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 28, 1998
( ) 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 7,793,235
(Title of Class) (No. of Shares Outstanding
at April 23, 1998)
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 28, 1998 and December 27, 1997............................3
Consolidated Statements of Operations
Thirteen weeks ended March 28, 1998 and March 29, 1997..........4
Consolidated Condensed Statements of Cash Flows
Thirteen weeks ended March 28, 1998 and March 29, 1997..........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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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
March 28, 1998 December 27, 1997
- -------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash $ 145,752 $ 748,117
Accounts and notes receivable, net of
allowance for doubtful accounts 21,381,375 18,661,411
Inventories:
Raw materials 1,874,297 1,940,423
Work in progress 592,098 580,362
Finished goods 890,049 775,417
--------------------------------------------------
3,356,444 3,296,202
Deferred income taxes, prepayments and other 3,309,938 2,241,587
--------------------------------------------------
Total current assets 28,193,509 24,947,317
--------------------------------------------------
Property, plant and equipment: 150,669,238 149,709,346
Less accumulated depreciation 106,313,890 105,501,230
--------------------------------------------------
44,355,348 44,208,116
--------------------------------------------------
Long-term receivables 11,328,694 11,233,128
--------------------------------------------------
Deferred income taxes 11,059,696 11,059,696
--------------------------------------------------
Spare parts inventory and miscellaneous assets 3,230,289 2,871,121
--------------------------------------------------
Total assets $ 98,167,536 $ 94,319,378
==================================================
Current liabilities:
Current portion of long-term debt $ 29,354 $ 29,354
Current obligations under capital leases 489,440 543,962
Notes payable, banks 950,000 900,000
Accounts payable 6,099,529 4,345,944
Accrued liabilities 7,077,316 6,817,319
Accrued income taxes 180,146 1,826,981
--------------------------------------------------
Total current liabilities 14,825,785 14,463,560
--------------------------------------------------
Long-term debt, less current portion 9,765,933 7,773,053
--------------------------------------------------
Long-term obligations under capital leases,
less current portion 499,534 587,156
--------------------------------------------------
Accrued pensions and other liabilities 12,258,405 11,771,540
--------------------------------------------------
Postretirement benefits other than pensions 18,465,607 18,129,226
--------------------------------------------------
Shareholders' equity:
Common stock 4,558,243 4,558,243
Capital in excess of par value of stock 29,340,203 29,337,938
Retained earnings 25,494,487 24,788,276
--------------------------------------------------
59,392,933 58,684,457
Less:
Treasury stock, at cost 16,707,854 16,738,364
Management Stock Purchase Plan
receivables and deferrals 332,807 351,250
--------------------------------------------------
42,352,272 41,594,843
--------------------------------------------------
Total liabilities and shareholders' equity $ 98,167,536 $ 94,319,378
==================================================
</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>
<S> <C> <C>
For the Thirteen Weeks Ended
March 28, 1998 March 29, 1997
- --------------------------------------------------------------------------------------------------------------------------
Gross Sales $ 57,160,752 $ 55,633,240
Less discounts and allowances (18,840,284) (18,178,494)
-----------------------------------------------
Net Sales 38,320,468 37,454,746
----------------------------------------------
Costs and expenses:
Cost of sales 23,824,979 23,172,108
Depreciation 1,751,378 1,695,427
Selling, general and administrative 10,471,017 10,231,580
Interest expense 141,243 127,590
Other income, net (351,364) (396,427)
-----------------------------------------------
35,837,253 34,830,278
----------------------------------------------
Income before provision for income taxes 2,483,215 2,624,468
Provision for income taxes 842,113 1,010,675
----------------------------------------------
Net income $ 1,641,102 $ 1,613,793
==============================================
Average common shares outstanding: Basic 7,791,652 7,743,369
Diluted 7,965,199 7,796,711
Per share of common stock:
Net income - Basic and Diluted $.21 $.21
==============================================
Cash dividend $.12 $.112
==============================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4 of 10
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TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
For the Thirteen Weeks Ended
March 28, 1998 March 29, 1997
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) operating activities
Net income $ 1,641,102 $ 1,613,793
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,751,378 1,695,427
Amortization 43,651 17,680
Other 883,774 833,997
Changes in assets and liabilities
affecting operations (3,481,810) (2,488,534)
---------------------------------------------------
Net cash from operating activities 838,095 1,672,363
--------------------------------------------------
Cash flows from (used for) investing activities
Proceeds from owner/operators' loan repayments 875,832 1,082,652
Purchase of property, plant and equipment (2,344,325) (3,003,813)
Loans to owner/operators (970,408) (1,686,258)
Other (179) 17,923
Net cash used for investing activities (2,439,080) (3,589,496)
---------------------------------------------------
Cash flows from (used for) financing activities
Additional long-term debt 3,000,000 2,000,000
Proceeds from sale of common stock 32,775 181,181
Dividends paid (934,891) (867,109)
Payment of long-term debt (1,149,264) (1,183,776)
Net increase in short-term debt 50,000 2,000,000
--------------------------------------------------
Net cash from financing activities 998,620 2,130,296
--------------------------------------------------
Net increase (decrease) in cash (602,365) 213,163
Cash, beginning of year 748,117 233,366
--------------------------------------------------
Cash, end of period $ 145,752 $ 446,529
==================================================
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 152,893 $ 88,816
==================================================
Income taxes $ 235,648 $ 1,106,307
==================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5 of 10
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TASTY BAKING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. 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 28, 1998 and December 27, 1997 and
the results of its operations for the thirteen weeks ended March 28, 1998
and March 29, 1997 and cash flows for the thirteen weeks ended March 28,
1998 and March 29, 1997. These unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto in the company's 1997 Annual Report to
Shareholders. In addition, the results of operations for the thirteen
weeks ended March 28, 1998 are not necessarily indicative of the results
to be expected for the full year.
