UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ----to----
COMMISSION FILE NUMBER 1-1361
Tootsie Roll Industries, Inc.
(Exact Name of Registrant as Specified in its Charter)
VIRGINIA 22-1318955
(State of Incorporation) (I.R.S. Employer Identification No.)
7401 South Cicero Avenue, Chicago, Illinois 60629
(Address of Principal Executive Offices) (Zip Code)
773-838-3400
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No __
Indicate by check mark whether the Registrant is a large accelerated
filer, an accelerated filer or a non-accelerated filer. See definition
of "accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer __ Accelerated filer X Non-accelerated filer __
Indicate by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act)
Yes __ No __
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (July
1, 2006)
Class Outstanding
Common Stock, $.69 4/9 par value 35,870,157
Class B Common Stock, $.69 4/9 par value 18,414,283
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
JULY 1, 2006
INDEX
Page No.
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Statements of
Financial Position 2
Condensed Consolidated Statements of Earnings,
Comprehensive Earnings and Retained Earnings 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-6C
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 6C
Item 4. Controls and Procedures 6D
Part II - Other Information
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds 7
Item 4. Submission of Matters to a Vote of Security
Holders 7
Item 6. Exhibits 7A
Signatures 7A
Certifications 7B-D
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of dollars) (UNAUDITED)
ASSETS July 1, July 2, Dec. 31,
CURRENT ASSETS 2006 2005 2005
Cash & cash equivalents $ 11,511 $ 31,780 $ 69,006
Restricted cash - - 22,330
Investments 39,452 39,015 54,892
Trade accounts receivable,
Less allowances of
$2,160, $2,582 & $2,255 21,969 29,293 30,856
Other receivables 1,160 2,273 2,768
Inventories
Finished goods & work in process 73,993 66,797 34,311
Raw material & supplies 24,778 24,103 20,721
Prepaid expenses 3,758 3,729 5,840
Deferred income taxes 6,654 1,352 5,872
Total current assets 183,275 198,342 246,596
PROPERTY, PLANT & EQUIPMENT, at cost
Land 19,401 14,992 14,857
Buildings 84,241 61,778 63,544
Machinery & equipment 254,614 253,204 250,841
358,256 329,974 329,242
Less-accumulated depreciation 156,220 149,607 150,482
Net property, plant and equipment 202,036 180,367 178,760
OTHER ASSETS
Goodwill 74,194 74,793 74,194
Trademarks 189,024 193,342 189,024
Investments 45,425 78,465 44,851
Split dollar life insurance 72,857 69,563 69,772
Investment in joint venture 11,188 10,945 10,499
392,688 427,108 388,340
Total assets $777,999 $805,817 $813,696
-2-
(The accompanying notes are an integral part of these statements.)
(in thousands except per share data) (UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY July 1, July 2, Dec. 31,
CURRENT LIABILITIES 2006 2005 2005
Bank loan $ - $ 26,400 $ 32,001
Accounts payable 19,702 16,874 17,482
Dividends payable 4,347 3,751 4,263
Accrued liabilities 41,021 42,460 44,969
Income taxes payable 7,936 12,089 14,941
Total current liabilities 73,006 101,574 113,656
NON-CURRENT LIABILITIES
Bank loan - 49,000 -
Deferred income taxes 38,756 25,691 32,088
Postretirement health care and life
insurance benefits 11,025 10,409 10,783
Industrial development bonds 7,500 7,500 7,500
Deferred compensation and other
liabilities 32,565 30,206 32,264
Total non-current liabilities 89,846 122,806 82,635
Total liabilities 162,852 224,380 196,291
SHAREHOLDERS' EQUITY
Common Stock, $.69-4/9 par value-
120,000 shares authorized; 35,870,
35,561 & 35,255, respectively, issued 24,910 24,695 24,483
Class B common stock, $.69-4/9 par value-
40,000 shares authorized; 18,414, 18,019
& 18,000, respectively, issued 12,788 12,513 12,500
Capital in excess of par value 453,074 435,675 426,125
Retained earnings 137,182 121,251 164,236
Accumulated other comprehensive loss (10,815) (10,705) (7,947)
Treasury stock (at cost)-
61, 60 & 60 shares, respectively (1,992) (1,992) (1,992)
Total shareholders' equity 615,147 581,437 617,405
Total liabilities and
shareholders' equity $777,999 $805,817 $813,696
-2A-
(The accompanying notes are an integral part of these statements.)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS
(in thousands except per share amounts) (UNAUDITED)
13 WEEKS ENDED
July 1, 2006 & July 2, 2005
