UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 4, 2009
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ----to----
COMMISSION FILE NUMBER 1-1361
Tootsie Roll Industries, Inc.
(Exact Name of Registrant as Specified in its Charter)
VIRGINIA 22-1318955
(State of Incorporation) (I.R.S. Employer Identification No.)
7401 South Cicero Avenue, Chicago, Illinois 60629
(Address of Principal Executive Offices) (Zip Code)
773-838-3400
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files)
Yes ___ No ___
Indicate by check mark whether the Registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "accelerated filer," "large accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer X Accelerated filer _
Non-accelerated filer __ Smaller reporting company ___
Indicate by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act)
Yes No X
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (July 4, 2009)
Class Outstanding
Common Stock, $.69 4/9 par value 36,099,795
Class B Common Stock, $.69 4/9 par value 19,926,770
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
JULY 4, 2009
INDEX
Page No.
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Statements of
Financial Position 2
Condensed Consolidated Statements of Earnings,
Comprehensive Earnings and Retained Earnings 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 6E
Item 4. Controls and Procedures 6E
Part II - Other Information
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 6. Exhibits 7A
Signatures 7A
Certifications 7B-D
This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. See "Information Regarding Forward-
Looking Statements" under Part I - Item 2 "Management's Discussion and Analysis
of Financial Condition and Results of Operations" of this Quarterly Report on
Form 10-Q.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of dollars) (UNAUDITED)
ASSETS July 4, June 28, Dec. 31,
CURRENT ASSETS 2009 2008 2008
Cash & cash equivalents $ 33,149 $ 31,251 $ 68,908
Investments 15,854 15,778 17,963
Trade accounts receivable,
Less allowances of
$2,202, $2,081 & $1,923 28,191 25,120 31,213
Other receivables 4,028 3,487 2,983
Inventories, at cost
Finished goods & work in process 63,218 74,858 34,862
Raw material & supplies 26,605 27,683 20,722
Prepaid expenses 8,139 2,806 11,328
Deferred income taxes - 1,585 -
Total current assets 179,184 182,568 187,979
PROPERTY, PLANT & EQUIPMENT, at cost
Land 19,323 19,417 19,307
Buildings 89,130 88,286 89,077
Machinery & equipment 280,316 266,577 279,100
Construction in progress 32,582 13,225 20,701
421,351 387,505 408,185
Less-accumulated depreciation 198,102 184,085 190,557
Net property, plant and equipment 223,249 203,420 217,628
OTHER ASSETS
Goodwill 73,237 73,237 73,237
Trademarks 189,024 189,024 189,024
Investments 49,488 73,217 49,809
Split dollar life insurance 74,808 74,944 74,808
Investment in joint venture 9,286 11,030 10,333
Prepaid expenses 9,994 - 9,274
405,837 421,452 406,485
Total assets $808,270 $807,440 $812,092
-2-
(The accompanying notes are an integral part of these statements.)
(in thousands except per share data) (UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY July 4, June 28, Dec. 31,
CURRENT LIABILITIES 2009 2008 2008
Accounts payable $ 12,501 $ 26,983 $ 13,885
Dividends payable 4,498 4,425 4,401
Accrued liabilities 36,703 36,829 40,335
Deferred income taxes 631 - 631
Total current liabilities 54,333 68,237 59,252
NON-CURRENT LIABILITIES
Deferred income taxes 44,031 35,794 43,346
Postretirement health care and life
insurance benefits 16,208 13,847 15,468
Industrial development bonds 7,500 7,500 7,500
Liability for uncertain tax positions 19,623 21,009 19,412
Deferred compensation and other
liabilities 33,983 36,934 32,344
Total non-current liabilities 121,345 115,084 118,070
Total liabilities 175,678 183,321 177,322
SHAREHOLDERS' EQUITY
Common Stock, $.69-4/9 par value-
120,000 shares authorized; 36,100,
35,659 & 35,658, respectively, issued 25,069 24,763 24,762
Class B common stock, $.69-4/9 par value-
40,000 shares authorized; 19,927, 19,406
& 19,357, respectively, issued 13,838 13,476 13,442
Capital in excess of par value 489,107 472,067 470,927
Retained earnings 120,018 126,589 142,872
Accumulated other comprehensive loss (13,448) (10,784) (15,241)
Treasury stock (at cost)-
67, 65 & 65 shares, respectively (1,992) (1,992) (1,992)
Total shareholders' equity 632,592 624,119 634,770
Total liabilities and
shareholders' equity $808,270 $807,440 $812,092
-2A-
(The accompanying notes are an integral part of these statements.)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS
(in thousands except per share amounts) (UNAUDITED)
13 WEEKS ENDED
July 4, 2009 & June 28, 2008
Net product sales $107,812 $101,591
Rental and royalty revenue 860 1,023
Total revenue 108,672 102,614
Product cost of goods sold 68,807 68,741
Rental and royalty cost 211 234
Total costs 69,018 68,975
Product gross margin 39,005 32,850
Rental and royalty gross margin 649 789
Total gross margin 39,654 33,639
Selling, marketing and administrative expenses 25,728 23,188
Earnings from operations 13,926 10,451
Other income, net 1,821 653
Earnings before income taxes 15,747 11,104
Provision for income taxes 5,409 3,858
Net earnings 10,338 7,246
Other comprehensive income, before tax:
Foreign currency translation adjustments 1,534 647
Unrealized losses on securities (82) (216)
Unrealized gains (losses) on derivatives 1,182 (856)
Other comprehensive income (loss), before tax 2,634 (425)
Income tax benefit (expense) related to items
of other comprehensive income (550) 399
Other comprehensive income (loss), net of tax 2,084 (26)
Comprehensive earnings $ 12,422 $ 7,220
Retained earnings at beginning of period $114,172 $123,744
Net earnings 10,338 7,246
Cash dividends (4,492) (4,401)
Retained earnings at end of period $120,018 $126,589
Net earnings per share $0.18 $0.13
Dividends per share * $0.08 $0.08
Average number of shares outstanding 56,245 56,642
*Does not include 3% stock dividend to shareholders of record on 3/9/09 and 3/10/08.
