Broadening Your Perspective 5-1 The financial statements of Tootsie Roll are pre

Question

Broadening Your Perspective 5-1

The financial statements of Tootsie Roll are presented below.

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)

    Impairment of equity method investment

    Loss from equity method investment

    Amortization of marketable security premiums

    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

  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

    Shares repurchased and retired

    Dividends paid in cash

    Net cash used in financing activities

  Income taxes paid

  Interest paid

  Stock dividend issued

Answer these questions using the Consolidated Income Statement.

What was Tootsie Roll’s gross profit rate in each of the 3 years? (Use “Net Product Sales” amounts.). (Round answers to 1 decimal places, e.g. 15.2%.)

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.)

Explanation / Answer

Gross profits rates for the 3 years

Gross profit for the year 2009 = Gross profit / Net sales

= 178704 / $495592

= 36.06%

Gross profit for the year 2010 = Gross profit / Net sales

= 171026 / $517149

= 33.07%

Gross profit for the year 2011 = Gross profit / Net sales

= 166242/ $528369

=31.46%

  

  

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