10-Q 1 tr-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

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, ChicagoIllinois

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   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files) Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

`

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes   No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date (March 31, 2022).

Class

Outstanding

Common Stock, $0.69-4/9 par value

40,487,362

Class B Common Stock, $0.69-4/9 par value

28,625,601

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, par value $0.69-4/9 per share

TR

New York Stock Exchange

TOOTSIE ROLL INDUSTRIES, INC.

MARCH 31, 2022

INDEX

Page No.

Part I —

Financial Information

Item 1.

Financial Statements꞉

Condensed Consolidated Statements of Financial Position

3-4

Condensed Consolidated Statements of Earnings and Retained Earnings

5

Condensed Consolidated Statements of Comprehensive Earnings

6

Condensed Consolidated Statements of Cash Flows

7

Notes to Condensed Consolidated Financial Statements

8-16

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16-21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

22

Part II —

Other Information

Item 1.

Legal Proceedings

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 6.

Exhibits

23

Signatures

24

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 “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.

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands) (Unaudited)

March 31, 2022

December 31, 2021

March 31, 2021

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

   

$

86,800

    

$

105,840

    

$

136,291

Restricted cash

377

386

399

Investments

58,727

39,968

42,396

Accounts receivable trade, less allowances of $2,378, $2,281 and $1,672

51,954

54,921

34,620

Other receivables

4,137

3,920

3,183

Inventories:

Finished goods and work-in-process

40,592

31,431

42,166

Raw materials and supplies

27,127

24,074

26,111

Prepaid expenses

5,947

7,761

7,166

Total current assets

275,661

268,301

292,332

PROPERTY, PLANT AND EQUIPMENT, at cost:

Land

21,712

21,704

21,711

Buildings

130,184

130,158

123,836

Machinery and equipment

447,060

446,777

421,364

Construction in progress

20,796

15,344

19,575

Operating lease right-of-use assets

7,220

7,419

653

626,972

621,402

587,139

Less - accumulated depreciation

416,839

412,496

399,566

Net property, plant and equipment

210,133

208,906

187,573

OTHER ASSETS:

Goodwill

73,237

73,237

73,237

Trademarks

175,024

175,024

175,024

Investments

276,780

291,175

243,749

Split dollar officer life insurance

-

-

2,514

Prepaid expenses and other assets

602

603

3,557

Deferred income taxes

1,417

1,372

1,005

Total other assets

527,060

541,411

499,086

Total assets

$

1,012,854

$

1,018,618

$

978,991

(The accompanying notes are an integral part of these statements.)

3

(in thousands except per share data) (Unaudited)

March 31, 2022

December 31, 2021

March 31, 2021

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

   

$

21,676

    

$

14,969

    

$

14,275

Bank loans

1,075

939

965

Dividends payable

171

6,042

168

Accrued liabilities

51,134

53,896

43,421

Postretirement health care benefits

616

616

544

Operating lease liabilities

1,037

1,072

611

Income taxes payable

4,550

2,434

5,957

Total current liabilities

80,259

79,968

65,941

NONCURRENT LIABILITIES:

Deferred income taxes

44,225

45,461

47,636

Postretirement health care benefits

12,617

12,619

12,947

Industrial development bonds

7,500

7,500

7,500

Liability for uncertain tax positions

3,512

3,415

3,483

Operating lease liabilities

6,183

6,347

42

Deferred compensation and other liabilities

89,052

94,511

82,856

Total noncurrent liabilities

163,089

169,853

154,464

TOOTSIE ROLL INDUSTRIES, INC. SHAREHOLDERS’ EQUITY:

Common stock, $.69-4/9 par value - 120,000 shares authorized; 40,487, 39,344 and 40,002, respectively, issued

28,116

27,322

27,779

Class B common stock, $.69-4/9 par value - 40,000 shares authorized; 28,626, 27,793 and 27,821, respectively, issued

19,879

19,300

19,320

Capital in excess of par value

749,819

709,880

732,165

Retained earnings

2,904

39,545

3,121

Accumulated other comprehensive loss

(28,967)

(25,013)

(21,577)

Treasury stock (at cost) - 99, 96 and 96 shares, respectively

(1,992)

(1,992)

(1,992)

Total Tootsie Roll Industries, Inc. shareholders’ equity

769,759

769,042

758,816

Noncontrolling interests

(253)

(245)

(230)

Total equity

769,506

768,797

758,586

Total liabilities and shareholders’ equity

$

1,012,854

$

1,018,618

$

978,991

(The accompanying notes are an integral part of these statements.)