Net sales $ 94,944 $103,627
Cost of goods sold 56,894 61,886
Gross margin 38,050 41,741
Selling, marketing and administrative expenses 22,378 22,820
Earnings from operations 15,672 18,921
Other income, net 2,542 1,184
Earnings before income taxes 18,214 20,105
Provision for income taxes 5,356 6,374
Net earnings 12,858 13,731
Other comprehensive income, before tax:
Foreign currency translation adjustments (374) 525
Unrealized gains (losses) on securities (900) 415
Unrealized (losses) on derivatives (2,035) (252)
Other comprehensive income (loss), before tax (3,309) 688
Income tax benefit (expense) related to items
of other comprehensive income 1,085 (60)
Other comprehensive income (loss), net of tax (2,224) 628
Comprehensive earnings $ 10,634 $ 14,359
Retained earnings at beginning of period $128,666 $111,266
Net earnings 12,858 13,731
Cash dividends (4,342) (3,746)
Retained earnings at end of period $137,182 $121,251
Net earnings per share $0.24 $0.25
Dividends per share * $0.08 $0.07
Average number of shares outstanding 54,338 55,114
*Does not include 3% stock dividend to shareholders of record on 3/10/06 and 3/11/05.
-3-
(The accompanying notes are an integral part of the statements.)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS
(in thousands except per share amounts) (UNAUDITED)
26 WEEKS ENDED
July 1, 2006 & July 2, 2005
Net sales $198,766 $201,552
Cost of goods sold 121,316 120,362
Gross margin 77,450 81,190
Selling, marketing and administrative expenses 45,427 45,110
Earnings from operations 32,023 36,080
Other income, net 4,389 2,391
Earnings before income taxes 36,412 38,471
Provision for income taxes 11,192 12,234
Net earnings 25,220 26,237
Other comprehensive income, before tax:
Foreign currency translation adjustments (698) 611
Unrealized (losses) on securities (740) (206)
Unrealized (losses) on derivatives (2,704) (405)
Other comprehensive income, before tax (4,142) -
Income tax benefit related to items
of other comprehensive income 1,274 226
Other comprehensive income, net of tax (2,868) 226
Comprehensive earnings $ 22,352 $ 26,463
Retained earnings at beginning of period $164,236 $149,055
Net earnings 25,220 26,237
Cash dividends (8,580) (7,401)
Stock dividends - 3% (43,694) (46,640)
Retained earnings at end of period $137,182 $121,251
Net earnings per share $0.46 $0.48
Dividends per share * $0.16 $0.14
Average number of shares outstanding 54,511 55,218
*Does not include 3% stock dividend to shareholders of record on 3/10/06 and 3/11/05.
-3A-
(The accompanying notes are an integral part of the statements.)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars) (UNAUDITED)
26 WEEKS ENDED
July 1, 2006 & July 2, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 25,220 $ 26,237
Adjustments to reconcile net earnings to
net cash provided by (used in) operating
activities:
Depreciation and amortization 7,414 7,156
Amortization of marketable securities 555 967
Purchase of trading securities (1,643) (1,424)
Changes in operating assets and liabilities:
Accounts receivable 8,723 (736)
Other receivables (95) (282)
Inventories (43,953) (31,975)
Prepaid expenses and other assets (1,730) (2,958)
Accounts payable and accrued liabilities (1,570) (4,779)
Income taxes payable and deferred (921) 3,567
Postretirement health care and life
insurance benefits 242 334
Deferred compensation and other liabilities 767 1,060
Other (42) 227
Net cash used in operating activities (7,033) (2,606)
CASH FLOWS FROM INVESTING ACTIVITIES:
Working capital adjustment from acquisition - 6,755
Capital expenditures (30,983) (8,550)
Decrease in restricted cash 22,330 -
Purchase of available for sale securities (6,826) (13,386)
Sale and maturity of available for
sale securities 21,544 24,292
Net cash provided by investing activities 6,065 9,111
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank loan - 6,400
Repayment of bank loan (32,001) (23,000)
Dividends paid in cash (8,628) (7,639)
Shares repurchased and retired (15,898) (7,475)
Net cash used in financing activities (56,527) (31,714)
Decrease in cash and cash equivalents (57,495) (25,209)
Cash and cash equivalents at the beginning of year 69,006 56,989
Cash and cash equivalents at the end of quarter $ 11,511 $ 31,780
Supplemental cash flow information:
Income taxes paid $ 10,118 $ 9,202
Interest paid $ 593 $ 1,092
Stock dividend issued $ 43,563 $ 46,311
(The accompanying notes are an integral part of the statements.)
