See below...

Broadening Your Perspective 8-1

The financial statements of Tootsie Roll are 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&nbp; $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    Less—Accumulated 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 value—120,000 shares authorized—36,479 and 36,057 respectively, issued 25,333  25,040    Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 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 timesAverage collection period days 

Broadening Your Perspective 8-2

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

CONSOLIDATED STATEMENTS OF INCOME

  For the years ended December 31, 2011 2010 2009  In thousands of dollars except per share amounts         Net Sales $6,080,788  $5,671,009 $5,298,668  Costs and Expenses:           Cost of sales 3,548,896  3,255,801 3,245,531    Selling, marketing and administrative 1,477,750  1,426,477 1,208,672    Business realignment and impairment (credits) charges, net (886) 83,433 82,875      Total costs and expenses 5,025,760  4,765,711 4,537,078  Income before Interest and Income Taxes 1,055,028  905,298 761,590    Interest expense, net 92,183  96,434 90,459  Income before Income Taxes 962,845  808,864 671,131    Provision for income taxes 333,883  299,065 235,137  Net Income $628,962  $509,799 $435,994  Net Income Per Share—Basic—Class B Common Stock $2.58  $2.08 $1.77  Net Income Per Share—Diluted—Class B Common Stock $2.56  $2.07 $1.77  Net Income Per Share—Basic—Common Stock $2.85  $2.29 $1.97  Net Income Per Share—Diluted—Common Stock $2.74  $2.21 $1.90  Cash Dividends Paid Per Share:           Common Stock $1.3800  $1.2800 $1.1900    Class B Common Stock 1.2500  1.1600 1.0712  The 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 SHEETS

  December 31, 2011 2010  In thousands of dollars        ASSETS        Current Assets:          Cash and cash equivalents $693,686  $884,642     Accounts receivable—trade 399,499  390,061     Inventories 648,953  533,622     Deferred income taxes 136,861  55,760     Prepaid expenses and other 167,559  141,132       Total current assets 2,046,558  2,005,217   Property, Plant and Equipment, Net 1,559,717  1,437,702   Goodwill 516,745  524,134   Other Intangibles 111,913  123,080   Deferred Income Taxes 38,544  21,387   Other Assets 138,722  161,212       Total assets $4,412,199  $4,272,732   LIABILITIES AND STOCKHOLDERS’ EQUITY        Current Liabilities:          Accounts payable $420,017  $410,655     Accrued liabilities 612,186  593,308     Accrued income taxes 1,899  9,402     Short-term debt 42,080  24,088     Current portion of long-term debt 97,593  261,392       Total current liabilities 1,173,775  1,298,845   Long-term Debt 1,748,500  1,541,825   Other Long-term Liabilities 617,276  494,461       Total liabilities 3,539,551  3,335,131   Commitments and Contingencies —  —   Stockholders’ Equity:          The Hershey Company Stockholders’ Equity            Preferred Stock, shares issued: none in 2011 and 2010 —  —       Common Stock, shares issued: 299,269,702 in 2011 and 299,195,325 in 2010 299,269  299,195       Class B Common Stock, shares issued: 60,632,042 in 2011 and 60,706,419 in 2010 60,632  60,706       Additional paid-in capital 490,817  434,865       Retained earnings 4,699,597  4,374,718       Treasury—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’ equity 849,022  902,316     Noncontrolling interests in subsidiaries 23,626  35,285         Total stockholders’ equity 872,648  937,601         Total liabilities and stockholders’equity $4,412,199  $4,272,732   THE HERSHEY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

  For the years ended December 31, 2011 2010 2009  In thousands of dollars           Cash Flows Provided from (Used by) Operating Activities            Net income $628,962  $509,799  $435,994    Adjustments to reconcile net income to net cash provided from operations:            Depreciation and amortization 215,763  197,116  182,411    Stock-based compensation expense, net of tax of $15,127, $17,413 and $19,223, respectively 28,341  32,055  34,927    Excess tax benefits from stock-based compensation (13,997) (1,385) (4,455)   Deferred income taxes 33,611  (18,654) (40,578)   Gain on sale of trademark licensing rights, net of tax of $5,962 (11,072) —  —    Business realignment and impairment charges, net of tax of $18,333, $20,635 and $38,308, respectively 30,838  77,935  60,823    Contributions 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) 20,329  46,584    Inventories (115,331) (13,910) 74,000    Accounts payable 7,860  90,434  37,228    Other assets and liabilities (205,809) 13,777  293,272   Net Cash Provided from Operating Activities 580,867  901,423  1,065,749   Cash Flows Provided from (Used by) Investing Activities            Capital additions (323,961) (179,538) (126,324)   Capitalized software additions (23,606) (21,949) (19,146)   Proceeds from sales of property, plant and equipment 312  2,201  10,364    Proceeds from sales of trademark licensing rights 20,000  —  —    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 Activities            Net change in short-term borrowings 10,834  1,156  (458,047)   Long-term borrowings 249,126  348,208  —    Repayment of long-term debt (256,189) (71,548) (8,252)   Proceeds from lease financing agreement 47,601  —  —    Cash dividends paid (304,083) (283,434) (263,403)   Exercise of stock options 184,411  92,033  28,318    Excess tax benefits from stock-based compensation 13,997  1,385  4,455    Contributions from noncontrolling interests in subsidiaries —  10,199  7,322    Repurchase 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) 631,037  216,502   Cash and Cash Equivalents as of January 1 884,642  253,605  37,103   Cash and Cash Equivalents as of December 31 $693,686  $884,642  $253,605   Interest Paid $97,892  $97,932  $91,623   Income Taxes Paid 292,315  350,948  252,230  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,   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    Less—Accumulated 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 value—120,000 shares authorized—36,479 and 36,057 respectively, issued 25,333  25,040    Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 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&nbp; $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.) 

Based on the information contained in these financial statements, compute the following 2011 values for each company. (Round answers to 1 decimal place, e.g. 15.2.)

(1)Accounts receivable turnover. (For Tootsie Roll, use “Net product sales.” Assume all sales were credit sales.)(2)Average collection period for accounts receivable.  Tootsie Roll Hershey Company Accounts receivable turnover times times Average collection period days days  Copyright © 2000-2016 by John Wiley & Sons, Inc. or related companies. All rights reserved.