,063
1,183
$54,246
$53,157
2,845
$56,002
$147,687
53,063
(18,078)
(46,806)
$135,866
$144,949
53,157
(17,790)
(32,629)
$147,687
Earnings per share
$0.76
$0.90
$0.89
Average Common and Class B Common shares outstanding
57,892
58,685
(The accompanying notes are an integral part of these statements.)
59,425
CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
December 31,
Assets
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
242,935
225,482
Less—Accumulated depreciation
212,162
215,492
Net property, plant and equipment
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
$857,856 $857,959
Total assets
December 31,
Liabilities and Shareholders’ Equity
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
$857,856 $857,959
Total liabilities and shareholders’ equity
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
Other receivables
Inventories
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Income taxes payable and deferred
Postretirement health care and life insurance benefits
Deferred compensation and other liabilities
Others
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Net purchase of trading securities
Purchase of available for sale securities
Sale and maturity of available for sale securities
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares repurchased and retired
Dividends paid in cash
Net cash used in financing activities
(5,448)
3,963
(15,631)
5,106
84
(5,772)
2,022
2,146
(708)
50,390
717
(2,373)
(1,447)
4,936
2,180
2,322
1,429
2,525
310
82,805
(5,899)
(2,088)
455
5,203
(2,755)
(12,543)
1,384
2,960
305
76,994
(16,351)
(3,234)
(39,252)
7,680
(51,157)
(12,813)
(2,902)
(9,301)
8,208
(16,808)
(20,831)
(1,713)
(11,331)
17,511
(16,364)
(18,190)
(18,407)
(36,597)
(22,881)
(18,130)
(41,011)
(20,723)
(17,825)
(38,548)
(37,364)
24,986
22,082
Cash and cash equivalents at beginning of year
115,976
$78,612
Cash and cash equivalents at end of year
Supplemental cash flow information
Income taxes paid
$16,906
Interest paid
$38
Stock dividend issued
$47,053
(The accompanying notes are an integral part of these statements.)
90,990
$115,976
68,908
$90,990
$20,586
$49
$46,683
$22,364
$182
$32,538
Increase (decrease) in cash and cash equivalents
Based on the information contained in these financial statements, determine the normal balance for:
Tootsie Roll Industries
Normal Balance
The Hershey Company
Normal Balance
(1) Accounts Receivable
(1) Inventories
(2) Net Property, Plant, and Equipment
(2) Provision for Income Taxes
(3) Accounts Payable
(3) Accrued Liabilities
(4) Retained Earnings
(4) Common Stock
(5) Net Product Sales
(5) Interest Expense
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