UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 (No Fee Required) for the fiscal year ended
December 28, 1996 (52 weeks)
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock,
par value $.50 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
The aggregate market value of voting stock held by non-affiliates as of February
14, 1997 is $77,274,041 computed by reference to the closing price on the New
York Stock Exchange on such date.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of February 14, 1997.
Class Outstanding
Common Stock,
par value $.50 6,193,634 shares
DOCUMENTS INCORPORATED BY REFERENCE
Document Reference
- -------- ---------
Pages 12 to 30 inclusive of the Annual Report to Share-
holders for the Fiscal Year Ended December 28, 1996 Part II
Pages 2 to 11 inclusive of the definitive Proxy Statement
dated March 20, 1997 Part III
(Note: Portions of pages 10 through 12 are not deemed "filed")
The index of exhibits is located on page number 7 of 15.
1 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART I
Item 1. Business
The Registrant was incorporated in Pennsylvania in 1914 and maintains its
main offices and manufacturing facilities in Philadelphia, Pennsylvania. The
Registrant's Tastykake Division (Tastykake) is engaged in the manufacture and
sale of a variety of small single portion cakes, pies, cookies, muffins,
pretzels, brownies, pastries, donuts and miniature donuts, and cupcakes under
the well established trademark, TASTYKAKE(R). These products comprise
approximately 85 varieties. The availability of some products, especially the
holiday-themed offerings, varies according to the season of the year. The cakes,
cookies and donuts principally sell at retail prices for individual packages
ranging from 30(cent) to 75(cent) per package and family convenience packages
and jumbo packs ranging from $1.99 to $3.99. The best known products with the
widest sales acceptance are various cupcakes and sponge cakes marketed under the
product trademarks JUNIORS(R) and KRIMPETS(R), and chocolate covered cakes under
KANDY KAKES(R). The pies principally sell at retail for 75(cent) each and
include various fruit and creme filled varieties and, at various times of the
year, additional seasonal varieties. The pastries and brownies are marketed
principally in snack packages and sell at a retail price of 75(cent) per
package. In response to a major market trend that has been heightened
considerably by the introduction of nutritional labeling, eight new low-fat cake
varieties were introduced in 1995. These low-fat products are sold primarily in
family convenience packages which sell at a retail price of $2.49 per package.
Individual muffins were introduced in 1996, three varieties of which were
low-fat. The muffins sell at a retail price of 99(cent) each.
Tastykake products are sold principally by independent owner/operators
through distribution routes to approximately 25,000 retail outlets in a six
state region from New York to Virginia, which is Tastykake's principal market.
Tastykake also distributes its products through major grocery chains in states
located throughout the mid-west, southwest and south. Including these market
areas, products are sold by distributors in approximately thirty states.
Tastykake also distributes its products through the TASTYKARE(TM) program,
whereby consumers can call a toll-free number to order the delivery of a variety
of Tastykake gift packs. Although the division's three largest customers
comprise a significant portion of its net sales revenue, the large number of
retailers comprising the customer base ensure the availability of TASTYKAKE(R)
products to consumers.
On July 1, 1996, the Registrant, 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.
Tasty Baking Oxford, Inc. is now in the process of planning for and acquiring
the production lines that will be placed in the facility. This facility will
manufacture products under the trademark TASTYKAKE(R). It is expected that
production at this facility will begin during the first quarter of 1997.
In August 1995, the Registrant acquired all of the outstanding shares of
capital stock of Dutch Mill Baking Company, Inc. (Dutch Mill). Dutch Mill, based
in Wyckoff, New Jersey, produces approximately 25 varieties of donuts, cookies
and cakes which are marketed primarily under the trademark DUTCH MILL(R) through
distributors to retail outlets in the New York City metropolitan area. These
products are sold primarily in family convenience packages at retail prices
ranging from $1.99 to $2.99 per package. During 1996, the Registrant reduced
Dutch Mill donut packaging from an eight-count to a six-count box, allowing them
to set the regular retail price at a competitive level.
The Registrant maintains a comprehensive advertising program which utilizes
outdoor poster campaigns, newspapers, customer coupons, radio and television
spot advertising and promotions with various sports teams. While the companies
sponsor research and development activities, the cost is not a material item.
The Registrant is engaged in a highly competitive business, particularly in
new marketing areas where its trademarks and reputation are not well-known.
Although the number of competitors varies among marketing areas and certain
competitors are national companies with multiple production facilities and a
nationwide distribution system, the Registrant believes it is one of the largest
independent producers in the country specializing primarily in small pies and
cakes. The Registrant is able to maintain a strong competitive position in its
principal marketing areas through the quality of its products.
2 of 15
<PAGE>
Item 1. Business, continued
No difficulty was experienced in obtaining raw materials in 1996. It is not
anticipated that there will be any significant adverse effects on the financial
condition of the Registrant as a result of price fluctuations or availability of
raw materials in 1997.
The Registrant's policies with respect to working capital items is not
unique. Inventory is generally maintained at levels sufficient for one to three
weeks sales, while the ratio of current assets to current liabilities is
maintained at a level between 1.5 and 2.5 to 1.
The Registrant employs approximately 1,050 persons, including approximately
100 part-time employees.
Item 2. Properties
The locations and primary use of the materially important physical
properties of the Registrant and its subsidiaries are as follows:
Location Primary Facility Use
2801 Hunting Park Avenue Corporate Office,
Philadelphia, PA (1) Production of cakes,
pies and cookies
Fox and Roberts Streets Sales and Finance Offices,
Philadelphia, PA (1) Data Processing
Operations, Office
Services and Warehouse
500 Braen Avenue Dutch Mill Offices,
Wyckoff, NJ (2) Production of donuts, cookies
and cakes
700 Lincoln Street Tasty Baking Oxford Offices,
Oxford, PA (3) Future production of honey
buns and other varieties of
baked goods
(1) These properties are recorded as capital leases. For a description of
major encumbrances on these properties, see Note 8 and 9 of Notes to
Consolidated Financial Statements in the 1996 Annual Report to Shareholders -
Exhibit 13, incorporated herein by reference.
(2) This property is leased under an operating lease. For a description of
rental obligations, see Note 9 of Notes to Consolidated Financial Statements in
the 1996 Annual Report to Shareholders - Exhibit 13, incorporated herein by
reference.
(3) This property was purchased and is owned by Tasty Baking Oxford, Inc.
In addition to the above, the Registrant leases various other properties
used principally as local pick up and distribution points. All of these
properties are sufficient for the business of the Registrant as now conducted,
although certain manufacturing space is near full utilization.
3 of 15
<PAGE>
Item 3. Legal Proceedings
In November, 1995, the Registrant received a proposed assessment from the
Internal Revenue Service ("IRS") for employment taxes based on an assertion that
during the years 1990 through 1994 the Registrant's independent owner/operators
were employees and not independent contractors. The Registrant has filed a
formal Protest with the IRS and has held conferences with an appeals officer of
the IRS. The Registrant believes that it has good grounds for the defenses which
it has asserted and has a reasonable chance for favorable resolution on all
issues. At this time the Registrant is unable to estimate the possible loss, if
any, that may be incurred as a result of this proposed assessment. The ultimate
outcome of this proposed assessment may or may not have a material impact on the
Registrant's financial position or results of operations.
The Registrant is involved in certain legal and regulatory actions, all of
which have arisen in the ordinary course of the Registrant's business. The
Registrant is unable to predict the outcome of these matters, but does not
believe that the ultimate resolution of such matters will have a material
adverse effect on the consolidated financial position or results of operations
of the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
This item is not applicable.
4 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART II
CROSS REFERENCE INDEX
FORM 10-K
ITEM NUMBER AND CAPTION INCORPORATED MATERIAL
Page(s) in Annual Report to
Shareholders for the Fiscal
Year Ended December 28, 1996
Item 5 Market for the Registrant's
Common Stock and Related
Shareholder Matters 16
Item 6 Selected Financial Data 17
Item 7 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 13 - 15
Item 8 Consolidated Financial Statements
and Supplementary Data:
Summary of Significant Accounting
Policies 12
Quarterly Summary 16
Consolidated Statements of
Operations and Retained Earnings 18
Consolidated Statements of Cash Flows 19
Consolidated Balance Sheets 20 - 21
Consolidated Statements of Changes
in Capital Accounts 22
Notes to Consolidated Financial
Statements 23 - 30
Report of Independent Accountants 31
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
This item is not applicable.
