Tootsie Roll Industries, Inc
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Annual Report 2002 3/15/02 11:44 AM Page 1 Tootsie Roll Industries, Inc. Annual Report 2001 Annual Report 2002 3/15/02 11:44 AM Page 2 Corporate Principles We believe that the differences among companies are attributable to the caliber of their people, and therefore we strive to attract and retain superior people for each job. We believe that an open family atmosphere at work combined with professional management fosters cooperation and enables each individual to maximize his or her contribution to the company and realize the corresponding rewards. We do not jeopardize long-term growth for immediate, short-term results. We maintain a conservative financial posture in the deployment and management of our assets. We run a trim operation and continually strive to eliminate waste, minimize cost and implement performance improvements. We invest in the latest and most productive equipment to deliver the best quality product to our customers at the lowest cost. We seek to outsource functions where appropriate and to vertically integrate Melvin J. Gordon, Chairman and Chief Executive Officer and Ellen R. Gordon, President operations where it is financially advantageous to do so. and Chief Operating Officer. We view our well known brands as prized assets to be aggressively advertised and promoted to each new generation of consumers. Corporate Profile Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of candy for 105 years. Our products are primarily sold under the familiar brand names, Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child’s Play, Charms, Blow Pop, Blue Razz, Cella’s chocolate covered cherries, Mason Dots, Mason Crows, Junior Mints, Charleston Chew, Sugar Daddy, Sugar Babies, Andes and Fluffy Stuff cotton candy. 1 Annual Report 2002 3/15/02 11:44 AM Page 3 To Our Shareholders Sales in 2001 were $423 million, Absent these nonrecurring items, • Capital expenditures of Halloween and Back to School are representing a decline of 1% from earnings would have been $1.34 $14 million were made to our main selling periods and thus the record sales of $427 million per share or 10% below 2000. increase efficiency, improve a focus of our promotional attained in 2000. Our sales results Some key financial highlights that quality and to support future activities. In 2001 promotions such were generally influenced by the occurred during 2001 include: growth. as shipper displays and pallet slowdown in the domestic packs contributed to sales in our • Cash dividends were paid economy. The conservative balance sheet we Halloween packaged goods line, for the fifty-ninth consecutive have established over the years most notably so in the grocery, Net earnings for the year were year. enabled us to navigate the mass merchandiser and drug $1.30 per share, or 13% below classes of trade. 2000 earnings per share of $1.49. • The dollar amount of cash challenges faced during 2001 2001 earnings were adversely dividends paid increased bywithout jeopardizingOur Bonusfuture Bag program and a affected by lower sales, changes in 8%. operations. Indeed, cash and tie-in between three of our most investments in marketable popular products and the video product mix and generally higher • A stock dividend was securities grew by $51 million release of The Mummy Returns operating costs. We also had distributed in April, the thirty- during the year, placing us in an added to packaged goods growth charges of $0.04 per share related seventh consecutive year even stronger position to respond outside of Halloween. A continued to an inventory adjustment and the we have paid stock to future investment opportunities, focus on seasonal offerings for closing of our smallest plant. dividends. including suitable business Easter, Valentine and Christmas acquisitions, as they may arise. boosted sales during those periods. Another avenue of growth for the year was our theater line Sales and Marketing featuring Junior Mints, Dots, Sugar Babies and Mini Charleston Chews Financial Highlights Targeted consumer and trade in jumbo, reclosable boxes that December 31, promotions that highlight the enable consumers to enjoy a treat 2001 2000 attributes of quality and value in now and still save some for later. (in thousands except per share data) our portfolio of venerable candy brands have long been a key Net Sales .................... $423,496 $427,054 component of the sales and Net Earnings ................. 65,687 75,737 marketing strategy of the company, and they remained so once again Working Capital ............... 188,250 145,765 during 2001. Net Property, Plant and Carefully planned and executed Equipment ................ 132,575 131,118 promotions helped to move our Shareholders’ Equity ............ 508,461 458,696 products into distribution and to Average Shares Outstanding* ..... 50,451 50,898 subsequently move them off of the Per Share Items* shelf with strong consumer Net Earnings ................ $1.30 $1.49 take-away. This held true during Shareholders’ Equity ........... 10.09 9.09 2001, and our products continue to Cash Dividends Paid ........... .28 .26 be popular in the trade due to their *Based on average shares outstanding adjusted for stock dividends. strong brand recognition and historically high sell-through. 2 Annual Report 2002 3/15/02 11:44 AM Page 4 Sales of Andes Creme` de Menthe skull-shaped flat pop that turns many brave men and women who Unwrapped, which featured Tootsie Thins and Fluffy Stuff cotton candy, your tongue red, was a have heroically served in so many Pops and Blow Pops on a lollipop acquired during 2000, also well-received addition to the ways during this challenging time. segment, Dots and Junior Mints in contributed to 2001 sales. Andes Charms Halloween line. a piece about ‘‘movie candy,’’ and had a particularly strong Christmas Charleston Chew and Sugar Notwithstanding the successes Advertising and Public due to successful promotional Babies during a look at ‘‘retro’’ and positive results outlined above, Relations efforts while Fluffy Stuff benefited sales declined by 1% during the candy. from increased distribution and two year as weak economic conditions As we have done for many years, seasonal line extensions: Cotton Our website, tootsie.com, was affected our sales. The catastrophic we continued to rely upon Tails for Easter and Snow Balls for enhanced with the addition of a events of September 11 further television to convey our advertising Christmas. direct link for consumers to contact dampened demand during the messages to consumers. The critical Halloween period as the company. Thousands of New products also added to sales emphasis in 2001 was our classic consumers were hesitant in inquiries have been received, during the year. Hot Chocolate ‘‘How Many Licks?’’ Tootsie Pop planning their parties and ranging from compliments about Pops, a delicious blend of rich commercial, one of the longest trick-or-treat activities in the our products to requests for chocolate hard candy and luscious running consumer product aftermath of 9/11. As our country financial information. We have also marshmallow flavored caramel, campaigns, which we targeted to banded together to recover from received numerous e-mails seeking and Fruit Smoothie Pops, four children on prominent cartoon this tragedy, Tootsie Roll an answer to the age-old question: varieties of fruity yogurt hard candy shows on cable television. pops with a chewy fruit center, introduced a limited edition of our ‘‘How many licks does it take to have proven to be popular niche popular Tootsie Roll Midgee in a Our products received additional get to the Tootsie Roll center of a items among consumers. Dead patriotic red, white and blue cable television exposure on the Tootsie Pop?’’ But, of course, ‘‘The Heads, a ghoulishly delicious, wrapper, paying tribute to the Food Network’s top rated program world may never know!’’ 3 Annual Report 2002 3/15/02 11:44 AM Page 5 Numerous articles and stories wrappers on the Blow Pop count purchase contracts to control costs International appeared in newspapers and goods line were revamped during and lock in prices at favorable magazines during the year the year and a bar code panel was levels when we feel it is prudent to Sales increased in Canada in 2001 commenting favorably on the added. On the Tootsie Pop, we do so and to ensure that the as did our export sales to many company and its well-known preserved the traditional wrapper company’s purchases are sourced foreign markets, while sales in products. Among these, Forbes and added a bar code on the as economically as possible. Mexico declined. Magazine named us one of the base of the stick of the pop. These We continue to prudently cultivate 200 Best Small Companies in are but a few examples of our Information Technology foreign markets where we see America, and our Chairman and ongoing efforts to remain growth potential. Chief Executive Officer was, for the contemporary in our methods while second consecutive year, ranked preserving the identity of our During 2001 we continued the by Chief Executive Magazine as brands. work that began in 2000 on the In Conclusion... one of the best performing redevelopment of several key business applications and executives in the food, beverage Capital investments of $14 million 2001, an economic downturn year processes. These new applications and tobacco industries. were made during the year to climaxed by the 9/11 tragedy, was increase efficiency, improve quality will give us state-of-the-art, web one of the more challenging years and to support future growth. enabled tools that are critical to we have had in some time. We Manufacturing Major projects included a 200,000 remaining competitive in today’s wish to thank the many loyal square foot expansion of a business environment. employees, customers, suppliers, Although we have been making distribution facility and additional sales brokers and foreign Tootsie Rolls for 105 years, we production capacity for Fluffy Stuff.