-3-
(The accompanying notes are an integral part of these statements.)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS
(in thousands except per share amounts) (UNAUDITED)
26 WEEKS ENDED
July 4, 2009 & June 28, 2008
Net product sales $201,866 $191,932
Rental and royalty revenue 1,837 2,115
Total revenue 203,703 194,047
Product cost of goods sold 129,526 129,370
Rental and royalty cost 427 516
Total costs 129,953 129,886
Product gross margin 72,340 62,562
Rental and royalty gross margin 1,410 1,599
Total gross margin 73,750 64,161
Selling, marketing and administrative expenses 47,861 43,238
Earnings from operations 25,889 20,923
Other income (loss), net 1,441 (587)
Earnings before income taxes 27,330 20,336
Provision for income taxes 8,672 6,637
Net earnings 18,658 13,699
Other comprehensive income, before tax:
Foreign currency translation adjustments 783 3,563
Unrealized gains (losses) on securities 71 (2,360)
Unrealized gains (losses) on derivatives 1,568 (282)
Other comprehensive income, before tax 2,422 921
Income tax benefit (expense) related to items
of other comprehensive income (629) 20
Other comprehensive income, net of tax 1,793 941
Comprehensive earnings $ 20,451 $ 14,640
Retained earnings at beginning of period $142,872 $156,752
Net earnings 18,658 13,699
Cash dividends (8,883) (8,697)
Stock dividends - 3% (32,629) (35,165)
Retained earnings at end of period $120,018 $126,589
Net earnings per share $0.33 $0.24
Dividends per share * $0.16 $0.16
Average number of shares outstanding 56,393 56,952
*Does not include 3% stock dividend to shareholders of record on 3/09/09 and 3/10/08.
-3A-
(The accompanying notes are an integral part of these statements.)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars) (UNAUDITED)
26 WEEKS ENDED
July 4, 2009 & June 28, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 18,658 $ 13,699
Adjustments to reconcile net earnings to
net cash provided by (used in) operating
activities:
Depreciation and amortization 8,261 8,005
Amortization of marketable securities 173 202
Net sales (purchases) of trading securities (1,144) 97
Changes in operating assets and liabilities:
Accounts receivable 3,118 7,429
Other receivables 523 (856)
Inventories (34,058) (44,872)
Prepaid expenses and other assets 3,560 3,789
Accounts payable and accrued liabilities (5,073) 10,091
Income taxes payable and deferred 307 910
Postretirement health care and life
insurance benefits 740 633
Deferred compensation and other liabilities 721 (1,051)
Other 351 224
Net cash used in operating activities (3,863) (1,700)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,719) (9,742)
Purchase of available for sale securities - (25,456)
Sale and maturity of available for
sale securities 4,355 39,216
Net cash provided by (used in) investing activities (9,364) 4,018
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid in cash (8,878) (8,738)
Shares repurchased and retired (13,654) (19,935)
Net cash used in financing activities (22,532) (28,673)
Decrease in cash and cash equivalents (35,759) (26,355)
Cash and cash equivalents-beginning of year 68,908 57,606
Cash and cash equivalents end of quarter $ 33,149 $ 31,251
Supplemental cash flow information:
Income taxes paid, net $ 6,833 $ 4,531
Interest paid $ 168 $ 148
Stock dividend issued $ 32,537 $ 35,043
(The accompanying notes are an integral part of these statements.)
-4-
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 4, 2009
(in thousands except per share amounts) (UNAUDITED)
Note 1 - Foregoing data has been prepared from the unaudited financial
records of Tootsie Roll Industries, Inc. and Subsidiaries (the
Company) and in the opinion of management all adjustments
necessary for a fair statement of the results for the interim
period have been reflected. All adjustments were of a normal
and recurring nature. Certain reclassifications have been made
to the prior year financial statements to conform to the current
year presentation. The Company adopted SFAS No. 165 as of July
5, 2009 and has evaluated all subsequent events through the date
and time its financial statements were issued on August 13, 2009.