Certain 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 28, 1998 and March 29, 1997, the
difference between the actual expenses incurred and the expenses charged
to operations was not material.
2. Net Income Per Common Share
Net income per common share is calculated according to the requirements
of Statement of Financial Accounting Standards No. 128 - "Earnings Per
Share" which requires companies to present basic and diluted earnings per
share. Net income per common share Basic is based on the weighted average
number of common shares outstanding during the year. Net income per
common share - Diluted is based on the weighted average number of common
shares and dilutive potential common shares outstanding during the year.
The company's dilutive potential common shares outstanding during the
year result entirely from dilutive stock options.
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 first quarter of 1998, the company realized net income of $1,641,102 or
$.21 per share versus $1,613,793 or $.21 per share for the first quarter of
1997.
For the first quarter, gross sales increased 2.7% to $57,160,752, compared to
$55,633,240 last year. Gross sales, less discounts and allowances, resulted in
net sales of $38,320,468, compared to $37,454,746 reported last year,
representing an increase of 2.3% which was related to a sales volume increase
from promotional efforts at the Tastykake division (Tastykake) and the addition
of Dutch Mill donuts to Tastykake owner/operator routes.
Cost of sales, as a percentage of gross sales, was 41.7% and 41.7% for the first
quarters of 1998 and 1997, respectively. Product development costs at the Oxford
facility were offset by improved manufacturing efficiencies and reduced
ingredient costs.
Selling, general and administrative expenses for the first quarter of 1998
increased by $239,437 or 2.3% over the comparable period in 1997. Most of the
increase can be attributed to the additional expenses from the Oxford facility,
which was not in operation during the first quarter of 1997. The balance of the
increase resulted from an increase in selling expenses associated with the
expansion into new geographic regions and an increase in administration costs
related to an upgrade of the computer system.
Interest expense increased for the first quarter of 1998 versus the first
quarter of 1997 as a result of increased average borrowing levels. The decrease
in other income, net for the first quarter of 1998 was the result of a decrease
in rental income.
The effective tax rate was 34.0% for the quarter ended March 28, 1998 and 38.5%
for the quarter ended March 29, 1997 which compares to a federal statutory rate
of 34%. There was no difference between the effective rate and the statutory
rate in the first quarter of 1998 because the effect of state taxes was offset
principally due to tax benefits arising from passive income. The principal
reason for the difference between the effective rate and the statutory rate in
the first quarter of 1997 was the effect of state income taxes.
7 of 10
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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 28, 1998, net cash from operating activities
decreased by $834,268 to $838,095 from $1,672,363 for the same period in 1997.
The decrease in net cash from operating activities was principally due to an
increase in prepaid expenses slightly offset by an increase in accrued expenses.
Net cash used for investing activities for the thirteen weeks ended March 28,
1998 decreased by $1,150,416 relative to the same period in 1997 principally due
to a decrease in capital requirements at the Oxford facility, as well as a
decrease in the funds needed to finance the net owner/operator loan activity.
Net cash from financing activities for the thirteen weeks ended March 28, 1998
decreased by $1,131,676 relative to the same thirteen weeks in 1997. The
decrease is primarily the result of a net decrease in short and long-term
borrowing relative to the prior year.
For the remainder of 1998 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
No matters were submitted to a vote of security holders during the
first 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 March 28, 1998.
Exhibit Index
Exhibit 27 - Financial Data Schedule
9 of 10
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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, 1998 /S/ John M. Pettine
(Date) JOHN M. PETTINE
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
10 of 10
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<ARTICLE> 5
<CIK> 0000096412
<NAME> TASTY BAKING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-28-1998
<CASH> 146
<SECURITIES> 0
<RECEIVABLES> 23,860
<ALLOWANCES> (2,479)
<INVENTORY> 3,356
<CURRENT-ASSETS> 28,194
<PP&E> 150,669
<DEPRECIATION> (106,314)
<TOTAL-ASSETS> 98,168
<CURRENT-LIABILITIES> 14,826
<BONDS> 10,266
<COMMON> 4,558
0
0
<OTHER-SE> 37,794
<TOTAL-LIABILITY-AND-EQUITY> 98,168
<SALES> 38,320
<TOTAL-REVENUES> 38,671
<CGS> 23,825
<TOTAL-COSTS> 23,825
<OTHER-EXPENSES> 1,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141
<INCOME-PRETAX> 2,483
<INCOME-TAX> 842
<INCOME-CONTINUING> 1,641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,641
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
