Broadening Your Perspective 8-1

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The financial statements ofTootsie Rollare presented below.

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.)

CONSOLIDATED STATEMENTS OF Financial Position TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
Assets	December 31,
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
LessAccumulated depreciation	242,935		225,482
Net property, plant and equipment	212,162		215,492
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
Total assets	$857,856		$857,959
Liabilities and Shareholders Equity	December 31,
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 value120,000 shares authorized36,479 and 36,057 respectively, issued	25,333	25,040
Class B common stock, $.69-4/9 par value40,000 shares authorized21,025 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
Total 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,
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	(5,448	)	717	(5,899	)
Other receivables	3,963	(2,373	)	(2,088	)
Inventories	(15,631	)	(1,447	)	455
Prepaid expenses and other assets	5,106	4,936	5,203
Accounts payable and accrued liabilities	84	2,180	(2,755	)
Income taxes payable and deferred	(5,772	)	2,322	(12,543	)
Postretirement health care and life insurance benefits	2,022	1,429	1,384
Deferred compensation and other liabilities	2,146	2,525	2,960
Others	(708	)	310	305
Net cash provided by operating activities	50,390		82,805		76,994
CASH 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	7,680	8,208	17,511
Net 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	)	24,986	22,082
Cash and cash equivalents at beginning of year	115,976	90,990	68,908
Cash and cash equivalents at end of year	$78,612	$115,976	$90,990
Supplemental cash flow information
Income taxes paid	$16,906	$20,586	$22,364
Interest paid	$38	$49	$182
Stock dividend issued	$47,053	$46,683	$32,538
(The accompanying notes are an integral part of these statements.)

Five Year Summary of Earning and Financial Hightlights TOOTISE ROLL. INDUSTRY, INC. AND SUBSIDIARIES (Thousands of dollars except per share, percentage and ratio figures)
2011	2010	2009	2008	2007
Sales and Earnings Data
Net product sales	$528,369	$517,149	$495,592	$492,051	$492,742
Product gross margin	163,144	167,815	175,817	158,055	165,456
Interest expenses	121	142	243	378	535
Provision for income taxes	16,974	20,005	9,892	16,347	25,401
Net earnings	43,938	53,063	53,157	38,880	52,175
% of net product sales	8.3	%	10.3	%	10.7	%	7.9	%	10.6	%
% of shareholders' equity	6.6	%	8.0	%	8.1	%	6.1	%	8.1	%
Per Common Share Data
Net earnings	$0.76	$0.90	$0.89	$0.65	$0.85
Cash dvidends declared	0.32	0.32	0.32	0.32	0.32
Stock dividends	3	%	3	%	3	%	3	%	3	%
Additional Financial Data
Working capital	$153,846	$176,662	$154,409	$129,694	$142,163
Net cash provided by opreating activities	50,390	82,805	76,994	57,333	90,148
Net cash provided by (used by) investing activities	(51,157	)	(16,808	)	(16,364	)	(7,565	)	(43,429	)
Net cash used in financing activities	(36,597	)	(41,011	)	(38,548	)	(38,666	)	(44,842	)
Property, plant & equipment additions	16,351	12,813	20,831	34,355	14,767
Net property, plant & equipment	212,162	215,492	220,721	217,628	201,401
Total assets	857,856	857,959	836,844	813,252	813,134
Long-term debt	7,500	7,500	7,500	7,500	7,500
Shareholders' equity	665,935	667,408	654,244	636,847	640,204
Average shares outstanding	57,892	58,685	59,425	60,152	61,580

Notes to Consolidated Financial Statements ($ in thousands)

Revenue recognition:

Products are sold to customers based on accepted purchase orders which include quantity, sales price and other relevant terms of sale. Revenue, net of applicable provisions for discounts, returns, allowances and certain advertising and promotional costs, is recognized when products are delivered to customers and collectability is reasonably assured. Shipping and handling costs of $45,850, $43,034, and $38,628 in 2011, 2010 and 2009, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured. Revenues from a major customer aggregated approximately 23.3%, 21.4% and 22.9% of net product sales during the years ended December 31, 2011, 2010 and 2009, respectively.

SEGMENT AND GEOGRAPHIC INFORMATION:

The Company operates as a single reportable segments encompassing the manufacturing and sale of confectionery products. Its principal manufacturing operations are located in the United States and Canada, and its principal market is in the United States. The Company also manufactures and sells confectionery products in Mexico, and exports products to Canada and countries worldwide.

The following geographic data includes net product sales summarized on the basis of the customer location and long-lived assets based on their location:

2011	2010	2009
Net product sales:
United states	$487,185	$471,714	$455,517
Foreign	41,184	45,435	40,075
$528,369	$517,149	$495,592
Long-lived assets:
United states	$170,173	$172,087	$176,044
Foreign	41,989	43,405	44,677
$212,162	$215,492	$220,721

Calculate the accounts receivable turnover and average collection period for 2011. (Use Net Product Sales. Assume all sales were credit sales.)(Round answers to 1 decimal place, e.g. 15.2.)

Accounts receivable turnover		times
Average collection period		days

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