-4-
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 2006
(in thousands except per share amounts) (UNAUDITED)
Note 1 - Foregoing data has been prepared from the unaudited
financial records of Tootsie Roll Industries, Inc.
and Subsidiaries (the Company) and in the opinion
of management all adjustments necessary for a fair
statement of the results for the interim period have
been reflected. All adjustments were of a normal
and recurring nature. These consolidated financial
statements should be read in conjunction with the
consolidated financial statements and the related
notes included in the Company's 2005 Annual Report
on Form 10-K.
Note 2 - Average shares outstanding for the period ended July
1, 2006 reflects stock repurchases and subsequent
retirements of 557 shares for $15,898 and a 3% stock
dividend distributed on April 13, 2006. Average shares
outstanding for the period ended July 1, 2005 reflects
stock repurchases and subsequent retirements of 252
shares for $7,475 and a 3% stock dividend distributed
on April 14, 2005.
Note 3 - Results of operations for the period ended July 1,
2006 are not necessarily indicative of results to be
expected for the year to end December 31, 2006 because
of the seasonal nature of the Company's operations.
Historically, the third quarter has been the Company's
largest sales quarter due to Halloween sales.
Note 4 - The bank loan, a demand note issued in December 2005,
was fully repaid in May 2006.
Note 5 - In July 2006, the FASB issued FASB Interpretation (FIN)
No. 48 Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement 109. FIN 48 prescribes
a comprehensive model for recognizing, measuring,
presenting and disclosing in the financial statements
tax positions taken on a tax return. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The
Company is currently assessing the impact of FIN 48 and
has not yet made any determination as to the effects, if
any, that it may have on the Company's financial position
and results of operations.
-5-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in thousands except per share amounts)
The following is management's discussion of the Company's operating results and
analysis of factors that have affected the accompanying Condensed Consolidated
Statement of Earnings.
NET SALES: Net change in
Second Quarter, 2006
Second Quarter vs.
2006 2005 Second Quarter, 2005
$ 94,944 $103,627 (8.4)%
First Half, 2006
First Half vs.
2006 2005 First Half, 2005
$198,766 $201,552 (1.4)%
Second quarter 2006 net sales were $94,944 compared to $103,627 in second
quarter 2005, a decrease of $8,683 or 8.4%. First half 2006 net sales of
$198,766 decreased $2,786 or 1.4% from first half 2005 net sales of $201,552.
The decrease in second quarter and first half 2006 sales was caused by a number
of factors. These include transitional changes in package size, weight and
price changes, inventory adjustments made by certain national account
customers, the timing of shipments in the comparative periods, and a late
Easter which adversely impacted the Company's spring-summer promotion by
shortening the sales promotion period in the comparative second quarter
periods. In addition, the conclusion of a contract to manufacture product
under a private label for a third party resulted in a sales decline of
approximately $2,900 in both the second quarter and first half 2006 periods.
As previously disclosed in our Form 10-K for the year ended December 31, 2005,
such contract manufacturing sales aggregated 2% of annual net sales in 2005.
COST OF SALES:
Cost of Sales as a
Second Quarter Percentage of Net Sales
2006 2005 2nd Qtr. 2006 2nd Qtr. 2005
$56,894 $61,886 59.9% 59.7%
Cost of Sales as a
First Half Percentage of Net Sales
2006 2005 1st Half 2006 1st Half 2005
$121,316 $120,362 61.0% 59.7%
Cost of sales as a percentage of net sales increased from 59.7% in the second
quarter 2005 to 59.9% in second quarter 2006, and from 59.7% in first half 2005
to 61.0% in first half 2006. These increases in cost of sales as a percentage
of net sales are principally the result of higher input costs relating to major
ingredients, energy, including natural gas, and higher plant repair and
maintenance expenses. In addition, higher costs for labor and fringe benefits,
as well as generally higher plant overhead costs, also contributed to the
increase in cost of sales as a percentage of sales for the second quarter and
first half 2006 periods.
