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 twenty-six weeks ended June 29, 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 June 29, 1996)
INDEX OF EXHIBITS IS LOCATED ON PAGE 9 OF 10.
Page 1 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets June 29, 1996 and
December 30, 1995.............................................3
Consolidated Condensed Statements of Operations
Thirteen Weeks and Twenty-six Weeks Ended June 29, 1996
and July 1, 1995..............................................4
Consolidated Condensed Statements of Cash Flows
Twenty-six Weeks Ended June 29, 1996 and July 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
Page 2 of 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
June 29, 1996 December 30, 1995
Current assets:
<S> <C> <C>
Cash $ 33,333 $ 85,104
Accounts and notes receivable, net of
allowance for doubtful accounts 19,461,158 18,630,903
Inventories:
Raw materials 1,989,285 2,202,682
Work in progress 603,038 593,416
Finished goods 850,957 467,184
------------ ------------
3,443,280 3,263,282
Deferred income taxes, prepayments and other 3,124,884 3,349,314
------------ ------------
Total current assets 26,062,655 25,328,603
------------ ------------
Property, plant and equipment: 129,340,131 126,870,388
Less accumulated depreciation 94,882,403 91,230,770
------------ ------------
34,457,728 35,639,618
------------ ------------
Long-term receivables 10,373,694 11,074,974
------------ ------------
Deferred income taxes 9,720,541 9,720,541
------------ ------------
Miscellaneous assets and deferred charges 3,453,717 3,539,247
------------ ------------
Total assets $ 84,068,335 $ 85,302,983
------------ ------------
Current liabilities:
Current portion of long-term debt $ 127,720 $ 127,720
Current obligations under capital leases 538,248 513,159
Notes payable, banks -- 700,000
Accounts payable 3,711,825 4,699,747
Accrued liabilities 5,645,965 5,344,162
------------ ------------
Total current liabilities 10,023,758 11,384,788
------------ ------------
Long-term debt, less current portion 3,300,697 4,576,385
------------ ------------
Long-term obligations under capital leases,
less current portion 1,372,454 1,653,134
------------ ------------
Accrued pensions and other liabilities 12,784,696 13,129,760
------------ ------------
Postretirement benefits other than pensions 19,260,912 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 20,750,057 19,425,849
------------ ------------
54,065,122 52,732,723
Less:
Treasury stock, at cost 16,363,340 16,364,757
Management Stock Purchase Plan
receivables and deferrals 375,964 429,813
------------ ------------
37,325,818 35,938,153
------------ ------------
Total liabilities and shareholders' equity $ 84,068,335 $ 85,302,983
============ ============
</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 Thirteen Weeks Ended For the Twenty-six Weeks Ended
June 29, 1996 July 1, 1995 June 29, 1996 July 1, 1995
<S> <C> <C> <C> <C>
Net Sales $ 37,749,267 $ 36,656,188 $ 73,692,876 $ 73,720,455
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 23,334,633 23,016,442 46,151,965 46,169,548
Depreciation 1,813,701 1,825,788 3,652,499 3,709,932
Selling, general and
administrative 9,963,743 9,523,043 19,595,314 18,893,691
Severance charge -- 950,000 -- 950,000
Interest expense 99,048 154,159 227,574 319,067
Other income, net (455,740) (929,124) (909,312) (1,836,669)
------------ ------------ ------------ ------------
34,755,385 34,540,308 68,718,040 68,205,569
------------ ------------ ------------ ------------
Income before provision for
income taxes 2,993,882 2,115,880 4,974,836 5,514,886
Provision for income taxes 1,157,108 889,034 1,918,713 2,317,164
------------ ------------ ------------ ------------
Net income $ 1,836,774 $ 1,226,846 $ 3,056,123 $ 3,197,722
============ ============ ============ ============
Average common shares outstanding 6,174,261 6,139,918 6,173,985 6,143,967
Per share of common stock:
Net income $ .30 $ .20 $ .50 $ .52
============ ============ ============ ============
Cash dividend $ .14 $ .14 $ .28 $ .28
============ ============ ============ ============
</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 Twenty-six Weeks Ended
June 29, 1996 July 1, 1995
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 3,056,123 $ 3,197,722
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,652,499 3,709,932
Amortization 35,158 26,943
Deferred taxes -- 444,999
Other 369,873 199,202
Changes in assets and liabilities
affecting operations (1,471,943) (1,608,054)
----------- -----------
Net cash from operating activities 5,641,710 5,970,744
----------- -----------
Cash flows from (used for) investing activities
Proceeds from owner/operator's loan repayments 2,604,830 1,993,905
Purchase of property, plant and equipment (2,470,609) (2,364,473)
Loans to owner/operators (1,910,613) (2,108,138)
Other 46,104 72,594
----------- -----------
Net cash used for investing activities (1,730,288) (2,406,112)
----------- -----------
Cash flows used for financing activities
Additional long-term debt 3,000,000 --
Dividends paid (1,731,915) (1,718,174)
Payment of long-term debt (4,531,278) (330,403)
Net decrease in short-term debt (700,000) (1,600,000)
----------- -----------
Net cash used for financing activities (3,963,193) (3,648,577)
----------- -----------
