Tootsie Roll Industries, Inc. has been in the candy business for 106 year and has a reputation for success. The company sells products primarily under the brand names of Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child’s Play, Charms, Blow Pop, Junior Mints, Charleston Chew, Sugar Daddy, Andes and Fluffy Stuff cotton candy, as well as several others. The company prides itself in maintaining a positive reputation by supporting the U. S Armed Forces. The company thinks more long-term and has remained quite steady over the last few years, despite increased ingredient prices. . Data Used: (all in thousands except Stock Dividends, Average Common Shares Outstanding and Stock Price Per Share) Net Income: $66388 Interest Expense: $309 Total Assets: $646080 Preferred Stock Dividends: $0695 Average Common Shares Outstanding: 51553 Stock Price Per Share: $37. 48 Current Assets: $224948 Current Liabilities: $63096 Total Liabilities: $119340 Cash From Operations: $71203 Average Current Liabilities: $60471 Gross Profit: $172420 Net Sales: $393185 Cost Of Goods Sold: $220765 Average Inventory: $41903. 50 Net Credit Sales: $22686 Average Net Receivables: $21544. 50 Average Total Assets: $632378
Tax Expense: $34099 Average Total Liabilities: $114777. 50 3. Evaluation of Information: a. Earnings per share = (66388-. 0695)/51553 = 1. 29 b. Price-Earnings Ratio = 37. 48/1. 29 = 29. 05 c. Working Capital = 224948-63096 = 161852 d. Current Ratio = 224948/63096 = 3. 57 e. Debt to Total Assets Ratio = 119310/646080 = . 18 f. Current Cash Debt Coverage = 71203/60471 = 1. 177 g. Cash Debt Coverage = 71203/114777. 5 = . 62 h. Gross Profit Rate = 172420/393185 = . 44 i. Profit Margin = 66388/393185 = . 17 j. Inventory Turnover Ratio = 220765/41903. 5 = 5. 27 k. Days in Inventory = 365/5. 27 = 69. 26 l.
Type of Inventory Cost Flow Assumption: FIFO m. Receivables Turnover Ratio = 393185/19523. 5 = 20. 13 n. Average Collection Period = 365/20. 13 = 18. 13 o. Return on Assets Ratio = 66388/632378 = . 105 p. Asset Turnover Ratio = 393185/632378 = . 62 q. Times Interest Earned Ratio= (66388+309+34099)/309 = 326. 2 4. What the Data means: Tootsie Roll Industries, Inc. is a well established company. The EPS ratio tells us that per share earnings have remained fairly steady over the last several years (1. 29 in 2003; 1. 26 in 2001; and 1. 45 in 2000), this helps us understand that Tootsie Roll is predictable and is a long-term growth company.
The price-earnings in 2001 were 33. 06 so it has dropped slightly. Tootsie Roll is a company that does not have a great dependency on dept. The working capital tells us that they have a great likelihood to pay off its liabilities, this relates to the current ratio. A good company would have a 2:1 ratio while Tootsie Roll has a 3. 57:1 ratio. This shows that the company can easily cover its liabilities. The debt to total assets ratio tells us that Tootsie Roll is not very dependent on creditors because only . 18 of every dollar in assets is provided by a creditor.
The company’s current cash debt coverage and cash debt coverage are very good because they are well recommended coverage rates. The gross profit rate is acceptable for the industry. It is important to not that ingredient costs were higher and the slow economy has caused a tight market, but Tootsie Roll’s staying power and strong core brands make then a prominent part of the market. This is also true for the profit margin. The company has a good inventory turnover ratio and by keeping inventory for about 70 days the company does not have excess inventory but it is able to keep up with demand.
By using the FIFO inventory cost flow assumption, the company may have an overstated gross profit. The receivables turnover ratio and average collection period are very good, the company has better results than other leading competitors in the industry. The company has strong assets and can cover liabilities and meet interest payments. By evaluating all the above information I believe Tootsie Roll Industries, Inc. is a strong company and worth investing in for the long-term.