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 28, 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 6,185,551
(Title of Class) (No. of Shares Outstanding
at September 28, 1996
INDEX OF EXHIBITS IS LOCATED ON PAGE 10 OF 11.
Page 1 of 11
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
September 28, 1996 and December 30, 1995.......................3
Consolidated Condensed Statements of Operations
Thirteen Weeks and Thirty-nine Weeks Ended
September 28, 1996 and September 30, 1995......................4
Consolidated Condensed Statements of Cash Flows
Thirty-nine Weeks Ended September 28, 1996 and
September 30, 1995.............................................5
Notes to Consolidated Condensed Financial Statements.........6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................10
Signature...................................................................11
Page 2 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 28, 1996 December 30, 1995
<S> <C> <C>
Current assets:
Cash $ 110,838 $ 85,104
Accounts and notes receivable, net of
allowance for doubtful accounts 20,830,826 18,630,903
Inventories:
Raw materials 1,773,084 2,202,682
Work in progress 580,181 593,416
Finished goods 1,033,187 467,184
------------ ------------
3,386,452 3,263,282
Deferred income taxes, prepayments and other 2,475,743 3,349,314
------------ ------------
Total current assets 26,803,859 25,328,603
------------ ------------
Property, plant and equipment: 135,140,727 126,870,388
Less accumulated depreciation 96,636,250 91,230,770
------------ ------------
38,504,477 35,639,618
------------ ------------
Long-term receivables 10,399,701 11,074,974
------------ ------------
Deferred income taxes 9,720,541 9,720,541
------------ ------------
Miscellaneous assets and deferred charges 3,278,650 3,539,247
------------ ------------
Total assets $ 88,707,228 $ 85,302,983
============ ============
Current liabilities:
Current portion of long-term debt $ 127,720 $ 127,720
Current obligations under capital leases 577,379 513,159
Notes payable, banks 1,400,000 700,000
Accounts payable 5,559,245 4,699,747
Accrued liabilities 6,770,264 5,344,162
------------ ------------
Total current liabilities 14,434,608 11,384,788
------------ ------------
Long-term debt, less current portion 5,267,152 4,576,385
------------ ------------
Long-term obligations under capital leases,
less current portion 1,290,169 1,653,134
------------ ------------
Accrued pensions and other liabilities 11,225,233 13,129,760
------------ ------------
Postretirement benefits other than pensions 18,952,833 18,620,763
------------ ------------
Shareholders' equity:
Common stock 3,644,544 3,644,544
Capital in excess of par value of stock 29,670,521 29,662,330
Retained earnings 20,936,301 19,425,849
------------ ------------
54,251,366 52,732,723
Less:
Treasury stock, at cost 16,363,340 16,364,757
Management Stock Purchase Plan
receivables and deferrals 350,793 429,813
------------ ------------
37,537,233 35,938,153
------------ ------------
Total liabilities and shareholders' equity $ 88,707,228 $ 85,302,983
============ ============
</TABLE>
See accompanying notes to consolidated condensed
financial statements.
Page 3 of 11
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended For the Thirty-nine Weeks Ended
Sept. 28, 1996 Sept. 30, 1995 Sept. 28, 1996 Sept. 30, 1995
<S> <C> <C> <C> <C>
Net Sales $ 36,021,652 $ 33,653,747 $ 109,714,528 $ 107,374,202
------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales 22,332,536 21,815,368 68,484,501 67,984,916
Depreciation 1,838,336 1,850,586 5,490,835 5,560,518
Selling, general and
administrative 10,472,900 9,532,556 30,068,214 28,426,247
Severance charge -- -- -- 950,000
Interest expense 134,564 131,219 362,138 450,286
Other income, net (446,541) (920,722) (1,355,853) (2,757,391)
------------- ------------- ------------- -------------
34,331,795 32,409,007 103,049,835 100,614,576
------------- ------------- ------------- -------------
Income before provision
for income taxes 1,689,857 1,244,740 6,664,693 6,759,626
------------- ------------- ------------- -------------
Provision for income taxes:
Current and deferred (637,636) (419,797) (2,556,349) (2,736,961)
Decrease in deferred
tax asset due to
change in tax rate -- (550,868) -- (550,868)
------------- ------------- ------------- -------------
Total provision for income taxes (637,636) (970,665) (2,556,349) (3,287,829)
------------- ------------- ------------- -------------
Net income $ 1,052,221 $ 274,075 $ 4,108,344 $ 3,471,797
============= ============= ============= =============
Average common shares outstanding 6,185,551 6,160,102 6,177,032 6,149,346
Per share of common stock:
Net income $ .17 $ .04 $ .67 $ .56
============= ============= ============= =============
Cash dividend $ .14 $ .14 $ .42 $ .42
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated
condensed financial statements.