4

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

EARNINGS AND RETAINED EARNINGS

(in thousands except per share amounts) (Unaudited)

Quarter Ended

March 31, 2022

March 31, 2021

Net product sales

    

$

139,291

     

$

101,795

Rental and royalty revenue

1,346

1,434

Total revenue

140,637

103,229

Product cost of goods sold

92,350

65,565

Rental and royalty cost

379

445

Total costs

92,729

66,010

Product gross margin

46,941

36,230

Rental and royalty gross margin

967

989

Total gross margin

47,908

37,219

Selling, marketing and administrative expenses

27,073

26,809

Earnings from operations

20,835

10,410

Other income (loss), net

(5,016)

3,816

Earnings before income taxes

15,819

14,226

Provision for income taxes

3,800

3,463

Net earnings

12,019

10,763

Less: net earnings (loss) attributable to noncontrolling interests

(8)

(4)

Net earnings attributable to Tootsie Roll Industries, Inc.

$

12,027

$

10,767

Net earnings attributable to Tootsie Roll Industries, Inc. per share

$

0.17

$

0.15

Dividends per share *

$

0.09

$

0.09

Average number of shares outstanding

69,039

69,858

Retained earnings at beginning of period

$

39,545

$

32,312

Net earnings attributable to Tootsie Roll Industries, Inc.

12,027

10,767

Cash dividends

(6,034)

(5,925)

Stock dividends

(42,634)

(34,033)

Retained earnings at end of period

$

2,904

$

3,121

*Does not include 3% stock dividend to shareholders of record on 3/7/22 and 3/5/21.

(The accompanying notes are an integral part of these statements.)

5

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS

(in thousands except per share amounts) (Unaudited)

Quarter Ended

March 31, 2022

March 31, 2021

Net earnings

   

$

12,019

    

$

10,763

Other comprehensive income (loss), before tax:

Foreign currency translation adjustments

569

(397)

Pension and postretirement reclassification adjustments:

Unrealized gains (losses) for the period on postretirement and pension benefits

-

-

Less: reclassification adjustment for (gains) losses to net earnings

(207)

(351)

Unrealized gains (losses) on postretirement and pension benefits

(207)

(351)

Investments:

Unrealized gains (losses) for the period on investments

(5,847)

(1,155)

Less: reclassification adjustment for (gains) losses to net earnings

(5)

-

Unrealized gains (losses) on investments

(5,852)

(1,155)

Derivatives:

Unrealized gains (losses) for the period on derivatives

221

476

Less: reclassification adjustment for (gains) losses to net earnings

(129)

(771)

Unrealized gains (losses) on derivatives

92

(295)

Total other comprehensive income (loss), before tax

(5,398)

(2,198)

Income tax benefit (expense) related to items of other comprehensive income

1,444

436

Total comprehensive earnings

8,065

9,001

Comprehensive earnings (loss) attributable to noncontrolling interests

(8)

(4)

Total comprehensive earnings attributable to Tootsie Roll Industries, Inc.

$

8,073

$

9,005

(The accompanying notes are an integral part of these statements.)

6

TOOTSIE ROLL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (Unaudited)

Quarter Ended

March 31, 2022

March 31, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings

   

$

12,019

    

$

10,763

Adjustments to reconcile net earnings to net cash used in operating activities:

Depreciation

4,216

4,365

Deferred income taxes

208

174

Amortization of marketable security premiums

1,334

739

Changes in operating assets and liabilities:

Accounts receivable

3,092

6,326

Other receivables

(239)

487

Inventories

(12,051)

(8,883)

Prepaid expenses and other assets

1,829

572

Accounts payable and accrued liabilities

4,296

(1,204)

Income taxes payable

2,213

2,295

Postretirement health care benefits

(209)

(347)

Deferred compensation and other liabilities

99

50

Net cash provided by operating activities

16,807

15,337

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(5,948)

(3,787)

Purchases of trading securities

(737)

(1,835)

Sales of trading securities

205

582

Purchase of available for sale securities

(25,148)

(30,031)

Sale and maturity of available for sale securities

8,524

8,543

Net cash from (used in) investing activities

(23,104)

(26,528)

CASH FLOWS FROM FINANCING ACTIVITIES:

Shares purchased and retired

(1,152)

(7,423)

Dividends paid in cash

(12,075)

(11,874)

Proceeds from bank loans

1,178

1,070

Repayment of bank loans

(1,016)

(896)

Net cash used in financing activities

(13,065)

(19,123)

Effect of exchange rate changes on cash

313

(252)

Increase (Decrease) in cash and cash equivalents

(19,049)

(30,566)

Cash, cash equivalents and restricted cash at beginning of year

106,226

167,256

Cash, cash equivalents and restricted cash at end of quarter

$

87,177

$

136,690

Supplemental cash flow information:

Income taxes paid/(received), net

$

1,571

$

1,233

Interest paid

$

2

$

2

Stock dividend issued

$

70,242

$

64,667

(The accompanying notes are an integral part of these statements.)

