SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the thirty-nine weeks ended September 30,
1995
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 1-5084
TASTY BAKING COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1145880
(State of Incorporation) (IRS Employer Identification Number)
2801 Hunting Park Avenue
Philadelphia, Pennsylvania 19129
(Address of principal executive offices) (Zip Code)
Telephone: 215-221-8500
(Registrant's Telephone Number, including area code)
N O N E
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 1995
Common stock, par value $.50 6,181,476 shares
Index of exhibits is located on page 9 of 10
Page 1 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page Number
Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 1995 and December 31, 1994 ..........................3
Consolidated Condensed Statements of Operations -
13 weeks and 39 Weeks Ended September 30, 1995 and
October 1, 1994 ...................................................4
Consolidated Condensed Statements of Cash Flows -
39 Weeks Ended September 30, 1995 and
October 1, 1994 ...................................................5
Notes to Consolidated Condensed Financial Statements ................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .................7 - 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K ...........................9
Signatures .........................................................10
Page 2 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION CONSOLIDATED CONDENSED BALANCE SHEETS
ITEM 1. FINANCIAL STATEMENTS (unaudited)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1995 1994
<S> <C> <C>
Current assets:
Cash $ 236,120 $ 147,251
Accounts and notes receivable,
net of allowance for
doubtful accounts 20,218,502 17,574,423
------------ ------------
Inventories:
Raw materials 1,832,337 1,657,926
Work in progress 632,537 633,909
Finished goods 638,172 645,225
------------ ------------
3,103,046 2,937,060
------------ ------------
Deferred income taxes,
prepayments and other 3,285,277 3,681,528
------------ ------------
Total current assets 26,842,945 24,340,262
------------ ------------
Property, plant and equipment 126,243,834 122,001,864
Less accumulated depreciation 89,498,975 84,063,636
------------ ------------
36,744,859 37,938,228
------------ ------------
Excess of cost of investment in
subsidiary over net assets
at acquisition 345,018 --
------------ ------------
Long-term receivables 11,320,309 10,872,115
------------ ------------
Deferred income taxes 9,859,452 10,830,705
------------ ------------
Other assets and deferred charges 3,201,338 3,155,286
------------ ------------
Total assets $ 88,313,921 $ 87,136,596
============ ============
Current liabilities:
Current portion of long-term debt $ 222,831 $ 222,831
Current obligations under capital leases 498,807 455,712
Notes payable, banks 1,800,000 1,800,000
Accounts payable 4,733,923 4,075,343
Accrued liabilities 5,739,956 4,552,843
Accrued income taxes (991,506) 893,111
------------ ------------
Total current liabilities 12,004,011 11,999,840
------------ ------------
Long-term debt, less current portion 5,544,287 5,349,558
------------ ------------
Long-term obligations under capital
leases, less current portion 1,785,209 2,166,293
------------ ------------
Deferred income 1,827,746 3,271,268
------------ ------------
Accrued pensions and other liabilities 12,810,061 11,691,444
------------ ------------
Postretirement benefits other than pensions 19,762,043 19,707,364
------------ ------------
SHAREHOLDERS' EQUITY
Common stock 3,644,544 3,644,544
Capital in excess of par value stock 29,615,083 29,175,510
Retained earnings 18,123,413 17,228,764
------------ ------------
51,383,040 50,048,818
Less:
Treasury stock, at cost 16,386,614 16,601,793
Management Stock Purchase Plan
receivables and deferrals 415,862 496,196
------------ ------------
34,580,564 32,950,829
------------ ------------
Total liabilities and
shareholders' equity $ 88,313,921 $ 87,136,596
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 3 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the 13 Weeks Ended For the 39 Weeks Ended
---------------------- ----------------------
09/30/95 10/01/94 09/30/95 10/01/94
<S> <C> <C> <C> <C>
Net Sales $33,653,747 $33,870,195 $107,374,202 $107,021,083
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 21,815,368 20,487,830 67,984,916 64,339,152