5 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART III
CROSS REFERENCE INDEX
FORM 10-K
ITEM NUMBER AND CAPTION INCORPORATED MATERIAL
Page(s) in definitive
Proxy Statement
Item 10 Directors and Executive Officers
of the Registrant 4 - 6
Item 11 Executive Compensation* 7 - 11
Item 12 Security Ownership of Certain Beneficial
Owners and Management 2 - 3
Item 13 Certain Relationship and Related
Transactions
With respect to certain business
relationships of Fred C. Aldridge, Jr.,
Esquire, director 5
Section 16(a) Beneficial Ownership
Reporting Compliance with respect to
the late filing of Form 3 for
G. Fred DiBona, Jr. 6
* Note that the sections entitled "Report of Compensation Committee on
Executive Compensation" and "PERFORMANCE GRAPH" pursuant to Reg. S-K, Item
402(a)(9) are not deemed "Soliciting Material" or "filed" as part of this
report.
6 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
for the fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994
------
Pages
(a)-1. List of Financial Statements
Summary of Significant Accounting Policies Incorporated herein
Quarterly Summary by reference to
Consolidated Statements of Operations and page 12 to 30
Retained Earnings inclusive of the
Consolidated Statements of Cash Flows Annual Report to
Consolidated Balance Sheets Shareholders for the
Consolidated Statements of Changes in Capital fiscal year ended
Accounts December 28, 1996.
Notes to Consolidated Financial Statements See page 11 of 15.
(a)-2. Schedule* for the fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994:
Report of Independent Accountants 9 of 15
II. Valuation and Qualifying Accounts 10 of 15
(a)-3. Exhibits Index - The following Exhibit Numbers refer to
Regulation S-K, Item 601**
(3) Articles of Incorporation and Bylaws of
registrant as amended and currently effective are
incorporated herein by reference to Exhibit 3 to
Form 10-K report of Registrant for 1995.
(10)(a) 1991 Long-term Incentive Plan, effective as of
January 1, 1991, is incorporated herein by
reference to Exhibit 10 to Form 10-K report of
Registrant for 1990.
(b) 1985 Stock Option Plan, effective December 20,
1985, is incorporated herein by reference to
Exhibit A of the Proxy Statement for the Annual
Meeting of Shareholders on April 18, 1986, filed
on or about March 21, 1986.
(c) Senior Management Employment Agreements dated
July 1, 1988 are incorporated herein by reference
to Exhibit 10(c) to Form 10-K report of
Registrant for 1991.
(d) Supplemental Executive Retirement Plan, dated
February 18, 1983 and amended May 15, 1987 and
April 22, 1988, is incorporated herein by
reference to Exhibit 10(d) to Form 10-K report of
Registrant for 1991.
* All other schedules are omitted because they are inapplicable or not required
under Regulation S-X or because the required information is given in the
financial statements and notes to financial statements.
** All other exhibits are omitted because they are inapplicable.
7 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
ITEM 14, CONTINUED
Pages
(e) Management Stock Purchase Plan is incorporated
herein by reference to the Proxy Statement for
the Annual Meeting of Shareholders on April 19,
1968 filed on or about March 20, 1968 and amended
April 23, 1976, April 24, 1987 and April 19,
1991.
(f) Trust Agreement dated as of November 17, 1989
between the company and Meridian Trust Company
relating to Supplemental Executive Retirement
Plan is incorporated herein by reference to
Exhibit 10(f) to Form 10-K report of Registrant
for 1994.
(g) Director Retirement Plan dated October 16, 1987
is incorporated herein by reference to Exhibit
10(h) to Form 10-K report of Registrant for 1992.
(h) 1993 Replacement Option Plan (P&J Spin-Off) is
incorporated herein by reference to Exhibit A of
the Definitive Proxy Statement dated March 17,
1994 for the Annual Meeting of Shareholders on
April 22, 1994.
(i) 1994 Long Term Incentive Plan is incorporated
herein by reference to Exhibit 10(j) to Form 10-K
report of Registrant for 1994.
(j) Trust Agreement dated January 19, 1990 between
the company and Meridian Trust Company relating
to the Director Retirement Plan is incorporated
herein by reference to Exhibit 10(k) to Form 10-K
report of Registrant for 1995.
Each of exhibits 10(a) - 10(j) constitute management contracts or
compensatory plans or arrangements.
(13) Annual Report to Shareholders for the fiscal year
ended December 28, 1996, pages 12 to 30 only.
(The balance of the Annual Report is not deemed
"filed" or "Soliciting Material".) 11 of 15
(21) Subsidiaries of the Registrant 12 of 15
(23)(a) Consent of Independent Accountants with respect
to Form S-3 (Registration No. 33-30560) and Post-
Effective Amendment No. 10 to Form S-8
(Registration No. 2-55836) and Post- Effective
Amendment No. 3 to Form S-8 (Registration No.
33-18904) and Post- Effective Amendment No. 4 to
Form S-3 (Registration No. 33-8427). 13 of 15
(b) The Registrant did not file a report on Form 8-K
during the fourth quarter ended December 28,
1996.
8 of 15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
the Board of Directors
Tasty Baking Company
Philadelphia, Pennsylvania
Our report on the consolidated financial statements of Tasty Baking Company
and subsidiaries has been incorporated by reference in this Form 10-K from page
31 of the 1996 Annual Report to the Shareholders of Tasty Baking Company. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 7 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
February 12, 1997
9 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
for the fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions(1) Period
Deducted from applicable assets:
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
For the fiscal year ended December 28, 1996 $2,361,794 $774,976 $741,906 $2,394,864
========= ======== ======= =========
For the fiscal year ended December 30, 1995 $2,063,765 $785,036 $487,007 $2,361,794
========= ======== ======= =========
For the fiscal year ended December 31, 1994 $1,644,739 $592,040 $173,014 $2,063,765
========= ======== ======= =========
Inventory valuation reserves:
For the fiscal year ended December 28, 1996 $75,000 $60,386 $35,386 $100,000
========= ======== ======= =========
For the fiscal year ended December 30, 1995 $74,535 $12,781 $12,316 $75,000
========= ======== ======= =========
For the fiscal year ended December 31, 1994 $81,023 $129,847 $136,335 $74,535
========= ======== ======= =========
Spare parts inventory reserve for obsolescence:
For the fiscal year ended December 28, 1996 $100,000 $282,315 $82,315 $300,000
========= ======== ======== =========
For the fiscal year ended December 30, 1995 $73,025 $46,262 $19,287 $100,000
========= ======== ======= ==========
For the fiscal year ended December 31, 1994 $89,760 $23,825 $40,560 $73,025
========= ======== ======= =========
Equipment allowance for obsolescence:
For the fiscal year ended December 28, 1996 $25,000 $40,019 $(9,981) $75,000
========= ======== ======= =========
For the fiscal year ended December 30, 1995 $19,136 $29,726 $23,862 $25,000
========= ======== ======= ==========
For the fiscal year ended December 31, 1994 $32,510 $ (13,374) (2) $ -- $19,136
========= ======== ======= =========
</TABLE>
(1) Decrease due to write-off of related assets.
(2) Reflects a reestimation of the equipment allowance for
obsolescence during fiscal year 1994.
10 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
Annual Report to Shareholders for the fiscal year ended Decmeber 28, 1996.
Exhibit 13
11 of 15
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The Registrant owns, directly or indirectly, 100% of the outstanding capital
stock of the following subsidiaries:
Business Name of Corporation Jurisdiction of Incorporation
TBC Financial Services, Inc. Pennsylvania
Dutch Mill Baking Company, Inc. New Jersey
Tasty Baking Oxford, Inc. Pennsylvania
The aforementioned is included in the Consolidated Financial Statements of the
Registrant filed herewith.
EXHIBIT 21
12 of 15
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Tasty Baking Company and subsidiaries on Form S-3 (File No. 33-30560), Post-
Effective Amendment No. 10 to Form S-8 (File No. 2-55836) and Post Effective
Amendment No. 3 to Form S-8 (File No. 33-18904) and Post-Effective Amendment No.
