SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the thirty-nine weeks ended September 27, 1997
( ) 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 6,234,039
(Title of Class) (No. of Shares Outstanding
at November 7, 1997)
INDEX OF EXHIBITS IS LOCATED ON PAGE 10 OF 11.
PAGE 1 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
September 27, 1997 and December 28, 1996.......................3
Consolidated Condensed Statements of Operations
Thirteen Weeks and Thirty-nine Weeks Ended
September 27, 1997 and September 28, 1996......................4
Consolidated Condensed Statements of Cash Flows
Thirty-nine Weeks Ended September 27, 1997 and
September 28, 1996.............................................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 4. Submission of Matters to a Vote of Security Holders............9
Item 6. Exhibits and Reports on Form 8-K...............................9
Signature ..............................................................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>
September 27, 1997 December 28, 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash $221,450 $233,366
Accounts and notes receivable, net of
allowance for doubtful accounts 20,392,524 16,962,591
Inventories:
Raw materials 1,899,991 1,626,877
Work in progress 644,446 563,381
Finished goods 795,581 665,254
----------- -----------
3,340,018 2,855,512
Deferred income taxes, prepayments and other 3,289,501 2,726,014
----------- -----------
Total current assets 27,243,493 22,777,483
----------- -----------
Property, plant and equipment: 146,975,688 139,349,055
Less accumulated depreciation 103,688,860 98,375,648
----------- -----------
43,286,828 40,973,407
----------- -----------
Long-term receivables 11,484,083 10,288,159
----------- -----------
Deferred income taxes 10,235,656 10,235,656
----------- -----------
Miscellaneous assets and deferred charges 2,970,797 3,153,659
----------- -----------
Total assets $95,220,857 $87,428,364
=========== ===========
Current liabilities:
Current portion of long-term debt $27,104 $58,340
Current obligations under capital leases 692,870 587,336
Notes payable, banks 2,750,000 --
Accounts payable 4,469,125 3,963,610
Accrued liabilities 7,507,181 6,533,612
Accrued income taxes 165,772 1,474,887
----------- -----------
Total current liabilities 15,612,052 12,617,785
----------- -----------
Long-term debt, less current portion 6,282,283 5,302,416
----------- -----------
Long-term obligations under capital leases,
less current portion 586,020 1,131,118
----------- -----------
Accrued pensions and other liabilities 12,117,452 11,203,178
----------- -----------
Postretirement benefits other than pensions 19,265,727 18,267,013
----------- -----------
Shareholders' equity:
Common stock 3,646,594 3,644,544
Capital in excess of par value of stock 30,230,206 29,742,513
Retained earnings 24,573,159 22,265,220
----------- -----------
58,449,959 55,652,277
Less:
Treasury stock, at cost 16,712,320 16,329,055
Management Stock Purchase Plan
receivables and deferrals 380,316 416,368
----------- -----------
41,357,323 38,906,854
----------- -----------
Total liabilities and shareholders' equity $95,220,857 $87,428,364
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 3 to 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended For the Thirty-nine Weeks Ended
Sept. 27, 1997 Sept. 28, 1996 Sept. 27, 1997 Sept. 28, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Sales $53,651,996 $52,755,993 $166,937,578 $158,890,911
Less discounts and allowances (17,607,128) (16,734,341) (54,463,859) (49,176,383)
------------- ------------- ------------- -------------
Net Sales $36,044,868 $36,021,652 $112,473,719 $109,714,528
------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales 22,478,742 22,332,536 69,261,592 68,484,501
Depreciation 1,847,134 1,838,336 5,402,627 5,490,835
Selling, general and
administrative 10,077,778 10,472,900 30,637,033 30,068,214
Interest expense 131,732 134,564 417,367 362,138
Other income, net (413,500) (446,541) (1,225,214) (1,355,853)
------------- ------------- ------------- -------------
34,121,886 34,331,795 104,493,405 103,049,835
------------- ------------- ------------- -------------
Income before provision
for income taxes 1,922,982 1,689,857 7,980,314 6,664,693
Provision for income taxes (726,455) (637,636) (3,063,360) (2,556,349)
------------- ------------- ------------- -------------
Net income $1,196,527 $1,052,221 $4,916,954 $4,108,344
============= ============= ============= =============