Depreciation 1,850,586 1,828,296 5,560,518 5,399,694
Selling, general and
administrative 9,532,556 10,400,070 28,426,247 31,345,720
Severance and restructure charges - - 950,000 1,240,000
Interest expense 131,219 205,095 450,286 573,268
Other income, net (920,722) (758,676) (2,757,391) (2,425,910)
------------ ------------ ------------ ------------
32,409,007 32,162,615 100,614,576 100,471,924
------------ ------------ ------------ ------------
Income before provision
for income taxes 1,244,740 1,707,580 6,759,626 6,549,159
------------ ------------ ------------ ------------
Provision for income taxes:
Current and deferred (419,797) (665,522) (2,736,961) (2,597,214)
Decrease in deferred tax asset
due to change in tax rate (550,868) - (550,868) -
------------ ------------ ------------ ------------
Total provision for income taxes (970,665) (665,522) (3,287,829) (2,597,214)
------------ ------------ ------------ ------------
Net income $ 274,075 $1,042,058 $3,471,797 $3,951,945
============ ============ ============ ============
Average common shares outstanding 6,160,102 6,139,110 6,149,346 6,140,903
Per share of common stock:
Net income $.04 $.17 $.56 $.64
============ ============ ============ ============
Cash dividend $.14 $.13 $.42 $.39
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 4 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the 39 Weeks Ended
09/30/95 10/01/94
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 3,471,797 $ 3,951,945
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,560,518 5,399,694
Amortization 39,906 28,796
Deferred taxes 1,426,287 561,905
Other (216,796) (886,545)
Changes in assets and liabilities affecting operations (2,601,787) (1,012,665)
----------- -----------
Net cash from operating activities 7,679,925 8,043,130
----------- -----------
Cash flows from (used for) investing activities
Proceeds from owner/operator's loan repayments 2,461,108 2,557,163
Purchase of property, plant and equipment (3,247,329) (2,743,031)
Loans to owner/operators (2,871,526) (2,846,596)
Proceeds from sale of property, plant and equipment 36,836 --
Other (49,492) (6,724)
----------- -----------
Net cash used for investing activities (3,670,403) (3,039,188)
----------- -----------
Cash flows used for financing activities
Dividends paid (2,577,148) (2,393,361)
Payment of long-term debt (1,343,505) (1,968,228)
Net decrease in short-term debt -- (700,000)
----------- -----------
Net cash used for financing activities (3,920,653) (5,061,589)
----------- -----------
Net increase (decrease) in cash 88,869 (57,647)
Cash, beginning of year 147,251 141,026
----------- -----------
Cash, end of period $ 236,120 $ 83,379
=========== ===========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 427,695 $ 417,224
=========== ===========
Income taxes $ 3,731,877 $ 2,852,503
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 5 of 10
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. On August 29, 1995, the company acquired all of the outstanding shares of
capital stock of Dutch Mill Baking Company, Inc. (Dutch Mill) in exchange
for 45,948 shares of the company's common stock valued at $649,000. Dutch
Mill, based in Wyckoff, New Jersey, produces donuts, muffins and cakes
under a variety of labels and operates principally in the New York
metropolitan area. The acquisition was accounted for as a purchase and,
accordingly, the net assets and results of operation of Dutch Mill are
included in the company's consolidated financial statements since the date
of acquisition. The excess of the total acquisition cost over the fair
value of net assets acquired of approximately $345,000 is being amortized
on a straight line basis over fifteen years. The pro forma results, had the
acquisition occurred at the beginning of fiscal year 1994 or 1995, would
not have had a significant impact on the company's consolidated results of
operations.
2. Severance and Restructure Charges - In the second quarter of 1995, the
company incurred severance costs of $950,000 resulting in a charge to net
income of $550,000 or $.09 per share after related tax benefit. The
severance charge resulted from changes in certain management positions
during the second quarter of 1995. The management positions were
established in connection with a Restructuring Program (the Program)
implemented in 1994.
