Broadening Your Perspective 13-2

The financial statements of The Hershey Company and Tootsie Roll are presented below.

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF INCOMEFor the years ended December 31,201120102009In thousands of dollars except per share amountsNet Sales$6,080,788$5,671,009$5,298,668Costs and Expenses:Cost of sales3,548,8963,255,8013,245,531Selling, marketing and administrative1,477,7501,426,4771,208,672Business realignment and impairment (credits) charges, net(886)83,43382,875Total costs and expenses5,025,7604,765,7114,537,078Income before Interest and Income Taxes1,055,028905,298761,590Interest expense, net92,18396,43490,459Income before Income Taxes962,845808,864671,131Provision for income taxes333,883299,065235,137Net Income$628,962$509,799$435,994Net Income Per Share?Basic?Class B Common Stock$2.58$2.08$1.77Net Income Per Share?Diluted?Class B Common Stock$2.56$2.07$1.77Net Income Per Share?Basic?Common Stock$2.85$2.29$1.97Net Income Per Share?Diluted?Common Stock$2.74$2.21$1.90Cash Dividends Paid Per Share:Common Stock$1.3800$1.2800$1.1900Class B Common Stock1.25001.16001.0712The 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 SHEETSDecember 31,20112010In thousands of dollarsASSETSCurrent Assets:Cash and cash equivalents$693,686$884,642Accounts receivable?trade399,499390,061Inventories648,953533,622Deferred income taxes136,86155,760Prepaid expenses and other167,559141,132Total current assets2,046,5582,005,217Property, Plant and Equipment, Net1,559,7171,437,702Goodwill516,745524,134Other Intangibles111,913123,080Deferred Income Taxes38,54421,387Other Assets138,722161,212Total assets$4,412,199$4,272,732LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable$420,017$410,655Accrued liabilities612,186593,308Accrued income taxes1,8999,402Short-term debt42,08024,088Current portion of long-term debt97,593261,392Total current liabilities1,173,7751,298,845Long-term Debt1,748,5001,541,825Other Long-term Liabilities617,276494,461Total liabilities3,539,5513,335,131Commitments and Contingencies?

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Stockholders' Equity:The Hershey Company Stockholders' EquityPreferred Stock, shares issued: none in 2011 and 2010??Common Stock, shares issued: 299,269,702 in 2011 and 299,195,325 in 2010299,269299,195Class B Common Stock, shares issued: 60,632,042 in 2011 and 60,706,419 in 201060,63260,706Additional paid-in capital490,817434,865Retained earnings4,699,5974,374,718Treasury?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' equity849,022902,316Noncontrolling interests in subsidiaries23,62635,285Total stockholders' equity872,648937,601Total liabilities and stockholders'equity$4,412,199$4,272,732

THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31,201120102009In thousands of dollarsCash Flows Provided from (Used by) Operating ActivitiesNet income

$628,962$509,799$435,994Adjustments to reconcile net income to net cash provided from operations:Depreciation and amortization215,763197,116182,411Stock-based compensation expense, net of tax of $15,127, $17,413 and $19,223, respectively28,34132,05534,927Excess tax benefits from stock-based compensation(13,997)(1,385)(4,455)Deferred income taxes33,611(18,654)(40,578)Gain on sale of trademark licensing rights, net of tax of $5,962(11,072)?

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Business realignment and impairment charges, net of tax of $18,333, $20,635 and $38,308, respectively30,83877,93560,823Contributions 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)20,32946,584Inventories(115,331)(13,910)74,000Accounts payable7,86090,43437,228Other assets and liabilities(205,809)13,777293,272Net Cash Provided from Operating Activities580,867901,4231,065,749Cash Flows Provided from (Used by) Investing ActivitiesCapital additions(323,961)(179,538)(126,324)Capitalized software additions(23,606)(21,949)(19,146)Proceeds from sales of property, plant and equipment3122,20110,364Proceeds from sales of trademark licensing rights20,000??

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 ActivitiesNet change in short-term borrowings10,8341,156(458,047)Long-term borrowings249,126348,208?Repayment of long-term debt(256,189)(71,548)(8,252)Proceeds from lease financing agreement47,601?