Page 4 of 11
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Thirty-nine Weeks Ended
Sept. 28, 1996 Sept. 30, 1995
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 4,108,344 $ 3,471,797
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,490,835 5,560,518
Amortization 52,431 39,906
Deferred taxes -- 1,426,287
Other (1,327,972) (216,796)
Changes in assets and liabilities
affecting operations 836,077 (2,601,787)
----------- -----------
Net cash from operating activities 9,159,715 7,679,925
----------- -----------
Cash flows from (used for) investing activities
Proceeds from owner/operator's loan repayments 3,203,559 2,461,108
Purchase of property, plant and equipment (8,271,305) (3,247,329)
Loans to owner/operators (2,539,257) (2,871,526)
Proceeds from sale of property, plant and equipment -- 36,836
Other 63,280 (49,492)
----------- -----------
Net cash used for investing activities (7,543,723) (3,670,403)
----------- -----------
Cash flows from (used for) financing activities
Additional long-term debt 5,000,000 --
Dividends paid (2,597,892) (2,577,148)
Payment of long-term debt (4,692,366) (1,343,505)
Net increase in short-term debt 700,000 --
----------- -----------
Net cash used for financing activities (1,590,258) (3,920,653)
----------- -----------
Net increase in cash 25,734 88,869
Cash, beginning of year 85,104 147,251
----------- -----------
Cash, end of period $ 110,838 $ 236,120
=========== ===========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 343,217 $ 427,695
=========== ===========
Income taxes $ 2,221,142 $ 3,731,877
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed
financial statements.
Page 5 of 11
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Manufacturing Facility
On July 1, 1996, the company, through a wholly-owned subsidiary, Tasty
Baking Oxford, Inc., completed the purchase of a 160,000 square foot
manufacturing facility in Oxford, Chester County, Pennsylvania for
$4,000,000. The company is now in the process of planning for and acquiring
the production lines that will be placed in the facility. It is expected
that production at this facility will begin during the first quarter of
1997.
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 $288,000 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. Severance Charge
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.
4. 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.
5. 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 September 28, 1996, and December 30, 1995 and
the results of its operations for the thirteen and thirty-nine weeks ended
September 28, 1996 and September 30, 1995 and cash flows for the
thirty-nine weeks ended September 28, 1996 and September 30, 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 thirty-nine weeks ended September 28,
1996 are not necessarily indicative of the results to be expected for the
full year.
Page 6 of 11
<PAGE>
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 28,
1996 and September 30, 1995, the difference between the actual expenses
incurred and the expenses charged to operations was not significant.
6. 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 7 of 11
<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 third quarter of 1996, the company realized consolidated net income of
$1,052,221 or $.17 per share versus $274,075 or $.04 per share for the third
quarter of 1995. 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 1995
consolidated operating results was the amortization of the gain on the sale of
the company's distribution routes which increased net income by $254,000 or $.04
per share. On a comparable operating basis, excluding the effects of the
adjustment for the tax rate change and the amortization of the route gain,
operating earnings were $571,000 or $.09 per share in the third quarter of 1995.
Therefore, third quarter 1996 operating results of $1,052,000 or $.17 per share
represent increases of 84% and 89%, respectively, over third quarter 1995
operating results.
