SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the thirteen weeks ended March 29, 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 6,206,205
(Title of Class) (No. of Shares Outstanding
at March 29, 1997)
INDEX OF EXHIBITS IS LOCATED ON PAGE 9 OF 10.
1 of 10
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TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 29, 1997 and December 28, 1996...........................3
Consolidated Statements of Operations
Thirteen weeks ended March 29, 1997 and March 30, 1996.........4
Consolidated Condensed Statements of Cash Flows
Thirteen Weeks Ended March 29, 1997 and March 30, 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 6. Exhibits and Reports on Form 8-K...............................9
Signature...................................................................10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 29, 1997 December 28, 1996
<S> <C> <C>
Current assets:
Cash $ 446,529 $ 233,366
Accounts and notes receivable, net of
allowance for doubtful accounts 19,776,600 16,962,591
Inventories:
Raw materials 1,796,309 1,626,877
Work in progress 517,668 563,381
Finished goods 557,228 665,254
------------ ------------
2,871,205 2,855,512
Deferred income taxes, prepayments and other 2,847,588 2,726,014
------------ ------------
Total current assets 25,941,922 22,777,483
Property, plant and equipment: 142,339,596 139,349,055
Less accumulated depreciation 100,057,803 98,375,648
42,281,793 40,973,407
Long-term receivables 10,888,268 10,288,159
Deferred income taxes 10,235,656 10,235,656
Miscellaneous assets and deferred charges 3,068,577 3,153,659
------------ ------------
Total assets $ 92,416,216 $ 87,428,364
============ ============
Current liabilities:
Current portion of long-term debt $ 27,104 $ 58,340
Current obligations under capital leases 622,514 587,336
Notes payable, banks 2,000,000 --
Accounts payable 4,661,688 3,963,610
Accrued liabilities 6,387,643 6,533,612
Accrued income taxes 1,385,520 1,474,887
------------ ------------
Total current liabilities 15,084,469 12,617,785
Long-term debt, less current portion 6,295,832 5,302,416
Long-term obligations under capital leases,
less current portion 949,984 1,131,118
Accrued pensions and other liabilities 11,618,528 11,203,178
Postretirement benefits other than pensions 18,605,577 18,267,013
Shareholders' equity:
Common stock 3,646,594 3,644,544
Capital in excess of par value of stock 29,880,964 29,742,513
Retained earnings 23,011,904 22,265,220
------------ ------------
56,539,462 55,652,277
Less:
Treasury stock, at cost 16,294,356 16,329,055
Management Stock Purchase Plan
receivables and deferrals 383,280 416,368
------------ ------------
39,861,826 38,906,854
------------ ------------
Total liabilities and shareholders' equity $ 92,416,216 $ 87,428,364
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
For the Thirteen Weeks Ended
March 29, 1997 March 30, 1996
Net sales $ 37,454,746 $ 35,943,609
------------ ------------
Costs and expenses:
Cost of sales 23,172,108 22,817,332
Depreciation 1,695,427 1,838,798
Selling, general and administrative 10,231,580 9,631,571
Interest expense 127,590 128,526
Other income, net (396,427) (453,572)
------------ ------------
34,830,278 33,962,655
------------ ------------
Income before provision for income taxes 2,624,468 1,980,954
Provision for income taxes 1,010,675 761,605
------------ ------------
Net income $ 1,613,793 $ 1,219,349
============ ============
Average common shares outstanding 6,249,538 6,184,850
Per share of common stock:
Net income $ .26 $ .20
============ ============
Cash dividend $ .14 $ .14
============ ============
See accompanying notes to consolidated condensed financial statements.
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TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
March 29, 1997 March 30, 1996
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 1,613,793 $ 1,219,349
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,695,427 1,838,798
Amortization 17,680 12,691
Other 833,997 (184,882)
Changes in assets and liabilities
affecting operations (2,488,534) (827,113)
----------- -----------
Net cash from operating activities 1,672,363 2,058,843
----------- -----------
Cash flows from (used for) investing activities
Proceeds from owner/operators' loan repayments 1,082,652 1,065,209
Purchase of property, plant and equipment (3,003,813) (497,334)
Loans to owner/operators (1,686,258) (838,338)
Other 17,923 19,392
----------- -----------
Net cash used for investing activities (3,589,496) (251,071)
----------- -----------
Cash flows from (used for) financing activities
Additional long-term debt 2,000,000 --
Proceeds from sale of common stock 181,181 --
Dividends paid (867,109) (865,879)
Payment of long-term debt (1,183,776) (191,570)
Net increase (decrease) in short-term debt 2,000,000 (700,000)
----------- -----------
Net cash from (used for) financing activities 2,130,296 (1,757,449)
----------- -----------
Net increase in cash 213,163 50,323
Cash, beginning of year 233,366 85,104
----------- -----------
Cash, end of period $ 446,529 $ 135,427
=========== ===========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 88,816 $ 133,349
=========== ===========
Income taxes $ 1,106,307 $ 115,099
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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TASTY BAKING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Manufacturing Facility
On July 1, 1996, the company, through a wholly-owned subsidiary, Tasty
Baking Oxford, Inc., completed the purchase 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. Interim Financial Information
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position of the company as of March 29, 1997 and December 28, 1996 and
the results of its operations for the thirteen weeks ended March 29, 1997
and March 30, 1996 and cash flows for the thirteen weeks ended March 29,
1997 and March 30, 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 thirteen
weeks ended March 29, 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 thirteen weeks ended March 29, 1997
and March 30, 1996, the difference between the actual expenses incurred
and the expenses charged to operations was not significant.