In the second quarter of 1994, the company completed the Program. The
Program was designed to enhance overall competitiveness, productivity and
efficiency in a highly competitive marketplace. The Program resulted in a
charge against second quarter 1994 earnings of $1,240,000 which had an
after-tax effect of $719,200 or $.12 per share. Included in this charge
were the costs associated with workforce reductions and realignments and
severance pay.
3. Decrease in Net Deferred Tax Assets Due to Change in Tax Rate - In the
third quarter of 1995, under the provisions of Statement of Financial
Accounting Standards No. 109 - "Accounting for Income Taxes", the company
was required to record a noncash charge to net income of $550,868 or $.09
per share. This charge resulted from a remeasuring of the company's
deferred tax asset and liability accounts as a result of a decrease in the
Pennsylvania Corporate Net Income Tax rate from 11.99% to 9.99%,
retroactive to January 1, 1995.
4. Interim Financial Information - In the opinion of management, the
accompanying unaudited consolidated condensed financial statements contain
all adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position of the company as of September 30,
1995, and December 31, 1994 and the results of its operations for the
thirteen and thirty-nine weeks ended September 30, 1995 and October 1, 1994
and cash flows for the thirty-nine weeks ended September 30, 1995 and
October 1, 1994. These unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto in the company's 1994 Annual Report to
Shareholders. In addition, the results of operations for the thirty-nine
weeks ended September 30, 1995 are not necessarily indicative of the
results to be expected for the full year.
Advertising expenses and certain other expense items are charged to
operations in the year incurred. However, for interim reporting purposes
the expenses are charged to operations on a pro-rata basis over the
company's accounting periods. For the thirty-nine weeks ended September 30,
1995 and October 1, 1994, the difference between the actual expenses
incurred and the expenses charged to operations was not significant.
5. Earnings Per Share - Per share amounts are based on the weighted average
number of common shares and equivalent shares outstanding during the
quarter and year to date.
Page 6 of 10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the third quarter of 1995, the company realized consolidated net income of
$274,075 or $.04 per share versus $1,042,058 or $.17 per share for the third
quarter of 1994. Included in the 1995 results was a noncash charge to net income
of $550,868 or $.09 per share. This charge resulted from a remeasuring of the
company's deferred tax asset and liability accounts in accordance with SFAS No.
109 due to a 2% decrease in the Pennsylvania Corporate Net Income Tax rate,
retroactive to January 1, 1995. Further impacting the company's consolidated
operating results was the acquisition on August 29, 1995 of Dutch Mill Baking
Company, Inc. (Dutch Mill) which reduced the third quarter 1995 consolidated
operating results by $124,706 or $.02 per share. On a comparable operating
basis, excluding the effects of the adjustment for the change in the
Pennsylvania Corporate Net Income Tax rate and the Dutch Mill acquisition,
operating earnings were $949,649 or $.15 per share in the third quarter of 1995
compared to $1,042,058 or $.17 per share in the third quarter of 1994.
For the thirty-nine weeks ended September 30, 1995, the company realized
consolidated net income of $3,471,797 or $.56 per share versus $3,951,945 or
$.64 per share for the comparable period in 1994. On a comparable operating
basis, excluding the effects of the adjustment for the state tax rate change,
the charges associated with the acquisition of Dutch Mill and the net effect of
severance and restructure charges, the comparable operating results for the
thirty-nine weeks ended September 30, 1995 were $4,697,371 or $.76 per share
versus $4,671,145 or $.76 for the comparable period in 1994.
The severance charge in 1995 resulted from changes in certain management
positions during the third quarter of 1995. The management positions were
established in connection with a restructuring program implemented in 1994. The
restructure charge in 1994 reflects the costs associated with this restructuring
program, which realigned departments and responsibilities in every area within
the company to enhance productivity and efficiency.