-6-
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES:
Second Quarter Percentage of Net Sales
2006 2005 2nd Qtr. 2006 2nd Qtr. 2005
$22,378 $22,820 23.6% 22.0%
First Half Percentage of Net Sales
2006 2005 1st Half 2006 1st Half 2005
$45,427 $45,110 22.9% 22.4%
Second quarter 2006 selling, marketing and administrative expenses were $22,378
compared to $22,820 in second quarter 2005, a decrease of $442 or 1.9%.
However, these expenses rose from $45,110 in first half 2005 to $45,427 in
first half 2006, an increase of $317 or 0.7%. As a percentage of net sales,
total selling, marketing and administrative expenses increased from 22.0% in
second quarter 2005 to 23.6% in second quarter 2006, and from 22.4% in first
half 2005 to 22.9% in first half 2006. The increase in selling, marketing and
administrative expenses as a percentage of sales for second quarter and first
half 2006 reflects higher freight and delivery expenses, including higher fuel
surcharges from carriers, and additional marketing expenses, principally new
artwork and plate expenses, relating to packaging changes associated with the
transition to new pack sizes and government mandated labeling changes.
Second quarter 2006 earnings from operations were $15,672 compared to $18,921
in second quarter 2005, a decrease of $3,249 or 17.2%. First half 2006 earnings
from operations were $32,023 compared to $36,080, a decrease of $4,057 or
11.2%. The decline in operating earnings in second quarter and first half 2006
principally resulted from lower reported consolidated sales combined with
higher input costs and increased marketing expenses as discussed above.
Although the Company took actions and implemented programs, including price
increases, with the objective to recover these higher input costs, these
actions, coupled with the effect of lower sales as discussed above, did not
result in the restoration of margins and profits in the second quarter and
first half of 2006.
NET EARNINGS:
Second Quarter, 2006
Second Quarter vs.
2006 2005 Second Quarter, 2005
$12,858 $13,731 (6.4)%
First Half, 2006
First Half vs.
2006 2005 First Half, 2005
$25,220 $26,237 (3.9)%
Second quarter 2006 net earnings were $12,858 compared to second quarter 2005
net earnings of $13,731, an $873 or 6.4% decrease. Second quarter 2006
earnings per share were $0.24, compared to $0.25 per share in the prior year
comparative period, a decrease of $0.01 or 4.0%.
First half 2006 net earnings were $25,220 compared to first half 2005 net
earnings of $26,237 a $1,017 or 3.9% decrease. First half net earnings per
share were $0.46 in 2006 compared to $0.48 per share in 2005, a decrease of
$0.02 per share or 4.2%.
-6A-
Other income, net was $2,542 in second quarter 2006 compared to $1,184 in
second quarter 2005, an increase of $1,358. The aforementioned increase is
primarily the result of $483 of decreased interest expense and a $739 capital
gain on investments. Other income, net was $4,389 in first half 2006 compared
to $2,391 in first half 2005, an increase of $1,998. First half 2006 other
income net reflects $690 of decreased interest expense, $316 of increased
investment income and a $739 capital gain on investment. The decreased
interest expense in both second quarter and first half 2006 reflects the
continuous reduction in bank loans during 2005 and first half 2006.
The consolidated effective income tax rate favorably decreased from 32.4% in
both second quarter and first half 2005 to 30.0% in second quarter 2006 and
31.3% in first half 2006. This improvement principally reflects lower
effective rates for foreign taxes.
In addition to the factors discussed above, earnings per share benefited from
fewer shares outstanding as a result of the Company's share repurchases.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's current ratio (current assets divided by current liabilities) was
2.5 to 1 as of the end of second quarter 2006 as compared to 2.0 to 1 as of the
end of second quarter 2005 and 2.2 to 1 as of the end of fourth quarter 2005.
Net working capital was $110,269 as of the end of second quarter 2006 as
compared to $132,940 and $96,768 as of the end of fourth quarter 2005 and
second quarter 2005, respectively. The aforementioned net working capital
amounts include aggregate cash and cash equivalents and short-term investments
less short-term bank loans which aggregated $50,963 as of the end of second
quarter 2006 compared to $91,897 and $44,395, as of the end of fourth quarter
2005 and second quarter 2005, respectively. In addition, long-term
investments, principally debt securities comprising municipal bonds, were
$45,425 as of the end of second quarter 2006 as compared to $44,851 and $78,465
as of the end of fourth quarter 2005 and second quarter 2005, respectively.
Investments in municipal bonds and other debt securities that matured during
first quarters 2006 and 2005 were generally used to pay down bank loans or
replaced with debt securities of similar maturities.