3. Earnings Per Share
Per share amounts are based on the weighted average number of common
shares and equivalent shares outstanding during the quarter.
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TASTY BAKING COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
For the first quarter of 1997, the company realized net income of $1,613,793
versus $1,219,349 for the first quarter of 1996. Net income per share increased
to $.26 from $.20 per share for the comparable quarter of 1996. These results
represent increases of 32% and 30%, respectively.
In the first quarter of 1997, net sales increased 4.2% to $37,454,746 from
$35,943,609 in the first quarter of 1996. Gross sales increased 8.3% during the
comparable period. The increase in gross sales for the first quarter of 1997
resulted primarily from price increases instituted by the company of
approximately 7.6% and unit sales growth of approximately .7% over the first
quarter of 1996. The difference between the increases of 8.3% in gross sales and
4.2% in net sales results primarily from higher promotion costs and increased
commissions.
Cost of sales, as a percentage of net sales, was 61.9% and 63.5% for the first
quarters of 1997 and 1996, respectively. This decrease in the current quarter
was due to moderating commodity costs and continued improvements in plant
operating efficiencies. These cost reductions and the price increases
implemented by the company combined to improve gross margin by 8.8% in 1997.
Selling, general and administrative expenses for the first quarter of 1997
increased by $600,009 or 6.2% over the comparable period in 1996. This increase
resulted primarily from a 2.6% increase in advertising costs and a 2.7% increase
in selling expenses. Advertising costs were higher due to a new television
campaign instituted in the first quarter of 1997. Higher selling expenses
resulted from the re-alignment of the company's sales regions, increased trade
show costs and consulting fees.
Interest expense remained relatively unchanged for the first quarter of 1997
versus the first quarter of 1996 as a result of increased borrowing levels being
offset by lower interest rates. The decrease in other income, net for the first
quarter of 1997 was the result of a decrease in rental income.
The effective tax rate for each of the quarters ended March 29, 1997 and March
30, 1996 was 38.5%, which compares to a federal statutory rate of 34%. The
principle reason for the difference between the effective rates and the
statutory rate in the first 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 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.
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Financial Condition
The company has consistently demonstrated the ability to generate sufficient
cash flow from operations. Bank borrowings, under various lines of credit
arrangements, are used to supplement cash flow from operations during periods of
cyclical shortages.
For the thirteen weeks ended March 29, 1997, net cash from operating activities
decreased by $386,480 to $1,672,363 from $2,058,843 for the same period in 1996.
Net cash from operating activities for the quarter ended March 29, 1997 was
negatively impacted by an increase in receivables due to the higher sales
volume, and a decrease in accrued income taxes. These changes were only
partially offset by an increase in net income relative to the comparable quarter
in 1996.
Net cash used for investing activities increased by $3,338,425 from the
comparable quarter in 1996 principally due to an increase in expenditures on
equipment for the new Oxford facility. Net cash from financing activities
increased by $3,887,745 relative to the same period in 1996. This increase is
primarily the result of a net increase in short and long-term debt relative to
the prior year.
For the remainder of 1997 the company anticipates that cash flow 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.
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TASTY BAKING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file a report on Form 8-K during the
thirteen weeks ended March 29, 1997.
Exhibit Index
Exhibit 27 - Financial Data Schedule
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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)
May 8, 1997 /s/ John M. Pettine
(Date) JOHN M. PETTINE
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
10 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000096412
<NAME> TASTY BAKING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 447
<SECURITIES> 0
<RECEIVABLES> 22,230
<ALLOWANCES> (2,453)
<INVENTORY> 2,871
<CURRENT-ASSETS> 25,942
<PP&E> 142,340
<DEPRECIATION> (100,058)
<TOTAL-ASSETS> 92,416
<CURRENT-LIABILITIES> 15,084
<BONDS> 7,246
<COMMON> 3,647
0
0
<OTHER-SE> 36,215
<TOTAL-LIABILITY-AND-EQUITY> 92,416
<SALES> 37,455
<TOTAL-REVENUES> 37,851
<CGS> 23,172
<TOTAL-COSTS> 23,172
<OTHER-EXPENSES> 1,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> 2,624
<INCOME-TAX> 1,010
<INCOME-CONTINUING> 1,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,614
<EPS-PRIMARY> $0.26
<EPS-DILUTED> $0.26
</TABLE>