Consolidated net sales for the third quarter of 1995 were $33,653,747 versus
$33,870,195 for the comparable period in 1994. This decrease was due to a slight
decrease in unit sales and the costs associated with increased promotional
activity, which were somewhat offset by price adjustments and sales contributed
by Dutch Mill.
Cost of sales in the third quarter of 1995 increased by 6.5% over the third
quarter of 1994. Higher ingredient and packaging costs accounted for 2.5% of
this increase and in addition, cost of sales in the third quarter of 1995
includes approximately $794,000 in shipping case costs, while in 1994 shipping
case costs of approximately $636,000 are reflected in operating expenses. This
change in classification was done as a result of a change in operating policy
that treats shipping cases as completely disposable items.
The decrease in interest expense for the third quarter of 1995 versus the third
quarter of 1994 was the result of lower average borrowing levels only partially
offset by higher average interest rates.
The increase in other income, net was primarily due to an increase in the
amortization of the gain on sale of distribution routes.
The effective tax rates on consolidated net income for the quarters ended
September 30, 1995 and October 1, 1994 were 78.0% and 38.9%, respectively, which
compares to a federal statutory rate of 34%. The principal reasons for the
difference between the effective rates and the statutory rate in 1995 and 1994
was the effect of state income taxes. In the third quarter of 1995, in
accordance with SFAS No. 109, the company recorded a noncash charge of $550,868.
This charge, which increased the provision for income taxes, resulted from a
remeasuring of the company's deferred tax asset and liability accounts due to a
reduction in the state income tax rate.
Page 7 of 10
<PAGE>
Financial Condition
The company has consistently demonstrated the ability to generate sufficient
cash for working capital from operations. Bank borrowings, under various lines
of credit arrangements, are used to supplement cash flow from operations during
periods of cyclical shortages.
For the thirty-nine weeks ended September 30, 1995, net cash from operating
activities decreased by $363,205 to $7,679,925 from $8,043,130 for the
comparable period in 1994. Net cash from operating activities was negatively
impacted by changes in working capital, particularly a decrease in accrued
taxes, relative to the same period in 1994.
Net cash used for investing activities for the thirty-nine weeks ended September
30, 1995 increased by $631,215 from the comparable period in 1994 principally
due to an increase in the purchase of property, plant and equipment. Net cash
used for financing activities decreased by $1,140,936 relative to the same
period in 1994. This decrease is primarily the result of a decrease in the
repayment of short and long term debt of $1,324,723 relative to the prior year.
For the remainder of 1995, the company anticipates that cash flow from
operations, along with the continued availability of bank lines of credit,
revolving credit agreements and other long-term financing, will provide
sufficient cash to meet operating and financing requirements.
Page 8 of 10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file a report on Form 8-K during the
thirteen weeks ended September 30, 1995.
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
Page 9 of 10
<PAGE>
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.
TASTY BAKING COMPANY
---------------------------------
(Registrant)
Date: November 10, 1995 /s/ John M. Pettine
----------------------- ---------------------------------
John M. Pettine
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Page 10 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000096412
<NAME> TASTY BAKING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 236
<SECURITIES> 0
<RECEIVABLES> 20,219
<ALLOWANCES> 0
<INVENTORY> 3,103
<CURRENT-ASSETS> 26,843
<PP&E> 126,244
<DEPRECIATION> 89,499
<TOTAL-ASSETS> 88,314
<CURRENT-LIABILITIES> 12,004
<BONDS> 7,329
<COMMON> 3,645
0
0
<OTHER-SE> 30,936
<TOTAL-LIABILITY-AND-EQUITY> 88,314
<SALES> 107,374
<TOTAL-REVENUES> 110,132
<CGS> 67,985
<TOTAL-COSTS> 67,985
<OTHER-EXPENSES> 6,511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 450
<INCOME-PRETAX> 6,760
<INCOME-TAX> 3,288
<INCOME-CONTINUING> 3,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,472
<EPS-PRIMARY> $.56
<EPS-DILUTED> $.56
</TABLE>