During first half 2006, the Company fully repaid $32,001 of short-term bank
loans. The balances of these bank loans, including the long-term portion, as of
the end of fourth quarter 2005 and second quarter 2005, were $32,001 and
$75,400, respectively. These bank loans were paid down through a combination of
cash flows provided by operating activities and investment maturities.
Net cash used in operating activities was $7,033 for first half 2006, compared
to $2,606 in first half 2005. The aforementioned change in net cash used in
operating activities principally reflects lower net income combined with
increased inventories and the timing of payments and cash flows related to
income taxes payable and deferred, partially offset by cash flows provided by
decreased accounts receivable and changes in accounts payable and accrued
liabilities.
-6B-
Capital expenditures for first half 2006 and 2005 were $30,983 and $8,550,
respectively. First half 2006 capital expenditures reflect $25,241 of
investments in rental income producing real estate which was funded from the
Company's restricted cash. Excluding the reinvestment of restricted cash,
capital expenditures for the 2006 year are anticipated to be generally in line
with historical annualized spending, and are to be funded from the Company's
cash flow from operations and internal sources.
All of the $22,330 in proceeds from the sale of surplus real estate during 2005
and held as restricted cash as of December 31, 2005, was reinvested
in "like kind" real estate during first half 2006 in compliance with U.S.
Internal Revenue Code Section 1031. During first half 2006 the Company
also reclassified approximately $7,600 of current income taxes payable to
deferred income taxes, all of which relates to the aforementioned Section
1031 reinvestment gain.
Cash dividends paid in first half 2006 and 2005 were $8,628 and $7,639,
respectively. The Company also repurchased and retired $15,898 and $7,475 of
its shares outstanding during first half 2006 and 2005, respectively.
This discussion and certain other sections of this Form 10-Q contain forward-
looking statements that are based largely on the Company's current expectations
and are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are subject to
certain risks, trends and uncertainties that could cause actual results and
achievements to differ materially from those expressed in the forward-looking
statements. Such risks, trends and uncertainties, which in some instances are
beyond the Company's control, include changes in demand and consumer
preferences, including seasonal events such as Halloween; the effect of changes
in commodity prices and ingredient costs; the effect of changes in foreign
currencies on the Company's foreign subsidiaries and resulting effects on costs
relating to foreign products principally marketed and sold in the USA ; the
Company's reliance on third-party vendors, including foreign supplies for
various goods and services; the Company's ability to successfully implement new
production processes and automated production lines; the effect of acquisitions
on the Company's results of operations and financial condition including the
effect of changes in assumptions such as discount rates and profit margins,
relating to the Company's impairment testing and analysis of its goodwill and
trademarks; changes in the confectionary market place including actions taken
by major retailers and customers; customer and consumer response to marketing
programs, changes in pack size and weights, and price adjustments; changes in
governmental laws and regulations including domestic and foreign taxes; the
overall competitive environment in the Company's industry; and changes in
assumptions and judgments discussed under the heading "Critical Accounting
Policies of the Company's MD&A" included in the 2005 annual report and 10-K.
The words "believe," "expect," "anticipate," "estimate," "intend" and similar
expressions generally identify forward-looking statements. Readers are
cautioned not to place undue reliance on such forward-looking statements, which
are as of the date of this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company is exposed to various market risks, including fluctuations in
sugar, corn syrup, edible oils, cocoa, dextrose, gum base ingredients and
packaging costs. The Company is also exposed to exchange rate fluctuations in
the Canadian dollar which is the currency used for a portion of the raw
material and packaging material costs and operating expenses at its Canadian
plants. The Company also invests in securities with maturities of up to three
years, the majority of which are held to maturity, which limits the Company's
exposure to interest rate fluctuations. There has been no material change in
the Company's market risks that would significantly affect the disclosures made
in the Form 10-K for the year ended December 31, 2005.
-6C-
Item 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of management, the chief
executive officer and chief financial officer of the Company have evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of July 1, 2006 and, based on their evaluation, the chief
executive officer and chief financial officer have concluded that these
controls and procedures are effective. Disclosure controls and procedures are
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures are also designed to ensure that information
is accumulated and communicated to management, including the chief executive
officer and chief financial officer, as appropriate to allow timely decisions
regarding required disclosure.
There has been no change in the Company's internal control over financial
reporting that occurred during the Company's fiscal quarter ended July 1, 2006
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
-6D-
PART II - OTHER INFORMATION
TOOTSIE ROLL INDUSTRIES, INC.