4 to Form S-3 (File No. 33-8427) of our reports dated February 12, 1997, on our
audits of the consolidated financial statements and financial statement
schedules of Tasty Baking Company and subsidiaries as of December 28, 1996 and
December 30, 1995, and for the three fiscal years in the period ended December
28, 1996, which reports are included or incorporated by reference in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
March 24, 1997
EXHIBIT 23(a)
13 of 15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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
By /s/ Carl S. Watts
Carl S. Watts, President
and Chief Executive Officer
14 of 15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/s/ Philip J. Baur Chairman of the Board March 21, 1997
Philip J. Baur, Jr. and Director of Tasty
Baking Company
/s/ Carl S. Watts President and Chief March 21, 1997
Carl S. Watts Executive Officer and
Director of Tasty
Baking Company
/s/ Nelson G. Harris Chairman of the March 21, 1997
Nelson G. Harris Executive Committee and
Director of Tasty
Baking Company
/s/ John M. Pettine Vice President, Chief March 21, 1997
John M. Pettine Financial and Accounting
Officer and Director of
Tasty Baking Company
/s/ Fred C. Aldridge, Jr. Director of Tasty Baking March 21, 1997
Fred C. Aldridge, Jr. Company
/s/ G. Fred DiBona, Jr. Director of Tasty Baking March 21, 1997
G. Fred DiBona, Jr. Company
/s/ James L. Everett,III Director of Tasty Baking March 21, 1997
James L. Everett, III Company
/s/Judith M von Seldeneck Director of Tasty Baking March 21, 1997
Judith M. von Seldeneck Company
15 of 15
Tasty Baking Company
is commited to being a profitable and
independent company with a strong
national presence and a leadership
recognition in the baking industry.
96 ANNUAL REPORT
<PAGE>
Financial Information
Management's Review
12 Summary of Significant Accounting Policies
13 Management's Analysis
16 Quarterly Summary
17 Five Year Selected Financial Data
Consolidated Financial Statements
18 Operations and Retained Earnings
19 Cash Flows
20 Balance Sheets
22 Changes in Capital Accounts
23 Notes to Consolidated Financial Statements
31 Report of Independent Accountants
11
<PAGE>
Summary of Significant Accounting Policies
Fiscal Year
The company and its subsidiaries operate under a 52-53 week fiscal year.
Basis of Consolidation
The consolidated financial statements include the accounts of the company and
its subsidiaries. Intercompany transactions are eliminated.
Use of Estimates
Certain amounts included in the accompanying consolidated financial statements
and related footnotes reflect the use of estimates based on assumptions made by
management. These estimates are made using all information available to
management, and management believes that these estimates are as accurate as
possible as of the dates and for the periods that the financial statements are
presented. Actual amounts could differ from these estimates.
Inventory Valuation
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out (FIFO) and last-in, first-out (LIFO) methods.
Property and Depreciation
Property, plant and equipment are carried at cost. Costs of major additions,
replacements and betterments are capitalized and maintenance and repairs which
do not improve or extend the life of the respective assets are charged to income
as incurred. When property is retired or otherwise disposed of, the cost of the
property and the related accumulated depreciation are removed from the accounts
and any resulting gains or losses are reflected in income for the period.
Depreciation is computed by the straight-line method over the estimated useful
lives of the assets. For income tax purposes, accelerated depreciation methods
are used. Amortization of asset values under capital leases which transfer asset
ownership by the end of the lease term or contain bargain purchase options is
provided over the estimated useful asset lives.
Amortization of asset values under other capital leases and depreciation of
leasehold improvements under operating leases are provided over the terms of the
related leases or the asset lives, if shorter.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Pension Cost
Pension cost was determined in accordance with the requirements of Statement of
Financial Accounting Standards No. 87 - "Employers' Accounting for Pensions."
The company's general funding policy is to contribute amounts deductible for
federal income tax purposes plus such additional amounts, if any, as the
company's actuarial consultants advise to be appropriate. Contributions are
intended to provide for benefits attributed to service to date and for those
expected to be earned in the future.
Net Income Per Common Share
Net income per common share is based on the weighted average number of common
shares and equivalent common shares outstanding during the year.
12
<PAGE>
Management's Analysis
Results of Operations
Net Income for the fiscal year ended December 28, 1996 increased to $6,304,579
or $1.02 per share from $5,640,112 or $.92 per share for the fiscal year ended
December 30, 1995. Net income for the fiscal year ended December 31, 1994 was
$5,800,744 or $.94 per share. The results for 1995 included a charge to net
income of $550,000 or $.09 per share for severance cost, a charge to net income
of $550,868 or $.09 per share related to the remeasuring of the company's
deferred tax assets and an increase to net income of $1,751,577 or $.28 per
share related to the amortization of the gain on the sale of company routes.
After eliminating the effect of these items the comparable 1995 results were
$4,989,400 or $.82 per share. Thus, the company's 1996 net income of $6,304,579
or $1.02 per share represents improvements of 26% and 24%, respectively, over
the comparable 1995 results.
Net sales increased to $146,718,391 in 1996 from $141,831,073 in 1995
representing an increase of 3.4%. In 1996, Dutch Mill Baking Company, Inc.
(Dutch Mill), which was acquired on August 29, 1995, contributed net sales of
$3,573,720 compared to $1,217,737 in 1995. On a comparable basis, excluding the
net sales contributed by Dutch Mill, net sales increased $2,531,335 or 1.8%. The
increase was due to excellent market conditions in the second half of 1996, a
well planned promotional schedule and gradual acceptance of price increases
instituted by the company.
In 1995, net sales decreased slightly to $141,831,073 from $142,055,111 in 1994.
On a comparable basis, excluding the net sales contributed by Dutch Mill, net
sales decreased by $1,441,775 or 1.0% for 1995 when compared to 1994. 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
an initial resistance to the price increase introduced in the fourth quarter of
1995. In 1994, net sales increased 3% to $142,055,111 from $137,772,730 in 1993.
This increase was due to an increase in unit sales of 2% combined with a
decrease in promotional expenses. The increase in unit sales was aided by the
introduction of new products.
Cost of sales as a percentage of net sales was 62.0%, 63.0%, and 59.8% in 1996,
1995, and 1994, respectively. In 1996 and 1995 the cost of shipping cases was
included in cost of sales, while for 1994 these charges were reflected in
selling, general and administrative expenses. Those charges were approximately
$2,706,000, $3,262,000, and $2,687,000 in 1996, 1995, and 1994 respectively. In
1996, the company realized an improvement in gross margin as a result of
favorable price increases on selected products and continued improvements in
plant operating efficiencies. In 1995, after the adjustment for the shipping
cases, the company realized a decrease in gross margins, primarily as a result
of higher ingredient and packaging costs. In 1994, the company realized an
improvement in gross margins as a result of savings from lower utility costs and
reduced costs in connection with the restructuring program.
Selling, general and administrative expenses in fiscal year 1996 increased
$1,581,518 or 4.3% over fiscal year 1995. Most of the increase can be attributed
to a full year of Dutch Mill expenses versus four months in 1995. The remaining
increases were selling and shipping costs associated with the higher sales.
These increases were partially offset by a reduction in advertising expense. In
1995 selling, general and administrative expenses decreased $3,673,358 or 9.0%
from fiscal year 1994. A portion of this decrease, however, reflects the
reclassification of shipping case costs as previously discussed. On a comparable
basis, and further excluding the effect of Dutch Mill, selling, general and
administrative expenses decreased by $1,468,240 or 3.9%. The decrease was
primarily due to the first full year of administrative savings associated with
the restructuring program implemented in the second quarter of 1994 which was
somewhat offset by increased advertising expenditures. Selling, general and
administrative expenses in 1994 remained relatively unchanged from 1993 levels.
In 1994, administrative savings generated by the restructuring program were
offset by increases in selling and advertising expenses.
13
<PAGE>
Results of Operations (continued)
Depreciation expense in 1996 and 1995, excluding the effect of Dutch Mill,
remained relatively unchanged. Depreciation expense in 1994 increased by
$542,653 or 8% primarily as a result of charges associated with the roll-out in
1993 of a hand-held computer system to the sales routes.
Other income, net decreased in 1996 compared to 1995 by $3,158,592 which is
attributed to the amortization of the gain on sale of company routes in 1995. In
1995, the total gain on the sale of company routes, which has been fully
amortized, was $3,162,033 resulting in an after-tax increase to net income of
$1,751,577 or $.28 per share. The increase in 1995 compared to 1994 was due to
the increase in the amortization of the gain on sale of company routes. Other
income, net remained relatively unchanged in 1994.
Interest expense in 1996 decreased as a result of lower average borrowing levels
and lower average interest rates. Interest expense in 1995 and 1994 decreased as
a result of lower average borrowing levels somewhat offset by higher average
interest rates.
The effective tax rates in 1996, 1995, and 1994 were 38.6%, 45.8%, and 39.7%,
respectively. In 1995, excluding the effect of the decrease in the company's net
deferred tax asset, the effective tax rate was 40.6%. The principal reason for
the difference between the effective rate and statutory rate for all years was
the effect of state income taxes.
In November, 1995, the company received a proposed assessment from the Internal
Revenue Service ("IRS") for employment taxes based on an assertion that during
the years 1990 through 1994 the company's independent owner/operators were
employees and not independent contractors. The company has filed a formal
Protest with the IRS and has held conferences with an appeals officer of the
IRS. The company believes that it has good grounds for the defenses which it has
asserted and has a reasonable chance for favorable resolution on all issues. At
this time the company is unable to estimate the possible loss, if any, that may
be incurred as a result of this proposed assessment. The ultimate outcome of
this proposed assessment may or may not have a material impact on the company's
financial position or results of operations.