Average common shares outstanding 6,340,140 6,185,551 6,260,762 6,177,032
Per share of common stock:
Net income $.19 $.17 $.79 $.67
============= ============= ============= =============
Cash dividend $.14 $.14 $.42 $.42
============= ============= ============= =============
</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 Thirty-nine Weeks Ended
Sept. 27, 1997 Sept. 28, 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $4,916,954 $4,108,344
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,402,627 5,490,835
Amortization 107,100 52,431
Other 2,080,853 (1,327,972)
Changes in assets and liabilities
affecting operations (4,425,824) 836,077
----------- -----------
Net cash from operating activities 8,081,710 9,159,715
----------- -----------
Cash flows from (used for) investing activities
Proceeds from owner/operator's loan repayments 2,526,332 3,203,559
Purchase of property, plant and equipment (7,769,331) (8,271,305)
Loans to owner/operators (3,728,396) (2,539,257)
Other 46,536 63,280
----------- -----------
Net cash used for investing activities (8,924,859) (7,543,723)
----------- -----------
Cash flows from (used for) financing activities
Additional long-term debt 2,000,000 5,000,000
Proceeds from sale of common stock 181,181 --
Dividends paid (2,609,015) (2,597,892)
Payment of long-term debt (1,490,933) (4,692,366)
Net increase in short-term debt 2,750,000 700,000
----------- -----------
Net cash from (used for) financing activities 831,233 (1,590,258)
----------- -----------
Net increase (decrease) in cash (11,916) 25,734
Cash, beginning of year 233,366 85,104
----------- -----------
Cash, end of period $221,450 $110,838
=========== ===========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $348,833 $343,217
=========== ===========
Income taxes $4,727,240 $2,221,142
=========== ===========
</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. Stock Split
On October 24, 1997, the Board of Directors approved a five-for-four stock split
of the company's common stock for the shareholders of record as of November 7,
1997, to be distributed on December 1, 1997. Restatements of the shares
outstanding or per share amounts have not been provided for the current period.
Had the transaction occurred prior to the release of the financial statements,
restatements of net income per common share would have been $.15 and $.14 for
the thirteen weeks ended September 27, 1997 and September 28, 1996 respectively,
and $.63 and $.53 for the thirty-nine weeks then ended.
2. Interim Financial Information
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position of the
company as of September 27, 1997, and December 28, 1996 and the results of its
operations for the thirteen and thirty-nine weeks ended September 27, 1997 and
September 28, 1996 and cash flows for the thirty-nine weeks ended September 27,
1997 and September 28, 1996. These unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto in the company's 1996 Annual Report to
Shareholders. In addition, the results of operations for the thirty-nine weeks
ended September 27, 1997 are not necessarily indicative of the results to be
expected for the full year.
Advertising expenses and certain other expense items are charged to operations
in the year incurred. However, for interim reporting purposes the expenses are
charged to operations on a pro-rata basis over the company's accounting periods.
For the thirty-nine weeks ended September 27, 1997 and September 28, 1996, the
difference between the actual expenses incurred and the expenses charged to
operations was not significant.
3. Net Income 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 third quarter of 1997, the company realized net income of $1,196,527 or
$.19 per share versus $1,052,221 or $.17 per share for the third quarter of
1996. These results represent increases of 13.7% and 11.8%, respectively.
For the thirty-nine weeks ended September 27, 1997, the company realized net
income of $4,916,954 or $.79 per share versus $4,108,344 or $.67 per share for
the comparable period in 1996, representing an increase of 19.7% and 17.9%,
respectively.
For the third quarter, gross sales increased 1.7% to $53,651,996, compared to
$52,755,993 last year. The increase in gross sales for the third quarter of 1997
resulted primarily from price increases instituted by the company. Gross sales,
less discounts and allowances, resulted in a net sales increase of .1% to
$36,044,868 compared to $36,021,652 reported last year.
