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 thirteen weeks ended March 30, 1996
( ) 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)
(215) 221-8500
(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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.50 6,184,850
(Title of Class) (No. of Shares Outstanding
at March 30, 1996)
INDEX OF EXHIBITS IS LOCATED ON PAGE 9 OF 10.
1 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 30, 1996 and December 30, 1995...................3
Consolidated Statements of Operations
Thirteen weeks ended March 30, 1996 and
April 1, 1995..........................................4
Consolidated Condensed Statements of
Cash Flows Thirteen Weeks Ended March 30,
1996 and April 1, 1995.................................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
2 of 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 30, 1996 December 30, 1995
<S> <C> <C>
Current assets:
Cash $ 135,427 $ 85,104
Accounts and notes receivable, net of
allowance for doubtful accounts 20,113,296 18,630,903
Inventories:
Raw materials 2,189,758 2,202,682
Work in progress 546,069 593,416
Finished goods 598,190 467,184
------------------ -----------------
3,334,017 3,263,282
Deferred income taxes, prepayments and other 3,126,586 3,349,314
------------------ -----------------
Total current assets 26,709,326 25,328,603
------------------ -----------------
Property, plant and equipment: 127,367,858 126,870,388
Less accumulated depreciation 93,069,704 91,230,770
------------------ -----------------
34,298,154 35,639,618
------------------ -----------------
Long-term receivables 10,845,297 11,074,974
------------------ -----------------
Deferred income taxes 9,720,541 9,720,541
------------------ -----------------
Miscellaneous assets and deferred charges 3,462,145 3,539,247
------------------ -----------------
Total assets $ 85,035,463 $ 85,302,983
================== =================
Current liabilities:
Current portion of long-term debt $ 127,720 $ 127,720
Current obligations under capital leases 525,703 513,159
Notes payable, banks -- 700,000
Accounts payable 4,499,556 4,699,747
Accrued liabilities 5,805,192 5,344,162
Accrued income taxes 242,449 --
------------------ -----------------
Total current liabilities 11,200,620 11,384,788
------------------ -----------------
Long-term debt, less current portion 4,512,326 4,576,385
------------------ -----------------
Long-term obligations under capital leases,
less current portion 1,513,078 1,653,134
------------------ -----------------
Accrued pensions and other liabilities 12,623,212 13,129,760
------------------ -----------------
Postretirement benefits other than pensions 18,865,640 18,620,763
------------------ -----------------
Shareholders' equity:
Common stock 3,644,544 3,644,544
Capital in excess of par value of stock 29,662,330 29,662,330
Retained earnings 19,779,319 19,425,849
------------------ -----------------
53,086,193 52,732,723
Less:
Treasury stock, at cost 16,364,757 16,364,757
Management Stock Purchase Plan
receivables and deferrals 400,849 429,813
------------------ -----------------
36,320,587 35,938,153
------------------ -----------------
Total liabilities and shareholders' equity $ 85,035,463 $ 85,302,983
================== =================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
March 30, 1996 April 1, 1995
<S> <C> <C>
Net sales $ 35,943,609 $ 37,064,267
------------------ -----------------
Costs and expenses:
Cost of sales 22,817,332 23,153,106
Depreciation 1,838,798 1,884,144
Selling, general and administrative 9,631,571 9,370,648
Interest expense 128,526 164,908
Other income, net (453,572) (907,545)
------------------ -----------------
33,962,655 33,665,261
------------------ -----------------
Income before provision for income taxes 1,980,954 3,399,006
Provision for income taxes 761,605 1,428,130
------------------ -----------------
Net income $ 1,219,349 $ 1,970,876
================== =================
Average common shares outstanding 6,184,850 6,148,975
Per share of common stock:
Net income $.20 $.32
================== =================
Cash dividend $.14 $.14
================== =================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
March 30, 1996 April 1, 1995
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 1,219,349 $ 1,970,876
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,838,798 1,884,144
Amortization 12,691 13,614
Deferred taxes -- 222,500
Other (184,882) 82,648
Changes in assets and liabilities
affecting operations (827,113) (1,106,044
------------------ -----------------
Net cash from operating activities 2,058,843 3,067,738
------------------ -----------------
Cash flows from (used for) investing activities
Proceeds from owner/operators' loan repayments 1,065,209 924,200
Purchase of property, plant and equipment (497,334) (1,411,797)
Loans to owner/operators (838,338) (981,968)
Other 19,392 54,268
------------------ -----------------
Net cash used for investing activities (251,071) (1,415,297)
------------------ -----------------
Cash flows used for financing activities
Dividends paid (865,879) (859,043)
Payment of long-term debt (191,570) (158,459)
Net decrease in short-term debt (700,000) (500,000)
------------------ -----------------
Net cash used for financing activities (1,757,449) (1,517,502)
------------------ -----------------
Net increase in cash 50,323 134,939
Cash, beginning of year 85,104 147,251
------------------ -----------------
Cash, end of period $ 135,427 $ 282,190
================== =================
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 133,349 $ 161,573
================== =================
Income taxes $ 115,099 $ 519,742
================== =================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Manufacturing Facility
On April 4, 1996, the company announced the signing of an agreement to
acquire a 160,000 square foot manufacturing facility located in Oxford,
Pennsylvania. The terms of this agreement have not been disclosed,
pending the anticipated final settlement of this transaction in June,
1996.
2. Purchase of Subsidiary
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 operations 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 $304,000 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
1995, would not have had a significant impact on the company's
consolidated results of operations.