7

TOOTSIE ROLL INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(in thousands except per share amounts) (Unaudited)

Note 1 — Significant Accounting Policies

General Information

Foregoing data has been prepared from the unaudited financial records of Tootsie Roll Industries, Inc. (the “Company”) and in the opinion of Management all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the interim period have been reflected. Certain amounts previously reported have been reclassified to conform to the current year presentation. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

Results of operations for the period ended March 31, 2022 are not necessarily indicative of results to be expected for the year to end December 31, 2021 because of the seasonal nature of the Company’s operations. Historically, the third quarter has been the Company’s largest net product sales quarter due to pre-Halloween net product sales.

On March 11, 2020, the World Health Organization designated the recent novel coronavirus ("COVID-19") as a global pandemic. The Company continues to actively monitor COVID-19 and its potential impact on our operations and financial results. The impact that COVID-19 will have on our consolidated financial statements throughout 2022 and beyond remains uncertain and ultimately will be dictated by the length and severity of the pandemic and Covid-19 variants, the pace of the “reopening” of the economy and economic recovery, and federal, state, local and foreign government actions taken in response. The effects of Covid-19 pandemic are unprecedented, and therefore the Company is unable to determine its effects on its net product sales and net earnings for the balance of 2022 and beyond.

Revenue Recognition

The Company’s revenues, primarily net product sales, principally resulting from the sale of goods, reflect the consideration to which the Company expects to be entitled generally based on customer purchase orders. The Company records revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") Topic 606 which became effective January 1, 2018. Adjustments for estimated customer cash discounts upon payment, discounts for price adjustments, product returns, allowances, and certain advertising and promotional costs, including consumer coupons, are variable consideration and are recorded as a reduction of net product sales revenue in the same period the related net product sales are recorded. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. A net product sale is recorded when the Company delivers the product to the customer, or in certain instances, the customer picks up the goods at the Company’s distribution center, and thereby obtains control of such product. Amounts billed and due from our customers are classified as accounts receivable trade on the balance sheet and require payment on a short-term basis. Accounts receivable trade are unsecured. Shipping and handling costs of $16,538 and $10,139 in first quarter 2022 and 2021, respectively, are included in selling, marketing and administrative expenses. A minor amount of royalty income (less than 0.2% of our consolidated net product sales) is also recognized from sales-based licensing arrangements, pursuant to which revenue is recognized as the third-party licensee sales occur. Rental income (approximately 1% of our consolidated net product sales) is not considered revenue from contracts from customers.

Leases

The Company identifies leases by evaluating its contracts to determine if the contract conveys the right to use an identified asset for a stated period of time in exchange for consideration. The Company considers whether it can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset. Leases with terms greater than 12 months are classified as either operating or finance leases at the

8

commencement date.  For these leases, we capitalize the present value of the minimum lease payments over the lease term as a right-of-use asset with an offsetting lease liability. The discount rate used to calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the lease is generally not known or determinable. The lease term includes any noncancelable period for which the Company has the right to use the asset. Currently, all capitalized leases are classified as operating leases and the Company records rental expense on a straight-line basis over the term of the lease.

Recently Adopted Accounting Pronouncements

As of the date of this report, there are no recent accounting pronouncements that have not yet been adopted that Management believes would have a material impact on the Company’s consolidated financial statements.

Note 2 — Average Shares Outstanding

The average number of shares outstanding for first quarter 2022 reflects aggregate stock purchases of 33 shares for $1,152 and a 3% stock dividend of 2,006 shares distributed on April 8, 2022. The average number of shares outstanding for first quarter 2021 reflects aggregate stock purchases of 234 shares for $7,423 and a 3% stock dividend of 1,970 shares distributed on April 2, 2021.

Note 3 — Income Taxes

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 2018 through 2020. The Company’s consolidated effective income tax rate was 24.0% and 24.3% in first quarter 2022 and 2021, respectively.