Net decrease in cash (51,771) (83,945)
Cash, beginning of year 85,104 147,251
----------- -----------
Cash, end of period $ 33,333 $ 63,306
=========== ===========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 233,946 $ 292,525
=========== ===========
Income taxes $ 1,718,612 $ 2,972,067
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
Page 5 of 10
<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 $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. 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. 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 June 29, 1996, and December 30, 1995 and the
results of its operations for the thirteen and twenty-six weeks ended June
29, 1996 and July 1, 1995 and cash flows for the twenty-six weeks ended
June 29, 1996 and July 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
twenty-six weeks ended June 29, 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 twenty-six weeks ended June 29, 1996
and July 1, 1995, 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>
TASTY BAKING COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
For the second quarter of 1996, the company realized net income of $1,836,774 or
$.30 per share versus $1,226,846 or $.20 per share for the second quarter of
1995. Results for the second quarter of 1995 were impacted by a severance charge
of $950,000 and by $476,769 for the amortization of the gain on the sale of the
company's distribution routes. After adjusting for related tax consequences, net
income was reduced by $550,000 or $.09 per share for the severance charge while
net income was increased by $254,269 or $.04 per share for the amortization of
the gain. On a comparable operating basis, before the effects of the severance
charge and the amortization of the gain, net income for the second quarter of
1995 was $1,522,577 or $.25 per share. Comparing this amount to second quarter
1996 net income of $1,836,774 represents an increase of 20%.
For the twenty-six weeks ended June 29, 1996, the company realized net income of
$3,056,123 or $.50 per share versus $3,197,722 or $.52 per share for the
comparable period in 1995. After adjusting for the severance charge ($550,000 or
$.09/share) and the amortization of the gain ($508,538 or $.08/share), 1995 net
income was $3,239,184 or $.53 per share.
Net sales for the second quarter of 1996 were $37,749,267 versus $36,656,188 for
the second quarter of 1995, an increase of 3%. The second quarter's higher sales
were due to renewed promotional activity, greater acceptance of the price
increase introduced during the fourth quarter of 1995 and the inclusion of Dutch
Mill's sales.
Cost of sales in the second quarter of 1996 decreased by 1% as a percent of
sales compared to the second quarter of 1995 reflecting the effect of the price
increase as fewer units were sold at improved margins.
Interest expense decreased in the second quarter of 1996 compared to the second
quarter of 1995 primarily due to decreased average borrowing levels.
The effective tax rates on net income for the quarters ended June 29, 1996 and
July 1, 1995 were 38.6% and 42.0%, respectively, which compares to a federal
statutory rate of 34%. The principal reason for the difference between the
effective rates and the statutory rate in 1996 and 1995 was the effect of state
income taxes.
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 twenty-six weeks ended June 29, 1996, net cash from operating activities
decreased by $329,034 to $5,641,710 from $5,970,744 for the twenty-six weeks
ended July 1, 1995. The decrease in net cash from operating activities was
principally due to reductions in deferred taxes relative to the same period in
1995.
Page 7 of 10
<PAGE>
Financial Condition (continued)
Net cash used for investing activities for the twenty-six weeks ended June 29,
1996 decreased by $675,824 relative to the same period in 1995 principally due
to a decrease in the funds needed to finance the net owner-operator loan
activity.
Net cash used for financing activities for the twenty-six weeks ended June 29,
1996 increased by $314,616 compared to the same twenty-six weeks in 1995 as the
company continued to lower its overall debt level.
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 including
anticipated expenditures for the recently acquired Oxford facility.
Page 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 June 29, 1996.
Exhibit Index
Exhibit 27 - Financial Data Schedule
Page 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)
August 9, 1996 /s/ John M. Pettine
(Date) -------------------------------------------
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> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<CASH> 33
<SECURITIES> 0
<RECEIVABLES> 21,903
<ALLOWANCES> (2,442)
<INVENTORY> 3,443
<CURRENT-ASSETS> 26,063
<PP&E> 129,340
<DEPRECIATION> 94,882
<TOTAL-ASSETS> 84,068
<CURRENT-LIABILITIES> 10,024
<BONDS> 4,673
0
0
<COMMON> 3,645
<OTHER-SE> 33,681
<TOTAL-LIABILITY-AND-EQUITY> 84,068
<SALES> 73,693
<TOTAL-REVENUES> 74,602
<CGS> 46,152
<TOTAL-COSTS> 46,152
<OTHER-EXPENSES> 3,653
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228
<INCOME-PRETAX> 4,975
<INCOME-TAX> 1,919
<INCOME-CONTINUING> 3,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,056
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