14
<PAGE>
Financial Condition
Historically, the company's ability to generate sufficient amounts of cash has
primarily come from operations. Bank borrowings, under various lines of credit
arrangements, are used to supplement cash flow from operations during periods of
cyclical shortages.
Net cash from operating activities increased in 1996 by $4,640,480 over the 1995
amount and totaled $15,835,771, a record amount from bakery operations. The
increase resulted principally from favorable changes in net income, receivables,
inventories and other working capital items. Net cash from operating activities
was used primarily to fund capital expenditures of $12,534,926 and dividend
payments of $3,465,208.
Capital expenditures totaled $12,534,926 in 1996 of which approximately
$8,900,000 represents the company's investment to date in the new Oxford
facility which was acquired in July 1996. The remaining capital expenditures
were made to continue the program of upgrading the company's bakery production
equipment. New loans to owner/operators in 1996 were funded entirely from
owner/operator loan payments and pay-offs which exceeded new loans by $773,717.
These funds were used principally to reduce short-term debt.
Net cash from operating activities in 1995 increased by $601,579 relative to the
comparable amount in 1994. The increase is primarily the result of favorable
changes in pension contributions, non-cash deferred tax adjustments and
favorable changes in working capital items, principally accounts payable. These
changes were partially offset by certain non-cash items, principally the gain on
the sale of the distributor routes, an increase in federal income tax payments
and an unfavorable change in accounts receivable. Net cash from operating
activities in 1995 totaled $11,195,291 and was used principally for dividend
payments of $3,443,027, repayment of long-term debt of $2,524,242, repayment of
short-term debt of $1,100,000 and capital expenditures.
Capital expenditures totaled $4,108,984 in 1995. These expenditures continued
the company's program of upgrading its bakery production equipment. New loans to
owner/operators in 1995 were funded principally from owner/operator loan
payments and pay-offs.
Net cash from operating activities in 1994 decreased by $2,445,671 relative to
1993. Favorable changes in accrued and deferred taxes and the effect of
increased depreciation were not sufficient to offset unfavorable changes in
accrued pensions and accounts payable which are primarily responsible for the
decline. Net cash from operating activities in 1994 totaled $10,593,712 and was
used principally for dividend payments of $3,252,857, repayment of long-term
debt of $3,624,638 and capital expenditures.
Capital expenditures totaled $3,704,770 in 1994. These expenditures were used to
complete the project to upgrade the electrical transformers within the bakery
and for the purchase of new computer software. New loans to Tastykake route
owner/operators in 1994 were, in effect, funded entirely from owner/operator
loan payments and pay-offs.
The company anticipates that cash flow from operating activities will improve in
1997, and with the continued availability of bank lines of credit, the Revolving
Credit Agreement and other long-term financing, sufficient cash will be
available for planned capital expenditures and other operating and financial
requirements.
15
<PAGE>
Quarterly Summary (Unaudited)
Summarized quarterly financial data (in thousands of dollars except for per
share amounts) for 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
1996
Net sales $ 35,944 $ 37,749 $ 36,022 $ 37,003 $146,718
Gross profit (after depreciation) 11,287 12,601 11,851 12,756 48,495
Net income 1,219 1,837 1,052 2,197 6,305
Per share of common stock:
Net income .20 .30 .17 .35 1.02
Cash dividends .14 .14 .14 .14 .56
Market prices:
High 12-3/4 11-7/8 12-7/8 15 15
Low 11-1/8 10-5/8 10-7/8 12-1/2 10-5/8
1995(a)
Net sales $ 37,064 $ 36,656 $ 33,654 $ 34,457 $141,831
Gross profit (after depreciation) 12,027 11,814 9,988 11,135 44,964
Net income 1,971 1,227 274 2,168 5,640
Per share of common stock:
Net income .32 .20 .04 .35 .92
Cash dividends .14 .14 .14 .14 .56
Market prices:
High 14-1/2 14 14-3/4 15-1/4 15-1/4
Low 12-3/4 12-1/2 12-1/4 11-7/8 11-7/8
</TABLE>
Each quarter consists of thirteen weeks. The market prices of the company's
stock reflect the high and low price by quarter as traded on the American Stock
Exchange through September 23, 1996 and the New York Stock Exchange for the
remainder of 1996. The approximate number of holders of record of the company's
stock (par value $.50 per share) as of February 14, 1997 was 3,500.
(a) Includes an after-tax charge to net income in the second quarter in the
amount of $550,000 or $.09 per share for severance costs and an after-tax
charge to net income in the third quarter in the amount of $551,000 or $.09
per share resulting from a remeasuring of the company's deferred tax asset
and liability accounts. The amortization of the gain on sale of company
routes resulted in increased net income in each of the first three quarters
of $254,000 or $.04 per share, and in the fourth quarter by $990,000 or
$.16 per share. Net income per share amounts by quarter do not add due to
rounding.
16
<PAGE>
Five Year Selected Financial Data
All amounts presented are in thousands except for per share amounts.
1996 1995(b) 1994(c) 1993(d) 1992
<TABLE>
<CAPTION>
Operating Results
<S> <C> <C> <C> <C> <C>
Net Sales $146,718 $141,831 $142,055 $137,773 $138,381
Income from Continuing Operations(a) $ 6,305 $ 5,640 $ 5,801 $ 5,687 $ 5,022
Per Share Amounts
Income from Continuing Operations(a) $ 1.02 $ .92 $ .94 $ .93 $ .83
Cash Dividends $ .56 $ .56 $ .53 $ .655 $ .80
Shareholders' Equity $ 6.28 $ 5.81 $ 5.37 $ 4.93 $ 10.03
Financial Position
Working Capital $ 10,160 $ 13,944 $ 12,340 $ 10,776 $ 7,422
Total Assets $ 87,428 $ 85,303 $ 87,136 $ 90,505 $112,096
Long-term Obligations $ 6,434 $ 6,230 $ 7,516 $ 11,206 $ 17,185
Shareholders' Equity $ 38,907 $ 35,938 $ 32,951 $ 30,243 $ 60,785
Shares of Common Stock Outstanding 6,194 6,185 6,136 6,136 6,058
Statistical Information
Capital Expenditures, Net $ 12,479 $ 3,685 $ 3,705 $ 7,305 $ 4,682
Depreciation $ 7,268 $ 7,463 $ 7,327 $ 6,785 $ 6,992
Average Common Shares
Outstanding 6,187 6,161 6,139 6,101 6,086
<FN>
(a) Amortization of the gain on sale of company routes resulted in increased
income from continuing operations of $1,752,000 or $.28 per share in 1995,
$898,000 or $.15 per share in 1994, $893,000 or $.15 per share in 1993, and
$904,000 or $.15 per share in 1992.
(b) Income from continuing operations and per share amount include after-tax
charges of $550,000 or $.09 per share for severance costs and $551,000 or
$.09 per share resulting from a remeasuring of the company's deferred tax
assets and liabilities.
(c) Income from continuing operations and per share amount include an after-tax
charge in the amount of $719,000 or $.12 per share for the restructuring
program.
(d) In August 1993, the company spun-off its wholly-owned subsidiary, Phillips
& Jacobs, Incorporated (P&J), to its shareholders. Cash dividends and
shareholders' equity per share amounts, long-term obligations and
shareholders' equity were impacted as a result of the spin-off of P&J.