The adoption of this standard did not have a material impact on
the Company's financial accounting or reporting. These consolidated
financial statements should be read in conjunction with the
consolidated financial statements and the related notes included
in the Company's 2008 Annual Report on Form 10-K.
Note 2 - Average shares outstanding for the 26 week period ended July 4,
2009 reflect stock repurchases and subsequent retirements of 632
shares for $13,654 and a 3% stock dividend distributed on April 9,
2009. Average shares outstanding for the 26 week period ended June
28, 2008 reflect stock repurchases and subsequent retirements of
839 shares for $19,935 and 3% stock dividends distributed on April
10, 2008 and April 9, 2009.
Note 3 - Results of operations for the period ended July 4, 2009 are not
necessarily indicative of results to be expected for the year to end
December 31, 2009 because of the seasonal nature of the Company's
operations. Historically, the third quarter has been the Company's
largest sales quarter due to Halloween sales. The Company's quarterly
financial reporting is based on thirteen week periods; the first
quarter of 2009 ended on April 4, 2009 and first half of 2009 ended on
July 4, 2009, and both periods benefited from three additional shipping
days compared to the same periods of the prior year.
Note 4 - The Company is subject to taxation in the U.S. and various state and
foreign jurisdictions. The Company remains subject to examination by
U.S. federal and state and foreign tax authorities for the years 2005
through 2007. With few exceptions, the Company is no longer subject
to examinations by tax authorities for years 2004 and prior. The
Company experienced a decrease in state income tax expense due to the
effective conclusion of an income tax audit in first quarter 2009 and
resulting favorable adjustment.
Note 5 - Fair Value Measurements
In the first quarter of 2009, the Company adopted FASB statement 157,
"Fair Value Measurements," (SFAS 157) for non-financial assets and
liabilities that are not recognized or disclosed at fair value in the
financial statements on a recurring basis. This adoption did not have a
material impact on the Company's financial position or results of
operations.
-5-
The Company's investments are carried at fair value which is measured on
a recurring basis and adjusted each time a financial statement is
prepared. In determining fair value of financial instruments, the
Company uses various prescribed techniques. The availability of inputs
observable in the market varies from instrument to instrument and
depends on a variety of factors including the type of instrument,
whether the instrument is actively traded, and other characteristics
particular to the instrument.
For many financial instruments, pricing inputs are readily observable
in the market, the valuation methodology used is widely accepted by
market participants, and the valuation does not require significant
management discretion. For other financial instruments, pricing inputs
are less observable in the market and may require management judgment.
The Company assesses the inputs used to measure fair value using a
three-tier hierarchy, as prescribed under SFAS 157. The hierarchy
indicates the extent to which inputs used in measuring fair value are
observable in the market. Level 1 inputs include quoted prices for
identical instruments and are the most observable. Level 2 inputs
include quoted prices for similar assets and observable inputs such as
interest rates, foreign currency exchange rates, commodity rates and
yield curves. Level 3 inputs are not observable in the market and
include management's own judgments about the assumptions market
participants would use in pricing the asset or liability. The use of
observable and unobservable inputs is reflected in the hierarchy
assessment disclosed in the table below.
As of July 4, 2009, the Company held certain financial instruments
that were required to be measured at fair value on a recurring basis.
These included cash and cash equivalents, derivative hedging instruments
related to Canadian dollar forward purchase contracts, and investments in
trading securities and available for sale securities, including auction
rate securities (ARS). The Company's available for sale and trading
securities principally consist of municipal bonds and mutual funds
that are publicly traded.
The following table presents information about the Company's financial
assets measured at fair value as of July 4, 2009, and indicates the
fair value hierarchy of the valuation techniques utilized by the
Company to determine such fair value:
Estimated Fair Value July 4, 2009
Total Input Levels Used
Description Fair Value Level 1 Level 2 Level 3
Cash and Cash Equivalents $ 33,149 $ 33,149
Auction Rate Security (ARS) 8,410 $ 8,410
Available-for-sale Security excluding ARS 28,905 $ 28,905
Derivatives 1,916 1,916
Trading Securities 28,027 28,027 ________ ______
Total assets measured at fair value $100,407 $ 63,092 $ 28,905 $ 8,410
-5A-
As of July 4, the Company's long term investments include $8,410
($13,550 original cost) of Jefferson County Alabama Sewer Revenue
Refunding Warrants, an ARS, originally purchased with an AAA rating.
The fair value remained unchanged from December 31, 2008. The Company
estimated the fair value of this ARS utilizing a valuation model with
Level 3 inputs as of July 4, 2009. This valuation model considered,
among other items, the credit risk of the collateral underlying the
ARS, the credit risk of Financial Guaranty Insurance Company (FIGIC)
the bond insurer, interest rates, and the amount and timing of expected
future cash flows including the Company's assumption about the market
expectation of the next successful auction. The Company classified
this ARS as non-current and has included it in long term investments on
the Consolidated Statements of Financial Position at July 4, 2009
because the Company believes that the current condition of the ARS
market as well as the credit condition of Jefferson County and FIGIC
may take more than twelve months to improve. Available for sale
securities which utilize Level 2 inputs consist primarily of municipal
bonds, which are valued based on alternative pricing sources with
reasonable levels of price transparency.