For the thirty-nine weeks ended September 28, 1996, the company realized
consolidated net income of $4,108,344 or $.67 per share versus $3,471,797 or
$.56 per share for the comparable period in 1995. Year to date 1995 results were
impacted by a severance charge of $950,000 resulting in an after-tax charge to
net income of $550,000 or $.09 per share. On a comparable operating basis,
excluding the effects of the tax rate change, the year to date amortization of
the route gain and the effect of the severance charge, the comparable operating
results for the thirty-nine weeks ended September 28, 1995 were $3,810,000 or
$.62 per share.
Consolidated net sales for the third quarter of 1996 were $36,021,652 versus
$33,653,747 for the comparable period in 1995, representing an increase of 7%.
The third quarter's higher sales were due to excellent market conditions, a well
planned promotional schedule, continued acceptance of the fourth quarter 1995
price increase and the inclusion of Dutch Mill's sales. Dutch Mill's net sales
were responsible for 1.6% of the sales increase as the 1995 third quarter
included only five weeks of sales activity versus thirteen weeks for the third
quarter of 1996.
Cost of sales in the third quarter of 1996 decreased as a percentage of sales
compared to the third quarter of 1995. The resulting improved gross margin is
primarily due to the effect of price increases.
The decrease in other income, net for the third quarter of 1996 was primarily
the result of the amortization of the gain on the sale of the company's
distribution routes being completed in the fourth quarter of 1995.
The effective tax rates on consolidated net income for the quarters ended
September 28, 1996 and September 30, 1995 were 37.7% and 33.7%, respectively,
excluding the effect of the $550,868 charge for remeasuring the company's
deferred tax asset and liability accounts in the third quarter of 1995. These
rates compare to a federal statutory rate of 34% and the differences between the
effective rates and the statutory rate is due to state income taxes. The charge
for $550,868, which increased the tax provision in the third quarter of 1995,
was made in accordance with SFAS No. 109 as noted above.
Page 8 of 11
<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 28, 1996, net cash from operating
activities increased by $1,479,790 to $9,159,715 from $7,679,925 for the
comparable period in 1995. Net cash from operating activities increased over
1995 as a result of $637,000 in additional net income and increases in accounts
payable and accrued insurance that were partially offset by reductions in
accrued pensions.
Net cash used for investing activities for the thirty-nine weeks ended September
28, 1996 increased by $3,873,320 from the comparable period in 1995 principally
due to the purchase of the Oxford facility and orders for the equipment to make
it operational. Net cash used for financing activities decreased by $2,330,000
relative to the same period in 1995. This decrease is primarily the result of
additional borrowings.
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.
Page 9 of 11
<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 September 28,
1996.
(c) Other Matters - Effective September 24, 1996, the company's
common stock began trading on the New York Stock Exchange.
Previously the company's common stock had been traded on
the American Stock Exchange.
Exhibit Index
Exhibit 27 - Financial Data Schedule
Page 10 of 11
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
SIGNATURE
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)
November 8, 1996 /s/ John M. Pettine
- ---------------------------- --------------------------------------------
(Date) JOHN M. PETTINE
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000096412
<NAME> TASTY BAKING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1996
<PERIOD-END> SEP-28-1996
<CASH> 111
<SECURITIES> 0
<RECEIVABLES> 23,220
<ALLOWANCES> (2,389)
<INVENTORY> 3,386
<CURRENT-ASSETS> 26,804
<PP&E> 135,141
<DEPRECIATION> (96,636)
<TOTAL-ASSETS> 88,707
<CURRENT-LIABILITIES> 14,435
<BONDS> 6,557
0
0
<COMMON> 3,645
<OTHER-SE> 33,892
<TOTAL-LIABILITY-AND-EQUITY> 88,707
<SALES> 109,715
<TOTAL-REVENUES> 111,070
<CGS> 68,485
<TOTAL-COSTS> 68,485
<OTHER-EXPENSES> 5,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 362
<INCOME-PRETAX> 6,664
<INCOME-TAX> 2,556
<INCOME-CONTINUING> 4,108
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,108
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.67
</TABLE>
