SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the twenty-six weeks ended June 28, 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 6,232,043
(Title of Class) (No. of Shares Outstanding
at August 7, 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
June 28, 1997 and December 28, 1996.................................3
Consolidated Statements of Operations
Thirteen weeks and Twenty-six weeks
ended June 28, 1997 and June 29, 1996 ..............................4
Consolidated Condensed Statements of Cash Flows
Twenty-six Weeks Ended June 28, 1997 and June 29, 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
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
June 28, 1997 December 28, 1996
<S> <C> <C>
Current assets:
Cash $ 175,654 $ 233,366
Accounts and notes receivable, net of
allowance for doubtful accounts 18,272,877 16,962,591
Inventories:
Raw materials 1,845,302 1,626,877
Work in progress 596,218 563,381
Finished goods 724,613 665,254
------------ ------------
3,166,133 2,855,512
Deferred income taxes, prepayments and other 3,596,572 2,726,014
------------ ------------
Total current assets 25,211,236 22,777,483
------------ ------------
Property, plant and equipment: 145,096,720 139,349,055
Less accumulated depreciation 101,917,868 98,375,648
------------ ------------
43,178,852 40,973,407
------------ ------------
Long-term receivables 11,949,889 10,288,159
------------ ------------
Deferred income taxes 10,235,656 10,235,656
------------ ------------
Spare parts inventory and miscellaneous assets 2,937,007 3,153,659
------------ ------------
Total assets $ 93,512,640 $ 87,428,364
============ ============
Current liabilities:
Current portion of long-term debt $ 27,104 $ 58,340
Current obligations under capital leases 657,692 587,336
Notes payable, banks 1,850,000 --
Accounts payable 4,745,228 3,963,610
Accrued liabilities 6,674,657 6,533,612
Accrued income taxes 491,517 1,474,887
------------ ------------
Total current liabilities 14,446,198 12,617,785
------------ ------------
Long-term debt, less current portion 6,289,125 5,302,416
------------ ------------
Long-term obligations under capital leases,
less current portion 768,276 1,131,118
------------ ------------
Accrued pensions and other liabilities 11,955,377 11,203,178
------------ ------------
Postretirement benefits other than pensions 18,928,596 18,267,013
------------ ------------
Shareholders' equity:
Common stock 3,646,594 3,644,544
Capital in excess of par value of stock 29,901,952 29,742,513
Retained earnings 24,249,118 22,265,220
------------ ------------
57,797,664 55,652,277
Less:
Treasury stock, at cost 16,266,198 16,329,055
Management Stock Purchase Plan
receivables and deferrals 406,398 416,368
------------ ------------
41,125,068 38,906,854
------------ ------------
Total liabilities and shareholders' equity $ 93,512,640 $ 87,428,364
============ ============
</TABLE>
See accompanying notes to consolidated condensed
financial statements.
3 of 10
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TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended For the Twenty-six Weeks Ended
June 28, 1997 June 29, 1996 June 28, 1997 June 29, 1996
<S> <C> <C> <C> <C>
Gross Sales $ 57,652,342 $ 54,781,233 $ 113,285,582 $ 106,134,918
Less discounts and allowances (18,678,237) (17,031,966) (36,856,731) (32,442,042)
------------- ------------- ------------- -------------
Net Sales 38,974,105 37,749,267 76,428,851 73,692,876
------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales 23,610,742 23,334,633 46,782,850 46,151,965
Depreciation 1,860,066 1,813,701 3,555,493 3,652,499
Selling, general and
administrative 10,327,675 9,963,743 20,559,255 19,595,314
Interest expense 158,045 99,048 285,635 227,574
Other income, net (415,287) (455,740) (811,714) (909,312)
------------- ------------- ------------- -------------
35,541,241 34,755,385 70,371,519 68,718,040
------------- ------------- ------------- -------------
Income before provision for
income taxes 3,432,864 2,993,882 6,057,332 4,974,836
Provision for income taxes 1,326,230 1,157,108 2,336,905 1,918,713
------------- ------------- ------------- -------------
Net income $ 2,106,634 $ 1,836,774 $ 3,720,427 $ 3,056,123
============= ============= ============= =============
Average common shares outstanding 6,278,579 6,174,261 6,252,500 6,173,985
Per share of common stock:
Net income $ .34 $ .30 $ .60 $ .50
============= ============= ============= =============
Cash dividend $ .14 $ .14 $ .28 $ .28
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated
condensed financial statements.
4 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Twenty-six Weeks Ended
June 28, 1997 June 29, 1996
<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 3,720,427 $ 3,056,123
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,555,493 3,652,499
Amortization 63,707 35,158
Other 1,620,436 369,873
Changes in assets and liabilities
affecting operations (2,552,172) (1,471,943)
----------- -----------
Net cash from operating activities 6,407,891 5,641,710
----------- -----------
Cash flows from (used for) investing activities
Purchase of property, plant and equipment (5,788,833) (2,470,609)
Proceeds from owner/operators' loan repayments 1,838,209 2,604,830
Loans to owner/operators (3,505,018) (1,910,613)
Other 32,400 46,104
----------- -----------
Net cash used for investing activities (7,423,242) (1,730,288)
----------- -----------
Cash flows from (used for) financing activities
Additional long-term debt 2,000,000 3,000,000
Proceeds from sale of common stock 181,181 --
Dividends paid (1,736,529) (1,731,915)
Payment of long-term debt (1,337,013) (4,531,278)
Net increase (decrease) in short-term debt 1,850,000 (700,000)
----------- -----------
Net cash from (used for) financing activities 957,639 (3,963,193)
----------- -----------
Net decrease in cash (57,712) (51,771)
Cash, beginning of year 233,366 85,104
----------- -----------
Cash, end of period $ 175,654 $ 33,333
=========== ===========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 228,036 $ 233,946
=========== ===========
Income taxes $ 3,470,240 $ 1,718,612
=========== ===========
</TABLE>
See accompanying notes to consolidated
condensed financial statements.