There is no difference between the fair value and carrying value of
the Company's long term debt.
Note 6 - Derivative Instruments and Hedging Activities
In March 2008, the FASB issued statement 161, "Disclosures about
Derivative Instruments and Hedging Activities - an amendment of FASB
Statement No. 133" (SFAS 161). This statement requires qualitative
disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of derivative
instruments and related gains and losses, and disclosures about
credit-risk-related contingent features in derivative agreements.
The Company adopted SFAS 161 during the first quarter of 2009 and the
adoption did not impact its financial condition, results of operations
or cash flow.
From time to time, the Company enters into futures contracts.
Commodity futures are intended and effective as hedges of market price
risks associated with the anticipated purchase of certain raw materials
(primarily sugar). Foreign currency forward contracts are intended and
effective as hedges of the Company's exposure to the variability of
cash flows, primarily related to the foreign exchange rate changes of
products manufactured in Canada and sold in the United States, and
periodic equipment purchases from foreign suppliers denominated in a
foreign currency. The Company does not engage in trading or other
speculative use of derivative instruments.
The Company's futures and forward contracts are being accounted for as
cash flow hedges and are recorded on the balance sheet at fair value.
Changes therein are recorded in accumulated other comprehensive loss,
net of tax, and are reclassified to earnings in the periods in which
earnings are affected by the hedged item. Substantially all amounts
reported in accumulated other comprehensive loss are expected to be
reclassified to cost of goods sold.
The Company utilizes foreign currency forward contracts to reduce the
effects of fluctuations in exchange rates, primarily relating to the
Canadian dollar. As of July 4, 2009, the Company had foreign currency
forward contracts outstanding with a notional amount of $21,387 that
hedged its exposure to changes in foreign currency exchange rates for
-5B-
its costs of manufacturing certain products in Canada for the U.S.
market. The fair value of foreign currency forward contracts, using
level 1 inputs, resulted in an asset of $1,916 as of July 4, 2009 which
is included in other receivables.
During second quarter and first half ended July 4, 2009, the Company
recorded $1,182 and $1,607, respectively, of existing net derivative
gains into accumulated other comprehensive loss which is a component of
shareholders' equity in the statement of financial position. The
Company also recognized a gain of $424 and $478, related to settlement
dates of foreign currency contracts settled during the second quarter
and first half of 2009, respectively. At July 4, 2009, the Company
expects to reclassify existing net gains of approximately $779 from
accumulated other comprehensive loss to next earnings during the next
twelve months.
The Company utilizes commodities futures contracts to mitigate the
effect of commodity cost fluctuations on certain ingredients, primarily
sugar. As of July 4, 2009, the Company had no outstanding commodities
futures contracts.
Note 7 - New Accounting Pronouncements
In April 2008, the FASB issued FASB Staff Position No. 142-3,
"Determination of the Useful Life of Intangible Assets" (FSP 142-3).
FSP 142-3 amends the factors to be considered in developing renewal or
extension assumptions used to determine the useful life of intangible
assets under SFAS No. 142, "Goodwill and Other Intangible Assets." The
intent of FSP 142-3 is to improve the consistency between the useful
life of an intangible asset and the period of expected cash flows used
to measure its fair value. FSP 142-3 was effective for first quarter
2009. The Company does not expect FSP 142-3 to have a material impact
on the accounting for future acquisitions or intangible assets, but the
potential impact is dependent upon the acquisitions of intangible
assets in the future.
In April 2009, the FASB issued FASB Staff Position No. 157-4,
"Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides
guidance on (1) estimating the fair value of an asset or liability
when the volume and level of activity for the asset or liability have
significantly decreased and (2) identifying transactions that are not
orderly. FSP 157-4 is effective for interim and annual periods ending
after June 15, 2009. The Company's adoption of FSP 157-4 during second
quarter 2009 did not have a material impact on the Company's
consolidated financial statements.
In April 2009, the FASB issued FASB Staff Position No. 115-2 and FAS
124-2, "Recognition and Presentation of Other-Than-Temporary
Impairments" (FSP 115-2). FSP 115-2 amends the other-than-temporary
impairment guidance for debt securities to make the guidance more
operational and to improve the presentation and disclosure of other-
than-temporary impairments on debt and equity securities. FSP 115-2 is
effective for interim and annual periods ending after June 15, 2009.
The Company's adoption of FSP 115-2 during second quarter 2009 did not
have a material impact on the Company's consolidated financial
statements.
-5C-
In April 2009, the FASB issued FASB Staff Position No. 107-1 and
APB 28-1, "Interim Disclosures about Fair Value of Financial
Instruments" (FSP 107-1). FSP 107-1 requires disclosures about the
fair value of financial instruments in interim reporting periods of
publicly traded companies as well as in annual financial statements.
FSP 107-1 is effective for interim periods ending after June 15, 2009.
The Company's adoption of FSP 107-1 during second quarter 2009 did not
have a material impact on the Company's consolidated financial
statements. See Note 5 to the Condensed Consolidated financial
statements.