?Cash dividends paid(304,083)(283,434)(263,403)Exercise of stock options184,41192,03328,318Excess tax benefits from stock-based compensation13,9971,3854,455Contributions from noncontrolling interests in subsidiaries?10,1997,322Repurchase 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)631,037216,502Cash and Cash Equivalents as of January 1884,642253,60537,103Cash and Cash Equivalents as of December 31$693,686$884,642$253,605Interest Paid$97,892$97,932$91,623Income Taxes Paid292,315350,948252,230

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 31,201120102009Net product sales

$528,369$517,149$495,592Rental and royalty revenue4,1364,2993,739Total revenue532,505521,448499,331Product cost of goods sold365,225349,334319,775Rental and royalty cost1,0381,088852Total costs366,263350,422320,627Product gross margin163,144167,815175,817Rental and royalty gross margin3,0983,2112,887Total gross margin166,242171,026178,704Selling, marketing and administrative expenses108,276106,316103,755Impairment charges??14,000Earnings from operations57,96664,71060,949Other income (expense), net2,9468,3582,100Earnings before income taxes60,91273,06863,049Provision for income taxes16,97420,0059,892Net earnings$43,938$53,063$53,157Net earnings$43,938$53,063$53,157Other comprehensive earnings (loss)(8,740)1,1832,845Comprehensive earnings$35,198$54,246$56,002Retained earnings at beginning of year.$135,866$147,687$144,949Net earnings43,93853,06353,157Cash 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$147,687Earnings per share$0.76$0.90$0.89Average Common and Class B Common shares outstanding

57,89258,68559,425(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)AssetsDecember 31,20112010CURRENT ASSETS:Cash and cash equivalents$78,612$115,976Investments10,8957,996Accounts receivable trade, less allowances of $1,731 and $1,53141,89537,394Other receivables3,3919,961Inventories:Finished goods and work-in-process42,67635,416Raw materials and supplies29,08421,236Prepaid expenses5,0706,499Deferred income taxes578689Total current assets212,201235,167PROPERTY, PLANT AND EQUIPMENT, at cost:Land21,93921,696Buildings107,567102,934Machinery and equipment322,993307,178Construction in progress2,5989,243455,097440,974Less?Accumulated depreciation242,935225,482Net property, plant and equipment212,162215,492OTHER ASSETS:Goodwill73,23773,237Trademarks175,024175,024Investments96,16164,461Split dollar officer life insurance74,20974,441Prepaid expenses3,2126,680Equity method investment3,9354,254Deferred income taxes7,7159,203Total other assets433,493407,300Total assets$857,856$857,959Liabilities and Shareholders' EquityDecember 31,20112010CURRENT LIABILITIES:Accounts payable$10,683$9,791Dividends payable4,6034,529Accrued liabilities43,06944,185Total current liabilities58,35558,505NONCURRENT LIABILITES:Deferred income taxes43,52147,865Postretirement health care and life insurance benefits26,10820,689Industrial development bonds7,5007,500Liability for uncertain tax positions8,3459,835Deferred compensation and other liabilities48,09246,157Total noncurrent liabilities133,566132,046SHAREHOLDERS' EQUITY:Common stock, $.69-4/9 par value?120,000 shares authorized?36,479 and 36,057 respectively, issued25,33325,040Class B common stock, $.69-4/9 par value?40,000 shares authorized?21,025 and 20,466 respectively, issued14,60114,212Capital in excess of par value533,677505,495Retained earnings, per accompanying statement114,269135,866Accumulated other comprehensive loss(19,953)(11,213)Treasury stock (at cost)?71 shares and 69 shares, respectively(1,992)(1,992)Total shareholders' equity665,935667,408Total 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 31,201120102009CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings$43,938$53,063$53,157Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation19,22918,27917,862Impairment charges?