</FN>
</TABLE>
17
<PAGE>
Consolidated Statements of Operations and Retained Earnings
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Dec. 28, Ended Dec. 30, Ended Dec. 31,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net sales $ 146,718,391 $ 141,831,073 $ 142,055,111
------------- ------------- -------------
Costs and expenses:
Cost of sales 90,955,370 89,403,295 84,921,787
Depreciation 7,267,639 7,463,311 7,327,385
Selling, general and administrative 38,622,140 37,040,622 40,713,980
Severance and restructure charges -- 950,000 1,240,000
Interest expense 520,375 675,613 803,688
Provision for doubtful accounts 825,145 785,036 592,040
Other income, net (1,742,863) (4,901,455) (3,164,684)
------------- ------------- -------------
136,447,806 131,416,422 132,434,196
------------- ------------- -------------
Income before provision for income taxes 10,270,585 10,414,651 9,620,915
------------- ------------- -------------
Provision for income taxes:
Federal 3,528,932 2,345,811 3,086,954
State 784,352 500,319 942,330
Deferred (347,278) 1,377,541 (209,113)
Decrease in net deferred tax asset due to change in tax rate -- 550,868 --
------------- ------------- -------------
3,966,006 4,774,539 3,820,171
------------- ------------- -------------
Net income 6,304,579 5,640,112 5,800,744
Retained Earnings
Balance, beginning of year 19,425,849 17,228,764 14,680,877
Cash dividends paid on common shares ($.56 per share in
1996 and 1995, $.53 per share in 1994) (3,465,208) (3,443,027) (3,252,857)
------------- ------------- -------------
Balance, end of year $ 22,265,220 $ 19,425,849 $ 17,228,764
============= ============= =============
Net income per common share $ 1.02 $ 0.92 $ 0.94
============= ============= =============
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
18
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Dec. 28, Ended Dec. 30, Ended Dec. 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from (used for) operating activities
Net income $ 6,304,579 $ 5,640,112 $ 5,800,744
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 7,267,639 7,463,311 7,327,385
Provision for doubtful accounts 825,145 785,036 592,040
Deferred taxes (346,213) 1,928,409 (209,113)
Other 754,438 (2,796,406) (251,160)
Changes in assets and liabilities:
Decrease (increase) in receivables 843,167 (1,271,407) (804,967)
Decrease (increase) in inventories 407,770 (148,302) 15,659
Decrease (increase) in prepayments and other 454,398 (482,770) 52,783
Increase (decrease) in accrued income taxes 1,474,887 (893,111) 214,083
Increase (decrease) in accrued pensions,
accounts payable and other current liabilities (2,150,039) 970,419 (2,143,742)
------------ ------------ ------------
Net cash from operating activities 15,835,771 11,195,291 10,593,712
------------ ------------ ------------
Cash flows from (used for) investing activities
Proceeds from owner/operators' loan repayments 3,804,198 3,276,511 3,860,216
Purchase of property, plant and equipment (12,534,926) (4,108,984) (3,704,770)
Loans to owner/operators (3,030,481) (3,442,811) (3,876,506)
Other 114,483 85,115 11,068
------------ ------------ ------------
Net cash used for investing activities (11,646,726) (4,190,169) (3,709,992)
------------ ------------ ------------
Cash flows from (used for) financing activities
Dividends paid (3,465,208) (3,443,027) (3,252,857)
Payment of long-term debt (6,875,575) (2,524,242) (3,624,638)
Net decrease in short-term debt (700,000) (1,100,000) --
Additional long-term debt 7,000,000 -- --
------------ ------------ ------------
Net cash used for financing activities (4,040,783) (7,067,269) (6,877,495)
------------ ------------ ------------
Net increase (decrease) in cash 148,262 (62,147) 6,225
Cash, beginning of year 85,104 147,251 141,026
------------ ------------ ------------
Cash, end of year $ 233,366 $ 85,104 $ 147,251
============ ============ ============
Supplemental cash flow information
Cash paid during the year for:
Interest $ 600,135 $ 718,587 $ 816,238
============ ============ ============
Income taxes $ 2,421,142 $ 4,116,161 $ 3,767,503
============ ============ ============
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
19
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Dec. 28, Dec. 30,
1996 1995
<S> <C> <C>
Assets
Current Assets:
Cash $ 233,366 $ 85,104
Receivables, less allowance of $2,394,864
and $2,361,794, respectively 16,962,591 18,630,903
Inventories 2,855,512 3,263,282
Deferred income taxes 2,504,715 2,673,617
Prepayments and other 221,299 675,697
------------ ------------
Total current assets 22,777,483 25,328,603
------------ ------------
Property, plant and equipment:
Land 1,267,095 697,987
Buildings and improvements 27,366,281 24,797,546
Machinery and equipment 110,715,679 101,374,855
------------ ------------
139,349,055 126,870,388
Less accumulated depreciation and amortization 98,375,648 91,230,770
------------ ------------
40,973,407 35,639,618
------------ ------------
Other assets:
Long-term receivables 10,288,159 11,074,974
Deferred income taxes 10,235,656 9,720,541
Spare parts inventory 2,779,531 2,929,882
Miscellaneous 374,128 609,365
------------ ------------
23,677,474 24,334,762
------------ ------------
$ 87,428,364 $ 85,302,983
============ ============
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Dec. 28, Dec. 30,
1996 1995
<S> <C> <C>
Liabilities
Current Liabilities:
Current portion of long-term debt $ 58,340 $ 127,720
Current obligations under capital leases 587,336 513,159
Notes payable, banks -- 700,000
Accounts payable 3,963,610 4,699,747
Accrued payrolls and employee benefits 5,608,274 4,310,550
Accrued income taxes 1,474,887 --
Other 925,338 1,033,612
----------- -----------
Total current liabilities 12,617,785 11,384,788
----------- -----------
Long-term debt, less current portion 5,302,416 4,576,385
----------- -----------
Long-term obligations under capital leases,
less current portion 1,131,118 1,653,134
----------- -----------
Accrued pensions and other liabilities 11,203,178 13,129,760
----------- -----------
Postretirement benefits other than pensions 18,267,013 18,620,763
----------- -----------
Shareholders' Equity
Common stock, par value $.50 per share, and
entitled to one vote per share:
Authorized 15,000,000 shares, issued 7,289,087 shares 3,644,544 3,644,544
Capital in excess of par value of stock 29,742,513 29,662,330
Retained earnings 22,265,220 19,425,849
----------- -----------
55,652,277 52,732,723
Less:
Treasury stock, at cost:
1,095,453 shares and 1,104,237 shares,
respectively 16,329,055 16,364,757
Management Stock Purchase Plan receivables
and deferrals 416,368 429,813
----------- -----------
38,906,854 35,938,153
----------- -----------
$87,428,364 $85,302,983
=========== ===========
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
21
<PAGE>
Consolidated Statements of Changes in Capital Accounts
<TABLE>
<CAPTION>
Dec. 28, 1996 Dec. 30, 1995 Dec. 31, 1994
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Common Stock:
Balance, beginning of year 7,289,087 $ 3,644,544 7,289,087 $ 3,644,544 7,289,087 $ 3,644,544
--------- ------------ --------- ------------ --------- ------------
Balance, end of year 7,289,087 $ 3,644,544 7,289,087 $ 3,644,544 7,289,087 $ 3,644,544
========= ============ ========= ============ ========= ============
Capital in Excess of
Par Value of Stock:
Balance, beginning of year $ 29,662,330 $ 29,175,510 $ 29,105,725
Issuances:
Management Stock
Purchase Plan 68,251 36,118 25,145
Purchase of subsidiary -- 423,774 --
Tax benefits related to
Management Stock
Purchase Plan and
Stock Option Plan 11,932 26,928 44,640
--------- ------------ --------- ------------ --------- ------------
Balance, end of year $ 29,742,513 $ 29,662,330 $ 29,175,510
========= ============ ========= ============ ========= ============
Treasury Stock:
Balance, beginning of year 1,104,237 $ 16,364,757 1,152,643 $ 16,601,793 1,152,639 $ 16,579,825
========= ============ ========= ============ ========= ============
Management Stock
Purchase Plan:
Reissued (9,559) (43,716) (5,624) (36,433) (2,812) (11,270)
Reacquired 775 8,014 3,166 24,638 2,816 33,238
Shares reacquired (reissued)
in connection with:
Purchase of subsidiary -- -- (45,948) (225,241) -- --
--------- ------------ --------- ------------ --------- ------------
Balance, end of year 1,095,453 $ 16,329,055 1,104,237 $ 16,364,757 1,152,643 $ 16,601,793
========= ============ ========= ============ ========= ============
Management Stock Purchase
Plan Receivables and Deferrals:
Balance, beginning of year $ 429,813 $ 496,196 $ 608,555
Common stock issued 111,966 72,550 36,415
Common stock
repurchased (10,608) (33,602) (34,603)
Note payments and
amortization of
deferred compensation (114,803) (105,331) (114,171)
--------- ------------ --------- ------------ --------- ------------
Balance, end of year $ 416,368 $ 429,813 $ 496,196
========= ============ ========= ============ ========= ============
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
22
<PAGE>
Notes to Consolidated Financial Statements
1. Manufacturing Facility:
On July 1, 1996, the company, through a wholly-owned subsidiary, Tasty Baking
Oxford, Inc., completed the purchase for $4,000,000 of a 160,000 square foot
manufacturing facility in Oxford, Chester County, Pennsylvania. This facility
will enable the company to manufacture products that are currently made for it
by other suppliers, improve its operating margins on those products and expand
new product offerings. The company completed the installation of the first
manufacturing line at the facility which began making products in January, 1997.