The Company adopted SFAS No. 165, "Subsequent Events" (SFAS 165),
During the second quarter 2009. SFAS 165 establishes general standards
of accounting for, and disclosure of, events that occur after the
balance sheet date but before financial statements are issued. SFAS
165 includes a requirement to disclose the date through which
subsequent events were evaluated. See Note 1 to the Condensed
Consolidated financial statements.
-5D-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in thousands except per share amounts)
The following is management's discussion of the Company's operating results and
analysis of factors that have affected the accompanying Condensed Consolidated
Statements of Earnings.
NET PRODUCT SALES Net change in
Second Quarter, 2009
Second Quarter vs.
2009 2008 Second Quarter, 2008
$107,812 $101,591 6.1%
First Half, 2009
First Half vs.
2009 2008 First Half, 2008
$201,866 $191,932 5.2%
Second quarter 2009 net product sales were $107,812 compared to $101,591 in
second quarter 2008, an increase of $6,221 or 6.1%. First half 2009 net product
sales of $201,866 increased $9,934 or 5.2% from first half 2008 net product
sales of $191,932. Second quarter and first half 2009 net product sales
benefited from effective marketing programs and selective price increases as
well as the timing of certain customer orders shipped in second quarter 2009
which were shipped in third quarter 2008. Consolidated 2009 net product sales
advanced despite declines in sales outside of the U.S. reflecting lower foreign
sales when translated into a stronger U.S. dollar reporting currency.
As the Company's quarterly financial reporting is based on thirteen week
periods, the first quarter as well as the first half of 2009 benefited from
three additional shipping days compared to the same periods of the prior year.
The number of shipping days in the comparative second quarter 2009 and 2008
periods were identical.
PRODUCT COST OF GOODS SOLD:
Second Quarter Percentage of Net Product Sales
2009 2008 2nd Qtr. 2009 2nd Qtr. 2008
$68,807 $68,741 63.8% 67.7%
First Half Percentage of Net Product Sales
2009 2008 1st Half 2009 1st Half 2008
$129,526 $129,370 64.2% 67.4%
Product cost of goods sold as a percentage of net product sales favorably
decreased from 67.7% in the second quarter 2008 to 63.8% in second quarter
2009, and from 67.4% in first half 2008 to 64.2% in first half 2009. This
favorable cost percentage decrease is primarily the result of selective price
increases, lower product costs for products manufactured in Canada due to more
favorable foreign exchange rates, and the overall benefits of additional sales
and production volumes, including improved plant efficiencies. In addition, the
Company's aggregate ingredient and packaging unit costs decreased slightly
during second quarter and first half 2009 when compared to the rising commodity
cost environment in the prior year comparative periods. As a result of the
above discussed factors, product gross margin increased from 32.3% in second
quarter 2008 to 36.2% in second quarter 2009 and from 32.6% in first half 2008
to 35.8% in first half 2009, increases of 3.9% and 3.2% as a percentage of net
product sales, respectively.
-6-
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES:
Second Quarter Percentage of Net Product Sales
2009 2008 2nd Qtr. 2009 2nd Qtr. 2008
$25,728 $23,188 23.9% 22.8%
First Half Percentage of Net Product Sales
2009 2008 1st Half 2009 1st Half 2008
$47,861 $43,238 23.7% 22.5%
Second quarter 2009 and 2008 selling, marketing and administrative expenses
were $25,728 and $23,188, respectively an increase of $2,540 or 11.0%; and
first half 2009 and 2008 selling, marketing and administrative expenses were
$47,861 and $43,238, respectively an increase of $4,623 or 10.7%. The
aforementioned expenses reflect increases of $895 and $2,102 related to
deferred compensation expense in second quarter and first half 2009,
respectively, compared to 2008. Such deferred compensation expense principally
results from changes in the market value of trading securities used as an
economic hedge of the Company's deferred compensation liabilities as further
discussed below. Adjusting for the aforementioned, selling marketing and
administrative expenses increased by $1,645 or 7.1% and $2,521 or 5.6% in
second quarter and first half 2009, respectively, when compared to the
corresponding comparative periods.
As a percentage of net product sales, second quarter selling, marketing and
administrative expenses were 23.9% and 22.8% in 2009 and 2008, respectively;
and first half same expenses as a percent of net product sales were 23.7%
and 22.5% in 2009 and 2008, respectively. Adjusting for the above discussed
deferred compensation expenses, operating expenses as a percent of sales
increased slightly from 22.8% in second quarter 2008 to 23.0% in second quarter
2009; and from 23.3% in first half 2008 to 23.4% in first half 2009.
The above discussed increases in selling, marketing and administrative expenses
primarily reflect the related increases in certain variable operating expenses
relating to higher net product sales, increases in certain accrued incentive
compensation awards that are generally adjusted for changes in net earnings,
and an increase in bad debt expense in the comparative quarterly periods.
However, selling, marketing and administrative expenses did favorably benefit
from lower energy and fuel costs relating to freight and delivery.