NOTE 4—Share Capital and Capital In Excess of Par Value:

Capital in

 

Class B

Excess

 

Common Stock

Common Stock

Treasury Stock

of Par

 

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Value

 

(000’s)

(000’s)

(000’s)

 

Balance at December 31, 2021

 

39,344

$

27,322

 

27,793

$

19,300

 

96

$

(1,992)

$

709,880

Issuance of 3% stock dividend

 

1,176

 

817

 

833

 

579

 

3

 

 

41,068

Purchase and retirement of common shares and other

 

(33)

 

(23)

 

 

 

 

 

(1,129)

Balance at March 31, 2022

 

40,487

$

28,116

 

28,626

$

19,879

 

99

$

(1,992)

$

749,819

Balance at December 31, 2020

 

39,073

$

27,134

 

27,012

$

18,758

 

93

$

(1,992)

$

706,930

Issuance of 3% stock dividend

 

1,163

 

808

 

809

 

562

 

3

 

 

32,495

Purchase and retirement of common shares and other

 

(234)

 

(163)

 

-

 

 

 

 

(7,260)

Balance at March 31, 2021

 

40,002

$

27,779

 

27,821

$

19,320

 

96

$

(1,992)

$

732,165

Note 5 — Fair Value Measurements

Current accounting guidance defines fair value as the price that would be received on the sale of an asset, or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Guidance requires disclosure of the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date. Guidance establishes a three-level valuation hierarchy based upon the transparency of inputs utilized in the measurement and valuation of financial assets or liabilities as of the measurement date. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level

9

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 March 31, 2022, December 31, 2021 and March 31, 2021, the Company held certain financial assets that are required to be measured at fair value on a recurring basis. These included derivative hedging instruments related to the purchase of certain raw materials and foreign currencies, investments in trading securities and available for sale securities. The Company’s available for sale securities principally consist of corporate bonds.

The fair value of the Company’s industrial revenue development bonds at March 31, 2022, December 31, 2021 and March 31, 2021 were valued using Level 2 inputs which approximates the carrying value of $7,500 for the respective periods. Interest rates on these bonds are reset weekly based on current market conditions.

10

The following table presents information about the Company’s financial assets and liabilities measured at fair value as of March 31, 2022, December 31, 2021 and March 31, 2021 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

Estimated Fair Value March 31, 2022

Total

Input Levels Used

Fair Value

Level 1

Level 2

Level 3

Cash and cash equivalents

   

$

86,800

    

$

86,800

    

$

-

    

$

-

Available for sale securities

250,845

1,264

249,581

-

Foreign currency forward contracts

400

-

400

-

Commodity futures contracts

242

242

-

-

Trading securities

84,662

69,076

15,586

-

Total assets measured at fair value

$

422,949

$

157,382

$

265,567

$

-

Estimated Fair Value December 31, 2021

Total

Input Levels Used

Fair Value

Level 1

Level 2

Level 3

Cash and cash equivalents

   

$

105,840

    

$

105,840

    

$

-

    

$

-

Available for sale securities

241,407

 

1,282

 

240,125

-

Foreign currency forward contracts

426

 

 

426

-

Commodity futures contracts, net

124

 

124

 

-

Trading securities

89,736

 

76,196

 

13,540

-

Total assets measured at fair value

$

437,533

$

183,442

$

254,091

$

-

Estimated Fair Value March 31, 2021

Total

Input Levels Used

Fair Value

Level 1

Level 2

Level 3

Cash and cash equivalents

   

$

136,291

    

$

136,291

    

$

-

    

$

-

Available for sale securities

207,874

3,144

204,730

-

Foreign currency forward contracts

755

-

755

-

Commodity futures contracts

670

670

-

-

Trading securities

78,271

65,532

12,739

-

Total assets measured at fair value

$

423,861

$

205,637

$

218,224

$

-

Note 6 — Derivative Instruments and Hedging Activities

From time to time, the Company uses derivative instruments, including foreign currency forward contracts and commodity futures contracts to manage its exposures to foreign exchange and commodity prices. Commodity futures contracts 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 recognizes all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Statement of Financial Position. Derivative assets are recorded in other receivables and derivative liabilities are recorded in accrued liabilities. The Company uses hedge accounting for its foreign currency and commodity derivative instruments as discussed above. Derivatives that qualify for hedge accounting are designated as cash flow hedges by formally documenting the hedge relationships, including identification of the hedging

11

instruments, the hedged items and other critical terms, as well as the Company’s risk management objectives and strategies for undertaking the hedge transaction.

Changes in the fair value of the Company’s cash flow hedges 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 for commodity derivatives are expected to be reclassified to cost of goods sold. Approximately $242 of this accumulated comprehensive gain is expected to be reclassified to earnings in 2022. Approximately $375 and $25 reported in accumulated other comprehensive gain for foreign currency derivatives are expected to be reclassified to other income, net in 2022 and 2023, respectively.  