A second manufacturing line is planned for the second 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 primarily donuts 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 $303,533 is being amortized on a straight line
basis over fifteen years. Had the acquisition occurred at the beginning of
fiscal year 1995 or 1994 there would have been no significant impact on the
company's consolidated results of operations.
3. Severance and Restructure Charges:
During the second quarter of 1995, the company incurred a
severance charge of $950,000 resulting in a reduction in net income of $550,000
or $.09 per share after related tax benefit. The severance charge resulted from
changes in certain management positions which were established in connection
with a Restructuring Program (the Program) implemented in 1994. During 1996 and
1995, payments approximating $266,000 and $288,000 respectively, were made in
connection with the severance charge.
In the second quarter of 1994, the company implemented the Program which was
designed to enhance overall competitiveness, productivity and efficiency through
the reduction of overhead costs. The Program resulted in a pre-tax charge of
$1,240,000 in the second quarter of 1994 which had an after-tax effect of
$719,200 or $.12 per share. This charge principally reflects the severance costs
resulting from workforce reductions and realignments throughout the company. As
of December 30, 1995, all obligations under the Program have been satisfied.
4. Inventories:
Inventories are classified and valued as follows:
Dec. 28, Dec. 30,
1996 1995
Classification:
Finished goods $ 665,254 $ 467,184
Work in progress 563,381 593,416
Raw materials and supplies 1,626,877 2,202,682
---------- ----------
$2,855,512 $3,263,282
========== ==========
Valued at lower of cost or market:
First-in, first-out (FIFO) $2,147,731 $2,226,253
Last-in, first-out (LIFO) 707,781 1,037,029
---------- ----------
$2,855,512 $3,263,282
========== ==========
For the inventories stated on the LIFO basis, the current replacement cost
exceeds LIFO value by approximately $467,000 at December 28, 1996 and $439,000
at December 30, 1995.
23
<PAGE>
5. Long-Term Receivables and Distribution Routes:
The majority of the company's sales distribution routes are owned by independent
owner/operators who have purchased the exclusive right to sell and distribute
Tastykake products in defined geographical territories. Initially, financing for
the purchase of these distribution routes was provided by a group of banks. In
December, 1995 the final payments were made by the owner/operators on the
initial financing for the purchase of these routes. The company maintains a
wholly-owned subsidiary to finance route purchase activities. At December 28,
1996 and December 30, 1995, notes receivable of $12,423,000 and $12,813,000,
respectively, are included in current and long-term receivables in the
accompanying consolidated balance sheets.
For financial reporting purposes, the net gain from the original sale of the
distribution routes of $15,869,428 was being amortized over ten years beginning
June 30, 1986. In the fourth quarter of 1995, in connection with the final
payments by the owner/operators on the initial financing of the route purchases,
the company completed the amortization of the gain. The resulting additional
amortization of $1,254,957 increased net income in 1995 by $734,501 after
provision for income taxes. The total amount of the gain recognized after
expenses and provision for income taxes was $1,751,577 and $897,815 in 1995 and
1994, respectively.
6. Notes Payable, Banks:
The company has credit arrangements with various banks under which it may borrow
up to $31,000,000 primarily at or below the prime rate of interest. Of the
$31,000,000, $11,000,000 is designated for short-term borrowings, while
$20,000,000 is for use under a Revolving Credit Agreement (see Note 7). The
company has agreed informally with the banks to provide compensating balances,
or fees in lieu thereof; however, withdrawal of funds is not restricted.
Notes payable had a zero balance at December 28, 1996. Notes payable of $700,000
were outstanding at December 30, 1995 at an interest rate of 6.35%. The average
outstanding borrowing during 1996 was $986,000 ($1,044,000 in 1995) and the
average interest rate was 5.47% (6.32% in 1995), calculated on the basis of the
average daily balance. The maximum short-term borrowings by the company at any
period end during 1996 aggregated $3,900,000 ($2,800,000 in 1995).
7. Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Dec. 28, Dec. 30,
1996 1995
<S> <C> <C>
Revolving Credit Agreement, with interest at or below the prime rate
(5.9% average rate at December 28, 1996) $4,000,000 $2,000,000
Term Loan exercised under a Revolving Credit Agreement, with interest
at 6.5%, $51,292 principal and interest payments due quarterly beginning
July 1, 1993 with a final payment of $1,197,796 due April 1, 1996 -- 1,210,268
Term Loan exercised under a Revolving Credit Agreement, with interest
at 6.5%, $44,877 principal and interest payments due quarterly beginning
April 3, 1994 with a final payment of $1,031,236 due January 2, 1997 1,031,236 1,139,290
Term Loan with interest at 8%, $4,374 principal and interest payments due
monthly beginning September 18, 1995 with a final payment of $253,834
due August 18, 1999 329,520 354,547
---------- ----------
5,360,756 4,704,105
Less current portion 58,340 127,720
---------- ----------
$5,302,416 $4,576,385
========== ==========
</TABLE>
Effective September 28, 1989, the company entered into a Revolving Credit
Agreement ('89 Agreement) which currently permits borrowings up to $20,000,000.
Borrowings under the '89 Agreement bear interest at an annual rate equal to the
prime rate, a CD rate, a LIBOR rate or a money market rate at the company's
option. Under the '89 Agreement, the company may borrow up to $20,000,000 until
September 28, 1998. However, the '89 Agreement contains provisions which
effectively allow the revolving credit period and maturity to be extended
indefinitely upon approval of the banks. The '89 Agreement contains restrictive
covenants which include provisions for maintenance of minimum current ratio and
tangible net worth, and restrictions on total liabilities, guarantees, loans,
investments and subsidiary debt.
24
<PAGE>
7. Long-Term Debt (continued):
Effective August 2, 1992, the company entered into a Revolving Credit Agreement
('92 Agreement) for $6,000,000 to finance owner/operator loans for the purchase
of Tastykake distribution routes. Each borrowing under the '92 Agreement
becomes, in effect, a term loan repayable in equal quarterly installments based
on a ten year amortization schedule with a three year balloon payment. Each
borrowing bears interest at a fixed rate based on the prime rate or the three
year Treasury Note yield determined at the time of the borrowing, at the
company's option. In May, 1995, the company and the bank mutually agreed not to
renew the '92 Agreement beyond May 31, 1996. In addition, it was further agreed
that any of the term loans extended under the '92 Agreement would be repaid
under their original terms and conditions with the intention of refinancing them
under the '89 Agreement. The '92 Agreement contains restrictive covenants
essentially the same as those contained in the '89 Agreement.
The following schedule of future long-term debt principal payments as of
December 28, 1996 is based on the stated maturity dates of the various long-term
borrowings and does not reflect future extensions or refinancings.
1997 58,340
1998 5,029,354
1999 273,062
----------
Total principal payments $5,360,756
==========
8. Obligations Under Capital Leases:
Obligations under capital leases consist of the following:
<TABLE>
<CAPTION>
Dec. 28, Dec. 30,
1996 1995
<S> <C> <C>
Capital lease obligation, with interest at 11%,
payable in monthly installments
of $43,833 through June, 1999 $1,145,269 $1,435,730
Industrial development mortgages, with interest at 4%
and 81/2%, payable in monthly installments
of $17,142 through March, 1998 and $8,052
thereafter through February, 2003 573,185 730,563
---------- ----------
1,718,454 2,166,293
Less current portion 587,336 513,159
---------- ----------
$1,131,118 $1,653,134
========== ==========
</TABLE>
9. Commitments and Contingencies:
The company leases certain plant and distribution facilities, machinery and
automotive equipment under noncancelable lease agreements. The company expects
that in the normal course of business, leases that expire will be renewed or
replaced by other leases. Included therein is a lease with the Trustees of the
Tasty Baking Company Pension Plan for property contributed to the plan. The net
annual rental is subject to adjustment every three years to provide fair market
rental to the Pension Plan and, accordingly, the net annual rental was adjusted
effective July 1, 1996. The lease expires on June 30, 1999 with an option to
renew for five additional three year periods. In addition, the company has an
option to purchase the property at any time at its then fair market value.
Property, plant and equipment relating to capital leases was $5,801,000 at
December 28, 1996 and December 30, 1995 with accumulated amortization of
$4,422,646 and $4,260,000, respectively. Depreciation and amortization of assets
recorded under capital leases was $247,000, $237,000, and $231,000 in 1996, 1995
and 1994, respectively.
The following is a schedule of future minimum lease payments as of December 28,
1996:
Noncancelable
Capital Leases Operating Leases
1997 $ 731,704 $ 901,640
1998 631,717 678,655
1999 359,627 538,901
2000 96,627 409,837
2001 96,627 287,156
Later years 104,680 148,144
---------- -----------
Total minimum lease payments $2,020,982 $2,964,333
===========
Less interest portion of payments 302,528
----------
Present value of future minimum lease payments $1,718,454
==========
25
<PAGE>
9. Commitments and Contingencies (continued):
Rental expense was approximately $1,222,000 in 1996, $1,113,000 in 1995, and
$840,000 in 1994.