Second quarter 2009 and 2008 earnings from operations were $13,926 and 10,451,
respectively; and first half 2009 and 2008 earnings from operations were
$25,889 and 20,923, respectively. Adjusting for the above discussed deferred
compensation expenses (including amounts included in product cost of goods
sold), second quarter 2009 earnings from operations were $15,134 compared to
$10,530 in second quarter 2008, an increase of $4,604 or 43.7%; and first half
2009 earnings from operations were $26,770 compared to $19,032 in first half
2009, an increase of $7,738 or 40.7%. Results for second quarter and first half
2009 were favorably impacted by higher sales and improved gross profit margins
as well as other factors discussed above.
NET EARNINGS:
Second Quarter, 2009
Second Quarter vs.
2009 2008 Second Quarter, 2008
$10,338 $ 7,246 42.7%
First Half, 2009
First Half vs.
2009 2008 First Half, 2008
$18,658 $13,699 36.2%
-6A-
Other income, net was $1,821 in second quarter 2009 compared to $653 in second
quarter 2008, a net increase of $1,168. For first half 2009 other income
(expense), net was $1,441 compared to $(587) for first half 2008, a net
increase of $2,028. Other income, net includes the changes in the market value
in the Company's trading securities which are an economic hedge of the
Company's deferred compensation liabilities. The income (expense) on such
trading securities was $1,209 and $80 in second quarter 2009 and 2008,
respectively, and $883 and $(1,889) in first half 2009 and 2008, respectively.
Such income or (expense) was substantially offset by a like amount of (expense)
or income in the aggregate product cost of goods sold and selling marketing and
administrative expenses in the respective periods. Other income, net also
includes decreases in investment income on available for sale securities and
cash balances reflecting lower interest rates in the investment markets.
The consolidated effective income tax rate decreased slightly from 34.7% in
second quarter 2008 to 34.3% in second quarter 2009, and from 32.6% in first
half 2008 to 31.7% in first half 2009. The decrease in the first half effective
tax rate reflects lower state income tax expense due to the effective
conclusion of an income tax audit in first quarter 2009 and resulting favorable
adjustment.
Second quarter 2009 net earnings were $10,338 compared to second quarter 2008
net earnings of $7,246, a $3,092 or 42.7% increase. Second quarter 2009
earnings per share were $0.18, compared to $0.13 per share in second quarter
2008, an increase of $0.05 or 38.5%. First half 2009 net earnings were $18,658
compared to first half 2008 net earnings of $13,699, a $4,959 or 36.2%
increase. First half net earnings per share were $0.33 in 2009 compared to
$0.24 per share in first half 2008, an increase of $0.09 per share or 37.5%.
The Company's earning per share for both second quarter and first half 2009
reflect common stock purchases in the open market resulting in fewer shares
outstanding.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's current ratio (current assets divided by current liabilities) was
3.3 to 1 as of the end of second quarter 2009 as compared to 2.7 to 1 as of the
end of second quarter 2008 and 3.2 to 1 as of the end of fourth quarter 2008.
Net working capital was $124,851 as of the end of second quarter 2009 as
compared to $114,331 and $128,727 as of the end of second quarter 2008 and
fourth quarter 2008, respectively. The aforementioned net working capital
amounts include total cash and cash equivalents and short-term investments which
aggregated $49,003 as of the end of second quarter 2009 compared to $47,029 and
$86,871, as of the end of second quarter 2008 and fourth quarter 2008,
respectively. In addition, long-term investments, principally debt securities
comprising municipal bonds, were $49,488 (includes $8,410 of Jefferson County
auction rate securities discussed in Note 5 to the accompanying Condensed
Consolidated Financial Statements) as of the end of second quarter 2009, as
compared to $73,217 and $49,809 as of the end of second quarter 2008 and
fourth quarter 2008, respectively. Aggregate cash and cash equivalents and short
and long-term investments were $98,491, $120,246 and $136,680, respectively for
second quarter ended 2009, second quarter 2008 and fourth quarter 2008,
respectively. Except for the Jefferson County auction rate securities referenced
above, investments in municipal bonds and other debt securities that matured
during first half 2009 and 2008 were generally used to purchase the Company's
common stock or were replaced with debt securities of similar maturities.
Net cash used in operating activities was $3,863 for first half 2009, as
compared to $1,700 for first half 2008. The aforementioned change in net cash
used in operating activities principally reflects the timing of payments and
cash flows relating to accounts receivable, inventories, accounts payable and
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accrued liabilities partially offset by the $4,959 improvement in net earnings
for the comparative periods. Capital expenditures for first half 2009 and 2008
were $13,719 and $9,742, respectively. Capital expenditures for the 2009 year
are anticipated to be generally in line with historical annualized spending, and
are to be funded from the Company's cash flow from operations and internal
sources.
Cash dividends paid in first half 2009 and 2008 were $8,878 and $8,738,
respectively.
During first half 2009, the Company also purchased and retired $13,654 of its
shares of common stock compared to $19,935 during the same period of the
previous year.