The following table summarizes the Company’s outstanding derivative contracts and their effects on its Condensed Consolidated Statements of Financial Position at March 31, 2022, December 31, 2021 and March 31, 2021:

March 31, 2022

Notional

    

    

    

    

Amounts

Assets

Liabilities

Derivatives designated as hedging instruments:

Foreign currency forward contracts

$

5,340

$

400

$

-

Commodity futures contracts

2,861

242

-

Total derivatives

$

642

$

-

December 31, 2021

Notional

    

    

    

    

Amounts

Assets

Liabilities

Derivatives designated as hedging instruments:

Foreign currency forward contracts

$

6,729

$

426

$

Commodity futures contracts

6,012

 

231

 

(107)

Total derivatives

$

657

$

(107)

March 31, 2021

Notional

    

    

    

    

Amounts

Assets

Liabilities

Derivatives designated as hedging instruments:

Foreign currency forward contracts

$

5,593

$

755

$

-

Commodity futures contracts

4,362

675

(5)

Total derivatives

$

1,430

$

(5)

12

The effects of derivative instruments on the Company’s Condensed Consolidated Statements of Earnings and Retained Earnings and the Condensed Consolidated Statements of Comprehensive Earnings for periods ended March 31, 2022 and March 31, 2021 are as follows:

For Quarter Ended March 31, 2022

    

    

    

    

Gain (Loss)

Gain (Loss)

on Amount Excluded

Gain (Loss)

Reclassified from

from Effectiveness

Recognized

Accumulated OCI

Testing Recognized

in OCI

into Earnings

in Earnings

Foreign currency forward contracts

$

76

$

102

$

-

Commodity futures contracts

145

27

-

Total

$

221

$

129

$

-

For Quarter Ended March 31, 2021

    

    

    

    

Gain (Loss)

Gain (Loss)

on Amount Excluded

Gain (Loss)

Reclassified from

from Effectiveness

Recognized

Accumulated OCI

Testing Recognized

in OCI

into Earnings

in Earnings

Foreign currency forward contracts

$

79

$

103

$

-

Commodity futures contracts

397

668

-

Total

$

476

$

771

$

-

13

Note 7 — Pension Plans

Beginning in 2012, the Company received periodic notices from the Bakery and Confectionery Union and Industry International Pension Fund (Plan), a multi-employer defined benefit pension plan for certain Company union employees, that the Plan’s actuary certified the Plan to be in “critical status”, as defined by the Pension Protection Act (PPA) and the Pension Benefit Guaranty Corporation (PBGC); and that a plan of rehabilitation was adopted by the trustees of the Plan in 2012. Beginning in 2015, the Plan was reclassified to “critical and declining status”, as defined by the PPA and PBGC, for the plan year beginning January 1, 2015. A designation of “critical and declining status” implies that the Plan is expected to become insolvent in the next 20 years. In 2016, the Company received new notices that the Plan’s trustees adopted an updated Rehabilitation Plan effective January 1, 2016, and all annual notices through 2021 have continued to classify the Plan in the “critical and declining status” category.

The Company has been advised that its withdrawal liability would have been $104,300, $99,300 and $99,800 if it had withdrawn from the Plan during 2021, 2020 and 2019, respectively. Should the Company actually withdraw from the Plan at a future date, a withdrawal liability, which could be higher than the above discussed amounts, could be payable to the Plan.

The amended rehabilitation plan, which continues, requires that employer contributions include 5% compounded annual surcharge increases each year for an unspecified period of time beginning January 2013 (in addition to the 5% interim surcharge initiated in 2012) as well as certain plan benefit reductions. In fourth quarter 2020, the Plan Trustees advised the Company that the surcharges would no longer increase and therefore be “frozen” at the rates and amounts in effect as of December 31, 2020 provided that the local bargaining union and the Company executed a formal consenting agreement by March 31, 2021. During first quarter 2021, the local bargaining union and the Company executed this agreement which resulted in the “freezing” of such surcharges as of December 31, 2020. The Company’s pension expense for this Plan for first quarter 2022 and 2021 was $763 and $604, respectively ($3,156 and $2,866 for twelve months 2021 and 2020, respectively). The aforementioned expense includes surcharges of $269 and $213 for first quarter 2022 and 2021, respectively ($1,112 and $1,010 for twelve months 2021 and 2020, respectively), as required under the amended plan of rehabilitation.

The Company is currently unable to determine the ultimate outcome of the above discussed matter and therefore is unable to determine the effects on its consolidated financial statements, but the ultimate outcome or the effects of any modifications to the current amended rehabilitation plan could be material to its consolidated results of operations or cash flows in one or more future periods.

14