In connection with a workers' compensation insurance policy, the company has
obtained a Standby Letter of Credit in the amount of $1,200,000 which is
required by the insurance company in order to guarantee future payment of
premiums.
In November, 1995, the company received a proposed assessment from the Internal
Revenue Service ("IRS") for employment taxes based on an assertion that during
the years 1990 through 1994 the company's independent owner/operators were
employees and not independent contractors. The company has filed a formal
Protest with the IRS and has held conferences with an appeals officer of the
IRS. The company believes that it has good grounds for the defenses which it has
asserted and has a reasonable chance for favorable resolution on all issues. At
this time the company is unable to estimate the possible loss, if any, that may
be incurred as a result of this proposed assessment. The ultimate outcome of
this proposed assessment may or may not have a material impact on the company's
financial position or results of operations.
The company and its subsidiaries are also involved in certain legal and
regulatory actions, all of which have arisen in the ordinary course of the
company's business. The company is unable to predict the outcome of these
matters, but does not believe that the ultimate resolution of such matters will
have a material adverse effect on the consolidated financial position or results
of operations of the company.
10. Pension Costs:
The company participates in a funded noncontributory pension plan providing
retirement benefits for substantially all employees. Benefits under this plan
generally are based on the employee's years of service and compensation during
the years preceding retirement. Net pension gains and losses in excess of 10% of
the greater of the projected benefit obligation or the market value of the plan
assets ("the corridor") are recognized in income in the year of occurrence.
Effective January 1, 1995, previously eligible employees of Phillips & Jacobs,
Incorporated (P&J), now known as PrimeSource Corporation, ceased their
participation in the plan. In August, 1995, $4,808,300 was transferred to the
PrimeSource Corporation Pension Plan. This transfer of assets corresponded to
the actuarially determined liabilities for active, retired and vested terminated
employees of P&J.
The components of pension cost are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 1,315,000 $ 1,033,000 $ 1,539,000
Interest cost on projected benefit obligation 4,811,000 4,984,000 5,287,000
Actual return on plan assets (6,527,000) (10,068,000) (337,000)
Net amortization and deferral 1,011,000 5,186,000 (5,237,000)
------------ ------------ ------------
Net amount charged to income $ 610,000 $ 1,135,000 $ 1,252,000
============ ============ ============
</TABLE>
The pension cost in 1994 of $1,252,000 included $254,000 which relates to P&J.
The following table sets forth the funded status of the pension plan at December
28, 1996 and December 30, 1995 and the amounts recognized in the accompanying
consolidated balance sheets.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Plan assets at fair value $ 62,699,000 $ 57,372,000
Actuarial present value of benefit obligations:
Vested 54,731,000 56,886,000
Nonvested 2,147,000 2,290,000
------------ ------------
Accumulated benefit obligations 56,878,000 59,176,000
Effect of projected future salary increases 10,060,000 11,644,000
------------ ------------
Projected benefit obligations 66,938,000 70,820,000
------------ ------------
Plan assets less than projected benefit obligations (4,239,000) (13,448,000)
Unrecognized net (gain) loss (2,504,000) 5,081,000
Unrecognized net transition asset (1,888,000) (2,257,000)
------------ ------------
Pension liability $ (8,631,000) $(10,624,000)
============ ============
</TABLE>
26
<PAGE>
10. Pension Costs (continued):
The actuarial present value of benefits and projected benefit obligations was
determined using a discount rate of 7.50% for fiscal year 1996, 7.25% for fiscal
year 1995, and 8.50% for fiscal year 1994. The expected long-term rate of return
on assets was 9% and the rate of compensation increase used to measure the
projected benefit obligation was 6% for fiscal years 1996, 1995, and 1994. Plan
assets are invested in a diverse portfolio that primarily consists of equity and
debt securities as well as certain real property and subsequent improvements
with additions thereto.
11. Postretirement Benefits Other than Pensions:
In addition to providing pension benefits, the company also provides certain
unfunded health care and life insurance programs for substantially all retired
employees. These benefits are provided through contracts with insurance
companies and health service providers. Effective January 1, 1996, the company
amended its plan to provide health care benefits to retired employees' spouses.
As a result, the unrecognized prior service cost amounted to $1,559,217 which is
being amortized over a five year period using the straight line method.
The net periodic postretirement benefit cost of continuing operations included
the following components:
1996 1995 1994
Service cost $ 266,489 $ 137,530 $ 210,883
Interest cost 917,257 901,760 1,246,404
Net amortization and deferral (211,434) (657,253) (84,269)
----------- ----------- -----------
$ 972,312 $ 382,037 $ 1,373,018
=========== =========== ===========
The amounts recognized in the company's balance sheet at December 28, 1996 and
December 30, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (8,525,409) $ (9,204,954)
Fully eligible active employees (1,980,385) (1,224,699)
Other active employees (2,396,635) (1,552,952)
Unrecognized net gain (6,618,072) (6,638,158)
Unrecognized prior service cost 1,253,488 --
------------ ------------
$(18,267,013) $(18,620,763)
============ ============
</TABLE>
The accumulated postretirement benefit obligation was determined using a 7.50%,
7.25%, and 8.50% weighted average discount rate in 1996, 1995, and 1994,
respectively, and an assumed compensation increase rate of 6% was used for
fiscal years ended 1996, 1995, and 1994. For 1997, the health care cost trend
rates are anticipated to be 8.12% and 7.41% for indemnified health plans and
HMO-type health plans, respectively, gradually declining to 5% in eight years
and remaining at that level thereafter. The health care cost trend rate
assumptions have a significant effect on the amounts reported. For example, a 1%
increase in the health care trend rate would increase the accumulated
postretirement benefit obligation by $371,000, $219,000, and $291,000 in 1996,
1995, and 1994, respectively and the net periodic cost by $49,000, $25,000, and
$34,000, in 1996, 1995, and 1994, respectively.
12. Thrift Plan:
The Tasty Baking Company Thrift Plan (the Plan) permits participants to make
contributions to the Plan on a pre-tax salary reduction basis in accordance with
the provision of Section 401(k) of the Internal Revenue Code. The company
contributes $1.00 for each $1.00 contributed by a participant up to a specified
limit. Company contributions charged against income totalled $369,169 in 1996,
$370,124 in 1995, and $367,246 in 1994.
Effective January 1, 1995, the company amended the Plan by adopting a Section
401(k) prototype plan sponsored by the Dreyfus Corporation. Under the Plan, as
amended, the company's contributions are invested in Tasty Baking Company common
stock and participants may choose from a selection of mutual fund options
offered by the Dreyfus Corporation for their contributions.
The company had 150,822 shares of its common stock reserved for possible
issuance under the Plan at December 28, 1996.
27
<PAGE>
13. Management Stock Purchase Plan:
The Management Stock Purchase Plan provides that common shares may be sold to
management employees from time to time at prices designated by the Board of
Directors (not less than 50% of the fair market value at date of grant) under
certain restrictions and obligations to resell to the company. During 1996 and
1995, a total of 9,559 and 5,624 shares of common stock was sold at 50% of fair
market value at date of grant. The aggregate sales price of these shares was
$55,836 and $36,275, respectively, for which collateral judgment notes were
obtained to be paid in equal quarterly installments (not to exceed 40) with
interest on the unpaid balance at 4.25% and 4.125% in 1996 and 4.25% and 4.38%
in 1995. At December 28, 1996, a total of 745,254 common shares was authorized
under the Plan, of which 187,540 shares remain available for issuance through
December 31, 1996.
For accounting purposes, the difference between the fair
market value of the stock at the date of grant and the purchase price, $56,131
in 1996 and $36,275 in 1995, represents compensation. The compensation is
deferred and, together with the notes receivable, is shown as a deduction from
shareholders' equity. The deferred compensation is amortized over a ten year
period or the period the employees perform services, whichever is less.
Amortization charged to income amounted to $38,755, $51,444, and $60,986, in
1996, 1995, and 1994, respectively.
In accordance with an Internal Revenue Service regulation, the company includes
both the dividends paid on shares restricted under the Plan, and the difference
between the purchase price of the stock at the date of the grant and the fair
market value at the date the Plan restrictions lapse as employee compensation
for federal income tax purposes. The tax benefits relating to the difference
between the amounts deductible for federal income taxes over the amounts charged
to income for book purposes have been credited to capital in excess of par value
of stock.