NEW ACCOUNTING PRONOUNCEMENTS
In April 2008, the FASB issued FASB Staff Position No. 142-3, "Determination of
the Useful Life of Intangible Assets" (FSP 142-3). FSP 142-3 amends the
factors to be considered in developing renewal or extension assumptions used to
determine the useful life of intangible assets under SFAS No. 142, "Goodwill
and Other Intangible Assets." The intent of FSP 142-3 is to improve the
consistency between the useful life of an intangible asset and the period of
expected cash flows used to measure its fair value. FSP 142-3 was effective
for first quarter 2009. The Company does not expect FSP 142-3 to have a
material impact on the accounting for future acquisitions or intangible assets,
but the potential impact is dependent upon the acquisitions of intangible
assets in the future.
In April 2009, the FASB issued FASB Staff Position No. 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP
157-4). FSP 157-4 provides guidance on (1) estimating the fair value of an
asset or liability when the volume and level of activity for the asset or
liability have significantly decreased and (2) identifying transactions that
are not orderly. FSP 157-4 is effective for interim and annual periods ending
after June 15, 2009. The Company's adoption of FSP 157-4 during second quarter
2009 did not have a material impact on the Company's consolidated financial
statements.
In April 2009, the FASB issued FASB Staff Position No. 115-2 and FAS 124-2,
"Recognition and Presentation of Other-Than-Temporary Impairments" (FSP 115-2).
FSP 115-2 amends the other-than-temporary impairment guidance for debt
securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities. FSP 115-2 is effective for interim and annual periods ending
after June 15, 2009. The Company's adoption of FSP 115-2 during second quarter
2009 did not have a material impact on the Company's consolidated financial
statements.
In April 2009, the FASB issued FASB Staff Position No. 107-1 and APB 28-1,
"Interim Disclosures about Fair Value of Financial Instruments" (FSP 107-1).
FSP 107-1 requires disclosures about the fair value of financial instruments in
interim reporting periods of publicly traded companies as well as in annual
financial statements. FSP 107-1 is effective for interim periods ending after
June 15, 2009. The Company's adoption of FSP 107-1 during second quarter 2009
did not have a material impact on the Company's consolidated financial
statements. See Note 5 to the Condensed Consolidated financial statements.
-6C-
The Company adopted SFAS No. 165, "Subsequent Events" (SFAS 165), during the
second quarter 2009. SFAS 165 establishes general standards of accounting for,
and disclosure of, events that occur after the balance sheet date but before
financial statements are issued. SFAS 165 includes a requirement to disclose
the date through which subsequent events were evaluated. See Note 1 to the
condensed consolidated financial statements.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This discussion and certain other sections contain forward-looking statements
that are based largely on the Company's current expectations and are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements can be identified by the use of
words such as "anticipated," "believe," "expect," "intend," "estimate,"
"project," and other words of similar meaning in connection with a discussion
of future operating or financial performance and are subject to certain
factors, risks, trends and uncertainties that could cause actual results and
achievements to differ materially from those expressed in the forward-looking
statements.
Such factors, risks, trends and uncertainties, which in some instances are
beyond the Company's control, including without limitation, the following: (i)
significant competitive activity, including advertising, promotional and price
competition, and changes in consumer demand for the Company's products; (ii)
fluctuations in the cost and availability of various ingredients and packaging
materials; (iii) inherent risks in the marketplace, including uncertainties
about trade and consumer acceptance and seasonal events such as Halloween; (iv)
the effect of acquisitions on the Company's results of operations and financial
condition; (v) the effect of changes in foreign currencies on the Company's
foreign subsidiaries operating results, and the effect of the Canadian dollar
on products manufactured in Canada and marketed and sold in the United States
in U.S. dollars; (vi) the Company's reliance on third-party vendors for various
goods and services; (vii) the Company's ability to successfully implement new
production processes and lines; (viii) the effect of changes in assumptions,
including discount rates, sales growth and profit margins, and the capability
to pass along higher ingredient and other input costs through price increases,
relating to the Company's impairment testing and analysis of its goodwill and
trademarks; (ix) changes in the confectionery marketplace including actions
taken by major retailers and customers; (x) customer, consumer and competitor
response to marketing programs and price and product weight adjustments, and
new products; (xi) dependence on significant customers, including volume and
timing of their purchases, and availability of shelf space; (xii) increases in
energy costs, including freight and delivery, that cannot be passed along to
customers through increased prices due to competitive reasons; (xiii) any
significant labor stoppages, strikes or production interruptions; (xiv) changes
in governmental laws and regulations including taxes and tariffs; (xv) the risk
that the market value of Company's investments could decline including being
classified as "other than temporary" as defined, and (xvi) the potential
effects of the current and future recessionary economic conditions. In
addition, the Company's results may be affected by general factors, such as
overall economic conditions, financial and securities' market factors,
political developments, currency exchange rates, interest and inflation rates,
accounting standards, taxes, and laws and regulations affecting the Company in
markets where it competes and those factors described in Part 1, Item 1A "Risk
Factors" and elsewhere in the Company's Annual Report on Form 10-K and in other
Company filings, including quarterly reports on Form 10-Q, with the Securities
and Exchange Commission.
-6D-
The risk factors identified and referred to above are believed to be
significant factors, but not necessarily all of the significant factors that
could cause actual results to differ from those expressed in any forward-
looking statement. Readers are cautioned not to place undue reliance on such
forward-looking statements, which are made only as of the date of this report.