Cost of sales, as a percentage of net sales, was 62.4% and 62.0% for the third
quarters of 1997 and 1996, respectively. The increase in the current quarter
resulted from reduced efficiencies due to continued product development at the
Oxford facility.
Selling, general and administrative expenses for the third quarter of 1997
decreased by $395,122 or 3.8% compared to the comparable period in 1996. This
change resulted primarily from certain consulting expenses that were incurred
only in the third quarter of 1996.
Interest expense remained relatively unchanged for the third quarter of 1997
versus the third quarter of 1996. The decrease in other income, net for the
third quarter of 1997 was the result of a decrease in rental income.
The effective tax rates for each of the quarters ended September 27, 1997 and
September 28, 1996 were 37.8% and 37.7%, 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 the third quarter of 1997 and 1996
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 the
company's independent owner/operators were employees and not independent
contractors. The company continues to attempt to resolve its dispute with the
IRS concerning the treatment of its independent owner/operators for payroll tax
purposes. A "Closing Agreement" (the Agreement) is currently being negotiated
between the company and the IRS. If the Agreement is accepted by both parties,
the company would incur a pre-tax charge of approximately $1.5 to $2.0 million
for tax years 1990-1997 including related expenses. In addition, the company
would agree to certain changes in the treatment of its independent
owner/operators for payroll tax purposes effective January 1, 1998. However,
within the Agreement, there are issues that remain in dispute, some of which the
company will not agree to and could cause the company to litigate its position
if a satisfactory resolution is not achieved.
Page 7 of 10
<PAGE>
Financial Condition
The company has consistently demonstrated the ability to generate sufficient
cash flows from operations. Bank borrowings, under various lines of credit
arrangements, are used to supplement cash flows from operations during periods
of cyclical shortages.
For the thirty-nine weeks ended September 27, 1997, net cash from operating
activities decreased by $1,078,005 to $8,081,710 from $9,159,715 for the
comparable period in 1996. The decrease in net cash from operating activities
was principally due to an increase in income tax payments and an increase in
accounts receivable. These reductions to net cash from operating activities were
partially offset by an increase in net income and a reduction in pension
contributions compared to 1996.
Net cash used for investing activities for the thirty-nine weeks ended September
27, 1997 increased by $1,381,136 relative to the same period in 1996 principally
due to an increase in owner/operator loan activity.
Net cash from financing activities for the thirty-nine weeks ended September 27,
1997 increased by $2,421,491 relative to the same thirty-nine weeks in 1996. The
increase is primarily the result of an increase in short-term debt.
For the remainder of 1997, the company anticipates that cash flows from
operations, along with the continued availability of bank lines of credit, the
revolving credit agreement and other long-term financing, will provide
sufficient cash to meet operating and financing requirements.
Page 8 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
third quarter of the fiscal year covered by this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file a report on Form 8-K during the thirteen
weeks ended September 29, 1997.
Exhibit Index
Exhibit 27 - Financial Data Schedule
Pgae 9 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TASTY BAKING COMPANY
(Registrant)
November 7, 1997 /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> OTHER
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 221
<SECURITIES> 0
<RECEIVABLES> 22,882
<ALLOWANCES> (2,489)
<INVENTORY> 3,340
<CURRENT-ASSETS> 27,243
<PP&E> 146,976
<DEPRECIATION> (103,689)
<TOTAL-ASSETS> 95,221
<CURRENT-LIABILITIES> 15,612
<BONDS> 6,868
<COMMON> 4,558
0
0
<OTHER-SE> 36,799
<TOTAL-LIABILITY-AND-EQUITY> 93,513
<SALES> 112,474
<TOTAL-REVENUES> 113,699
<CGS> 69,262
<TOTAL-COSTS> 69,262
<OTHER-EXPENSES> 5,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 417
<INCOME-PRETAX> 7,980
<INCOME-TAX> 3,063
<INCOME-CONTINUING> 4,917
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,917
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