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14,000Impairment of equity method investment

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4,400Loss from equity method investment

194342233Amortization of marketable security premiums

1,267522320Changes 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)455Prepaid expenses and other assets

5,1064,9365,203Accounts payable and accrued liabilities

842,180(2,755)Income taxes payable and deferred

(5,772)2,322(12,543)Postretirement health care and life insurance benefits

2,0221,4291,384Deferred compensation and other liabilities

2,1462,5252,960Others

(708)310305Net cash provided by operating activities50,39082,80576,994CASH 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

7,6808,20817,511Net 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)24,98622,082Cash and cash equivalents at beginning of year115,97690,99068,908Cash and cash equivalents at end of year$78,612$115,976$90,990Supplemental cash flow informationIncome taxes paid

$16,906$20,586$22,364Interest paid

$38$49$182Stock 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:

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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)%.)

HersheyTootsie RollPercentage increase (decrease) in net sales

%

%Percentage increase (decrease) in net income

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%

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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)%.)

HersheyTootsie RollPercentage increase (decrease) in total assets

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%Percentage increase (decrease) in total stockholders' equity

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%

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

HersheyTootsie RollEarnings per share

Problem 12-10A Condensed financial data of Odgers Inc. follow. ODGERS INC. Comparative Balance Sheets December 31 Assets 2014 Cash 2013 $ 98,576 $ 59,048 Accounts receivable 107,116 46,360 Inventory 137,250 125,477 Prepaid expenses 34,648 31,720 Long-term investments 168,360 132,980 Plant assets 347,700 295,850 Accumulated depreciation (61,000 ) (63,440 ) Total $832,650 $627,995 $ 124,440 $ 82,106 20,130 25,620 Bonds payable 134,200 178,120 Common stock 268,400 213,500 Liabilities and Stockholders' Equity Accounts payable Accrued expenses payable Retained earnings Total 285,480 128,649 $832,650 $627,995 ODGERS INC. Income Statement Data For the Year Ended December 31, 2014 Sales revenue $473,921 Less: Cost of goods sold $165,261 Operating expenses, excluding depreciation 15,140 Depreciation expense 56,730 Income taxes 33,282 Interest expense 5,771 Loss on disposal of plant assets 9,150 Net income 285,334 $ 188,587 Additional information: 1. New plant assets costing $122,000 were purchased for cash during the year. Old plant assets having an original cost of $70,150 and accumulated depreciation of 2. $59,170 were sold for $1,830 cash. 3. Bonds payable matured and were paid off at face value for cash. 4. A cash dividend of $31,756 was declared and paid during the year. Further analysis reveals that accounts payable pertain to merchandise creditors. Prepare a statement of cash flows for Odgers Inc. using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) ODGERS INC. Statement of Cash Flows For the Year Ended December 31, 2014 $ : $ $ Don't show me this message again for the assignment Problem 13-2A The comparative statements of Osborne Company are presented here. OSBORNE COMPANY Income Statements For the Years Ended December 31 2014 Net sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations 2013 $1,894,249 1,062,249 832,000 503,709 328,291 $1,754,209 1,009,709 744,500 482,709 261,791 23,838 304,453 93,838 $ 210,615 21,838 239,953 74,838 $ 165,115 Other expenses and losses Interest expense Income before income taxes Income tax expense Net income OSBORNE COMPANY Balance Sheets December 31 Assets 2014 2013 Current assets Cash Debt investments (short-term) Accounts receivable Inventory Total current assets Plant assets (net) Total assets $ 60,100 74,000 121,509 127,838 383,447 662,349 $1,045,796 $ 64,200 50,000 106,509 117,338 338,047 533,649 $871,696 $ 163,709 45,338 209,047 233,349 442,396 $149,109 43,838 192,947 213,349 406,296 290,000 313,400 603,400 $1,045,796 300,000 165,400 465,400 $871,696 Liabilities and Stockholders' Equity Current liabilities Accounts payable Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity Common stock ($5 par) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity All sales were on account. Net cash provided by operating activities for 2014 was $222,290. Capital expenditures were $135,410, and cash dividends were $62,615. Compute the following ratios for 2014. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%.) $ (a) Earnings per share (b) Return on common stockholders' equity % (c) Return on assets % (d) Current ratio :1 (e) Accounts receivable turnover times (f) Average collection period days (g) Inventory turnover times (h) Days in inventory days (i) Times interest earned times (j) Asset turnover times (k) Debt to assets % (l) Current cash debt coverage times (m) Cash debt coverage times $ (n) Free cash flow Don't show me this message again for the assignment