14. Stock Option Plans:
The company has three Stock Option Plans - 1994 Long Term Incentive Plan, 1991
Long Term Incentive Plan and 1985 Stock Option Plan, all of which were approved
by the shareholders and Board of Directors of the company. Under the terms of
the 1994 Long Term Incentive Plan, options to purchase a total of 250,000 common
shares may be granted to key executives of the company. Options become
exercisable in five equal installments beginning on the date of grant until
fully exercisable after four years. The option price is determined by the Board
and, in the case of incentive stock options, will be no less than the fair
market value of the shares on the date of grant. Options lapse at the earlier of
the expiration of the option term specified by the Board (not more than ten
years in the case of incentive stock options) or three months following the date
on which employment with the company terminates. The terms and conditions of the
1991 Long Term Incentive Plan and the 1985 Stock Option Plan are similar to the
1994 Long Term Incentive Plan.
Transactions involving the Plans are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 319,500 $ 13.46 248,500 $ 13.49 187,375 $ 13.75
Less: Forfeitures -- (24,000) 13.52 (23,375) 13.75
------- ------- ------- ------- ------- -------
319,500 224,500 164,000
Granted 87,500 14.50 95,000 13.38 84,500 13.00
------- ------- ------- ------- ------- -------
Outstanding at end of year 407,000 $ 13.68 319,500 $ 13.46 248,500 $ 13.49
======= ======= ======= ======= ======= =======
Options exercisable at year-end 229,400 167,600 151,875
Range of exercise prices $13.00 to $14.50 $13.00 to $13.75 $13.00 to $13.75
Weighted-average fair value of
options granted during the year $2.53 $2.25
Weighted-average remaining
contractual life 6.9 years 7.1 years
</TABLE>
28
<PAGE>
14. Stock Option Plans (continued):
A summary of the status of options granted to the Directors by the company as of
the fiscal year ended for 1996, 1995, and 1994 is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 58,440 $ 13.75 74,477 $ 13.75 74,477 $ 13.75
Less: Forfeitures -- (16,037) 13.75 --
------ ------- ------ ------- ------ -------
58,440 58,440 74,477
Granted 45,000 14.50 -- --
------ ------- ------ ------- ------ -------
Outstanding at end of year 103,440 $ 14.08 58,440 $ 13.75 74,477 $ 13.75
====== ======= ====== ======= ====== =======
Options exercisable at year-end 67,440 58,440 151,875
Range of exercise prices $13.75 to $14.50 $ 13.75 $ 13.75
Weighted-average fair value of
options granted during the year $2.53
</TABLE>
The company has continued to apply APB Opinion No. 25 and related
interpretations in accounting for its plans and, accordingly, no compensation
cost has been recognized for the stock option plans. In 1995 the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123 "Accounting for Stock Based Compensation" (SFAS No. 123) which changes
the method for recognition of cost on plans similar to those of the company.
Under SFAS No. 123 pro forma disclosures are required if no cost compensation is
recognized.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for the 1996 grants: dividend yield of 4.17%, expected
volatility of 19.51%, and an expected life of 5 years and a risk-free interest
rate of 6.17% for the employee and directors' grants. The following assumptions
were used for the 1995 grant: dividend yield of 4.03%, expected volatility of
19.19%, risk-free interest rate of 5.71% and an expected life of 5 years. The
calculated difference between the reported and pro forma amounts is $.01 per
share for both 1996 and 1995.
15. Capitalization of Interest Costs:
The company capitalizes interest as a component of the cost of significant
construction projects in accordance with Statement of Financial Accounting
Standards No. 34. The following table sets forth data relative to capitalized
interest:
1996 1995 1994
Total interest $551,709 $738,852 $828,900
Less capitalized interest 31,334 63,239 25,212
-------- -------- --------
Interest expense $520,375 $675,613 $803,688
======== ======== ========
29
<PAGE>
16. Other Income, Net:
Other income, net consists of the following:
1996 1995 1994
Interest income $1,155,599 $1,166,438 $1,056,656
Amortized gain on sale
of distribution routes -- 3,162,033 1,535,820
Rental income 428,701 393,276 431,227
Other, net 158,563 179,708 140,981
---------- ---------- ----------
$1,742,863 $4,901,455 $3,164,684
========== ========== ==========
17. Provision for Income Taxes:
The provision for income taxes, at an effective rate of 38.6% in 1996, 45.8% in
1995 (40.6% excluding the effect of change in tax rate on the net deferred tax
asset), and 39.7% in 1994, differs from the amounts derived from applying the
statutory U.S. federal income tax rate of 34% to income before provision for
income taxes as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory tax provision $ 3,491,999 $ 3,540,897 $ 3,271,111
State income taxes, net of
federal income tax benefit 445,234 499,748 694,242
Effect of change in tax rate
on deferred tax asset -- 550,868 --
Other, net 28,773 183,026 (145,182)
----------- ----------- -----------
Provision for income taxes $ 3,966,006 $ 4,774,539 $ 3,820,171
=========== =========== ===========
</TABLE>
Deferred income taxes represent the future tax consequences of differences
between the tax bases of assets and liabilities and their financial reporting
amounts at each year end. Significant components of the company's deferred
income tax assets (liabilities) are as follows:
1996 1995
Postretirement benefits other than pensions $ 7,368,720 $ 7,448,305
Pension and employee benefit costs 4,608,914 4,517,361
Depreciation and amortization (1,500,103) (1,668,601)
Vacation pay 870,156 793,676
Provision for doubtful accounts 966,063 944,718
Other 426,621 358,699
------------ ------------
12,740,371 12,394,158
Less current portion 2,504,715 2,673,617
------------ ------------
$ 10,235,656 $ 9,720,541
============ ============
18. Concentrations of Credit:
The company encounters, in the normal course of business, exposure to
concentrations of credit risk with respect to trade receivables. This risk is
limited due to the large number of customers comprising the company's customer
base. Ongoing credit evaluations of customers' financial condition are performed
and, generally, no collateral is required. The company maintains reserves for
potential credit losses and such losses have not exceeded management's
expectations.
30
<PAGE>
Report of Independent Accountants
To the Shareholders and the
Board of Directors
Tasty Baking Company
We have audited the accompanying consolidated balance sheets of Tasty Baking
Company and subsidiaries as of December 28, 1996 and December 30, 1995 and the
related consolidated statements of operations and retained earnings, changes in
capital accounts and cash flows for each of the three fiscal years in the period
ended December 28, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (page 12 and pages 18
- - 30) present fairly, in all material respects, the consolidated financial
position of Tasty Baking Company and subsidiaries as of December 28, 1996 and
December 30, 1995, and the consolidated results of their operations and their
cash flows for each of the three fiscal years in the period ended December 28,
1996 in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
February 12, 1997
31
TASTY BAKING COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The Registrant owns, directly or indirectly, 100% of the outstanding capital
stock of the following subsidiaries:
Business Name of Corporation Jurisdiction of Incorporation
TBC Financial Services, Inc. Pennsylvania
Dutch Mill Baking Company, Inc. New Jersey
Tasty Baking Oxford, Inc. Pennsylvania
The aforementioned is included in the Consolidated Financial Statements of the
Registrant filed herewith.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Tasty Baking Company and subsidiaries on Form S-3 (File No. 33-30560), Post-
Effective Amendment No. 10 to Form S-8 (File No. 2-55836) and Post Effective
Amendment No. 3 to Form S-8 (File No. 33-18904) and Post-Effective Amendment No.
4 to Form S-3 (File No. 33-8427) of our reports dated February 12, 1997, on our
audits of the consolidated financial statements and financial statement
schedules of Tasty Baking Company and subsidiaries as of December 28, 1996 and
December 30, 1995, and for the three fiscal years in the period ended December
28, 1996, which reports are included or incorporated by reference in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
March 24, 1997
<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-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 233
<SECURITIES> 0
<RECEIVABLES> 19,358
<ALLOWANCES> (2,395)
<INVENTORY> 2,856
<CURRENT-ASSETS> 22,777
<PP&E> 139,349
<DEPRECIATION> (98,376)
<TOTAL-ASSETS> 87,428
<CURRENT-LIABILITIES> 12,618
<BONDS> 6,434
0
0
<COMMON> 3,645
<OTHER-SE> 35,262
<TOTAL-LIABILITY-AND-EQUITY> 87,428
<SALES> 146,718
<TOTAL-REVENUES> 148,461
<CGS> 90,955
<TOTAL-COSTS> 90,955
<OTHER-EXPENSES> 7,268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 520
<INCOME-PRETAX> 10,271
<INCOME-TAX> 3,966
<INCOME-CONTINUING> 6,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,305
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