3. Interim Financial Information
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position of the company as of March 30, 1996 and December 30, 1995 and
the results of its operations for the thirteen weeks ended March 30, 1996
and April 1, 1995 and cash flows for the thirteen weeks ended March 30,
1996 and April 1, 1995. These unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto in the company's 1995 Annual Report to
Shareholders. In addition, the results of operations for the thirteen
weeks ended March 30, 1996 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 thirteen weeks ended March 30, 1996
and April 1, 1995, the difference between the actual expenses incurred
and the expenses charged to operations was not significant.
4. Earnings Per Share
Per share amounts are based on the weighted average number of common
shares and equivalent shares outstanding during the quarter.
6 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
For the first quarter of 1996, the company realized net income of $1,219,349
versus $1,970,876 for the first quarter of 1995. Net income per share decreased
to $.20 from $.32 per share for the comparable quarter of 1995. Results for the
first quarter of 1995, however, include amortization of the gain on sale of
company routes which increased net income by $254,269 or $.04 per share. This
gain became fully amortized in 1995. Thus, on a comparable basis, net income
decreased to $1,219,349 or $.20 per share for the first quarter of 1996 from
$1,716,607 or $.28 per share for the first quarter of 1995.
In the first quarter of 1996, net sales decreased 3% to $35,943,609 from
$37,064,267 in the first quarter of 1995. On a comparable basis, excluding the
net sales contributed by Dutch Mill Baking Company, Inc. (Dutch Mill) which was
acquired in August, 1995, net sales decreased $2,075,363 or 5.6% from the first
quarter of 1995. The decrease in net sales is attributable to a decrease in unit
volume which was caused by the continuing soft economy in the snack cake
industry combined with the anticipated effects of a price increase in the fourth
quarter of 1995. In addition, the blizzard in January, 1996 forced a two day
bakery shutdown which resulted in lost unit sales.
Cost of sales as a percentage of net sales was 63.5% and 62.5% for the first
quarters of 1996 and 1995, respectively. The decrease in gross margin in 1996
resulted from increases in the prices of ingredients and packaging which were
somewhat offset by the fourth quarter 1995 price increase. The acquisition of
Dutch Mill did not have a significant impact on gross margin for the first
quarter of 1996.
Selling, general and administrative expenses for the first quarter of 1996
increased by $260,923 or 1.5% over the comparable period in 1995. Excluding the
effects of Dutch Mill, selling, general and administrative expenses decreased
approximately 1% due to the company's ongoing cost reduction efforts.
The decrease in interest expense for the first quarter of 1996 versus the first
quarter of 1995 was the result of lower average debt and lower average interest
rates.
The decrease in other income, net for the first quarter of 1996 was the result
of the amortization of the gain on sale of company routes which was completed in
the fourth quarter of 1995.
The effective tax rates on net income for the quarters ended March 30, 1996 and
April 1, 1995 were 38.5% and 42%, which compares to a federal statutory rate of
34%. The principle reason for the difference between the effective rates and the
statutory rate in 1996 and 1995 was the effect of state income taxes.
7 of 10
<PAGE>
Results of Operations (continued)
In October, 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 requires companies to adopt its provisions for
fiscal years beginning after December 15, 1995. SFAS No. 123 established
accounting standards requiring the calculation of expense for stock options
based on an option pricing model, but it also allows the continued use of the
intrinsic value based method of accounting prescribed by Accounting Principles
Board (APB) Opinion No. 25. The company has decided to continue to follow the
accounting method outlined in APB No. 25. Accordingly, the company will present
the pro-forma disclosures of net income and earnings per share required by SFAS
No. 123 in its 1996 Annual Report to Shareholders.
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 thirteen weeks ended March 30, 1996, net cash from operating activities
decreased by $1,008,895 to $2,058,843 from $3,067,738 for the same period in
1995. Net cash from operating activities for the quarter ended March 30, 1996
was negatively impacted by a decrease in net income and deferred taxes relative
to the comparable quarter in 1995.
Net cash used for investing activities decreased by $1,164,226 from the
comparable quarter in 1995 principally due to a decrease in expenditures on
property, plant and equipment. Net cash used for financing activities increased
by $239,947 relative to the same period in 1995. This increase is primarily the
result of a further reduction in short and long-term debt of $233,111 relative
to the prior year.
For the remainder of 1996 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.
8 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
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 March 30, 1996.
Exhibit Index
Exhibit 27 - Financial Data Schedule
9 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
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)
May 10, 1996
(Date) JOHN M. PETTINE
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
10 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000096412
<NAME> TASTY BAKING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 135
<SECURITIES> 0
<RECEIVABLES> 22,544
<ALLOWANCES> (2,431)
<INVENTORY> 3,334
<CURRENT-ASSETS> 26,709
<PP&E> 121,368
<DEPRECIATION> 93,070
<TOTAL-ASSETS> 85,035
<CURRENT-LIABILITIES> 11,201
<BONDS> 6,025
0
0
<COMMON> 3,645
<OTHER-SE> 32,676
<TOTAL-LIABILITY-AND-EQUITY> 85,035
<SALES> 35,943
<TOTAL-REVENUES> 36,397
<CGS> 22,817
<TOTAL-COSTS> 22,817
<OTHER-EXPENSES> 1,839
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 1,981
<INCOME-TAX> 762
<INCOME-CONTINUING> 1,219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,219
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