5 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Manufacturing Facility
On July 1, 1996, the company, through a wholly-owned subsidiary, Tasty
Baking Oxford, Inc., completed the purchase 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. The company is currently running test
trials on a second manufacturing line and expects to be producing products
during the third quarter.
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 June 28, 1997 and December 28, 1996 and the
results of its operations for the thirteen and twenty-six weeks ended June
28, 1997 and June 29, 1996 and cash flows for the twenty-six weeks ended
June 28, 1997 and June 29, 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
twenty-six weeks ended June 28, 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 twenty-six weeks ended June 28, 1997
and June 29, 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.
6 of 10
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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 second quarter of 1997, the company realized net income of $2,106,634 or
$.34 per share versus $1,836,774 or $.30 per share for the second quarter of
1996. These results represent increases of 14.7% and 13.3%, respectively.
For the twenty-six weeks ended June 28, 1997, the company realized net income of
$3,720,427 or $.60 per share versus $3,056,123 or $.50 per share for the
comparable period in 1996, an increase of 21.7% and 20%, respectively.
For the second quarter, gross sales increased 5.2% to $57,652,342, compared to
$54,781,233 last year. Gross sales, less discounts and allowances resulted in a
net sales increase of 3.2% to $38,974,105 compared to $37,749,267 reported last
year. The increase in gross sales for the second quarter of 1997 resulted
primarily from price increases instituted by the company. The difference between
the increases of 5.2% in gross sales and 3.2% in net sales resulted primarily
from higher promotion costs and increased discounts.
Cost of sales, as a percentage of net sales, was 60.6% and 61.8% for the second
quarters of 1997 and 1996, respectively. This decrease in the current quarter
was due to moderating commodity costs as well as favorable packaging costs
throughout the quarter.
Selling, general and administrative expenses for the second quarter of 1997
increased by $363,932 or 3.7% over the comparable period in 1996. This increase
resulted primarily from an increase in advertising costs and selling expenses.
Advertising costs were higher due to a new television campaign which was
instituted in the first quarter of 1997 and continued into the second quarter.
The increase in selling expenses resulted from the re-alignment of the company's
sales regions and expenses associated with higher sales levels.
Interest expense increased for the second quarter of 1997 versus the second
quarter of 1996 as a result of increased average borrowing levels. The decrease
in other income, net for the second quarter of 1997 was the result of a decrease
in rental income.
The effective tax rate for each of the quarters ended June 28, 1997 and June 29,
1996 was 38.6%, 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 second 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.
7 of 10
<PAGE>
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 twenty-six weeks ended June 28, 1997, net cash from operating activities
increased by $766,181 to $6,407,891 from $5,641,710 for the same period in 1996.
The increase in net cash from operating activities was principally due to an
increase in net income and a reduction in pension contributions versus the prior
year. These favorable changes were partially offset by an increase in
receivables due to higher sales.
Net cash used for investing activities for the twenty-six weeks ended June 29,
1997 increased by $5,692,954 relative to the same period in 1996 principally due
to an increase in expenditures on equipment for the new Oxford facility, as well
as an increase in the funds needed to finance the net owner/operator loan
activity.
Net cash from financing activities for the twenty-six weeks ended June 28, 1997
increased by $4,920,832 relative to the same twenty-six weeks in 1996. The
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.
8 of 10
<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's annual meeting of shareholders was held on April 25,
1997.
(b) The directors elected at the meeting were:
For Against Withheld
James L. Everett,III 4,808,071 --- 343,313
Nelson G. Harris 4,807,738 --- 343,646
Carl S. Watts 4,812,533 --- 338,851
Other directors whose terms of office continued after the meeting are
as follows: Philip J. Baur, Jr., Judith M. Von Seldeneck, Fred C.
Aldridge, Jr., G. Fred DiBona, Jr., and John M. Pettine.
(c) Other matters voted upon at the meeting and the results of those votes
were as follows:
For Against Abstain
Approval of the Amendments
to the Tasty Baking Company
Management Stock Purchase Plan 3,229,672 701,387 114,413
For Against Abstain
Approval of Coopers & Lybrand L.L.P.,
as independent certified public
accountants 5,107,938 20,608 22,838
The foregoing matters are described in detail in the Company's proxy statement
dated March 20, 1997.
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 twenty-six
weeks ended June 28, 1997.
Exhibit Index
Exhibit 27 - Financial Data Schedule
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)
August 7, 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> MAR-30-1996
<PERIOD-END> JUN-28-1997
<CASH> 176
<SECURITIES> 0
<RECEIVABLES> 20,678
<ALLOWANCES> (2,405)
<INVENTORY> 3,166
<CURRENT-ASSETS> 25,211
<PP&E> 145,097
<DEPRECIATION> (101,918)
<TOTAL-ASSETS> 93,513
<CURRENT-LIABILITIES> 14,446
<BONDS> 7,057
<COMMON> 3,647
0
0
<OTHER-SE> 37,478
<TOTAL-LIABILITY-AND-EQUITY> 93,513
<SALES> 38,974
<TOTAL-REVENUES> 39,389
<CGS> 23,611
<TOTAL-COSTS> 23,611
<OTHER-EXPENSES> 1,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> 3,433
<INCOME-TAX> 1,326
<INCOME-CONTINUING> 2,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,107
<EPS-PRIMARY> $0.34
<EPS-DILUTED> $0.34
</TABLE>