The Company undertakes no obligation to update such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK:
The Company is exposed to various market risks, including fluctuations in
sugar, corn syrup, edible oils, including soybean oil, cocoa, dextrose, milk
and whey, and gum-base input ingredients and packaging and fuel costs. The
Company is exposed to exchange rate fluctuations in the Canadian dollar which
is the currency used for a portion of the raw material and packaging material
costs and operating expenses at its Canadian plants. The Company invests in
securities with maturities or auction dates of up to three years, the majority
of which are held to maturity, which limits the Company's exposure to interest
rate fluctuations. There has been no material change in the Company's market
risks that would significantly affect the disclosures made in the Form 10-K for
the year ended December 31, 2008.
Item 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of management, the Chief
Executive Officer and Chief Financial Officer of the Company have evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of July 4, 2009 and, based on their evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that these
controls and procedures are effective. Disclosure controls and procedures are
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures are also designed to ensure that information
is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
There has been no change in the Company's internal control over financial
reporting that occurred during the Company's fiscal quarter ended July 4, 2009
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
-6E-
PART II - OTHER INFORMATION
TOOTSIE ROLL INDUSTRIES, INC.
AND SUBSIDIARIES
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Approximate Dollar
(a) Total (b) Average Shares Value of Shares that
Number of Price Paid per Purchased as Part of May Yet Be Purchased
Shares Share Publicly Announced Plans Under the Plans
Period Purchased Or Programs or Programs
APR 4 TO MAY 2 NONE NONE NOT APPLICABLE NOT APPLICABLE
MAY 3 TO MAY 30 118,100 $ 22.85 NOT APPLICABLE NOT APPLICABLE
MAY 31 TO JUL 4 301,700 22.32 NOT APPLICABLE NOT APPLICABLE
TOTAL 419,800 $ 22.47 NOT APPLICABLE NOT APPLICABLE
While the Company does not have a formal or publicly announced stock
repurchase program, the Company's board of directors periodically authorizes
a dollar amount for share repurchases. The treasurer executes share
repurchase transactions according to these guidelines.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company, held on May 4, 2009,
the following number of votes were cast for the matters indicated:
1. For the election of five directors of the Company by the holders of
Common Shares and Class B Common Shares voting together:
Broker
Nominee For Withheld Abstain Non-Vote
Melvin J. Gordon 219,677,596 5,534,224 -0- -0-
Ellen R. Gordon 219,762,186 5,449,634 -0- -0-
Lana Jane Lewis-Brent 220,596,207 4,615,613 -0- -0-
Barre A. Siebert 221,610,127 3,601,693 -0- -0-
Richard P. Bergeman 220,615,158 4,596,662 -0- -0-
2. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
auditors for the fiscal year 2009:
Broker
For Withheld Against Non-Vote
Common Shares and Class B
Common Shares voting together 223,007,018 -0- 2,121,267 -0-
No other matters were submitted to a vote by ballot at the 2009 Annual
Meeting.
-7-
Item 6. EXHIBITS
Exhibits 31.1 and 31.2 - Certifications Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 - Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
TOOTSIE ROLL INDUSTRIES, INC.
Date: Aug. 13, 2009 BY:/S/MELVIN J. GORDON
Melvin J. Gordon
Chairman and Chief
Executive Officer
Date: Aug. 13, 2009 BY:/S/G. HOWARD EMBER, JR.
G. Howard Ember, Jr.
Vice President Finance and
Chief Financial Officer
-7A-
Exhibit 31.1
CERTIFICATION
I, Melvin J. Gordon, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tootsie Roll
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the state-
ments made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial infor-
mation included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such dis-
closure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: Aug. 13, 2009
By: /S/MELVIN J. GORDON
Melvin J. Gordon
Chairman and Chief
Executive Officer
-7B-
Exhibit 31.2
CERTIFICATION
I, G. Howard Ember, Jr. certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tootsie Roll
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the state-
ments made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial infor-
mation included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such dis-
closure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: Aug. 13, 2009
By: /S/G. HOWARD EMBER, JR.
G. Howard Ember, Jr.
Vice President Finance and
Chief Financial Officer
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Exhibit 32
Certificate Pursuant to Section 1350 of Chapter 63
Of Title 18 of the United States Code
Each of the undersigned officers of Tootsie Roll Industries, Inc.
Certifies that (i) the Quarterly Report on Form 10-Q of Tootsie Roll
Industries, Inc. for the quarterly period ended July 4, 2009 (the
Form 10-Q) fully complies with the requirements of secton 13(a) or
15(d) of the Securities Exchange Act of 1934 and (ii) the information
contained in the Form 10-Q fairly presents, in all material respects,
the financial condition and results of operations of Tootsie Roll
Industries, Inc. and its subsidiaries.
Dated: Aug. 13, 2009 /S/MELVIN J. GORDON
Melvin J. Gordon
Chairman and Chief
Executive Officer
Dated: Aug. 13, 2009 /S/G. HOWARD EMBER, JR.
G. Howard Ember, Jr.
Vice President Finance and
Chief Financial Officer
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