AND SUBSIDIARIES
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Approximate Dollar
(a) Total (b) Average Shares Value of Shares that
Number of Price Paid per Purchased as Part of May Yet Be Purchased
Shares Share Publicly Announced Plans Under the Plans
Period Purchased Or Programs or Programs
APR 2 TO APR 29 266,500 $ 28.67 NOT APPLICABLE NOT APPLICABLE
APR 30 TO MAY 27 13,100 29.91 NOT APPLICABLE NOT APPLICABLE
MAY 28 TO JUL 1 55,600 28.37 NOT APPLICABLE NOT APPLICABLE
TOTAL 335,200 $ 28.67
While the Company does not have a formal or publicly announced stock
repurchase program, the Company's board of directors periodically authorizes
a dollar amount for share repurchases. The treasurer executes share
repurchase transactions according to these guidelines.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company, held on May 1, 2006,
The following number of votes were cast for the matters indicated:
1. For the election of five Directors of the Company by the holders of
Common Shares and Class B Common Shares voting together:
Broker
Nominee For Withheld Abstain Non-Vote
Melvin J. Gordon 204,087,696 5,755,507 -0- -0-
Ellen R. Gordon 204,052,403 5,790,800 -0- -0-
Lana Jane Lewis-Brent 207,529,205 2,313,998 -0- -0-
Barre A. Siebert 207,498,937 2,344,266 -0- -0-
Richard P. Bergeman 207,157,459 2,685,744 -0- -0-
2. Proposal to approve the Tootsie Roll Industries, Inc. Management
Incentive Plan:
Broker
For Withheld Abstain Non-Vote
Common Shares and Class B
Common Shares voting together 205,157,095 4,236,155 449,953 -0-
-7-
3. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
auditors for the fiscal year 2006:
Broker
For Withheld Abstain Non-Vote
Common Shares and Class B
Common Shares voting together 207,010,579 2,773,817 58,807 -0-
No other matters were submitted to a vote by ballot at the 2006 Annual
Meeting.
Item 6. EXHIBITS
Exhibit 10.1 - Tootsie Roll Industries, Inc. Management
Incentive Plan, filed as Appendix A to the Company's Definitive
Proxy Statement on Schedule 14A filed with the Commission on
March 24, 2006 (File No. 001-01361) and incorporated herein by
reference.
Exhibits 31.1 and 31.2 - Certifications Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 - Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
TOOTSIE ROLL INDUSTRIES, INC.
Date: Aug. 8, 2006 BY:/S/MELVIN J. GORDON
Melvin J. Gordon
Chairman of the Board
Date: Aug. 8, 2006 BY:/S/G. HOWARD EMBER, JR.
G. Howard Ember, Jr.
Vice President Finance
-7A-
Exhibit 31.1
CERTIFICATION
I, Melvin J. Gordon, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tootsie Roll
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the state-
ments made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial infor-
mation included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such dis-
closure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) designed such disclosure controls over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: Aug. 8, 2006
By: /S/MELVIN J. GORDON
Melvin J. Gordon
Chairman and Chief Executive Officer
-7B-
Exhibit 31.2
CERTIFICATION
I, G. Howard Ember, Jr. certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tootsie Roll
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the state-
ments made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial infor-
mation included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such dis-
closure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) designed such disclosure controls over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: Aug. 8, 2006
By: /S/G. HOWARD EMBER, JR.
G. Howard Ember, Jr.
Vice President Finance and
Chief Financial Officer
-7C-
Exhibit 32
Certificate Pursuant to Section 1350 of Chapter 63
Of Title 18 of the United States Code
Each of the undersigned officers of Tootsie Roll Industries, Inc.
Certifies that (i) the Quarterly Report on Form 10-Q of Tootsie Roll
Industries, Inc. for the quarterly period ended July 1, 2006 (the
Form 10-Q) fully complies with the requirements of secton 13(a) or
15(d) of the Securities Exchange Act of 1934 and (ii) the information
contained in the Form 10-Q fairly presents, in all material respects,
the financial condition and results of operations of Tootsie Roll
Industries, Inc. and its subsidiaries.
Dated: Aug. 8, 2006 /S/MELVIN J. GORDON
Melvin J. Gordon
Chairman and Chief
Executive Officer
Dated: Aug. 8, 2006 /S/G. HOWARD EMBER, JR.
G. Howard Ember, Jr.
V.P. Finance and
Chief Financial Officer
-7D-