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 24, 2000
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( ) 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 company as specified in its charter)
Pennsylvania 23-1145880
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(State of Incorporation) (IRS Employer Identification Number)
2801 Hunting Park Avenue, Philadelphia, Pennsylvania 19129
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(Address of Principal Executive Offices) (Zip Code)
(215) 221-8500
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(Company's Telephone Number, including area code)
Indicate by check mark whether the company (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 company 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 7,845,312
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(Title of Class) (No. of Shares Outstanding
at August 8, 2000)
INDEX OF EXHIBITS IS LOCATED ON PAGE 9 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 24, 2000 and December 25, 1999...............................3
Consolidated Condensed Statements of Operations
Twenty-six weeks ended June 24, 2000 and June 26, 1999............4
Consolidated Condensed Statements of Cash Flows
Twenty-six weeks ended June 24, 2000 and June 26, 1999............5
Notes to Consolidated Condensed Financial Statements..............6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................7-8
Item 3. Quantitative and Qualitative Disclosure
About Market Risk8
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 24, 2000 December 25, 1999
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Current assets:
<S> <C> <C>
Cash $ 119,861 $ 705,494
Accounts and notes receivable, net of
allowance for doubtful accounts 23,742,361 19,682,733
Inventories:
Raw materials 3,605,245 3,193,027
Work in progress 662,627 568,416
Finished goods 1,795,343 744,336
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6,063,215 4,505,779
Deferred income taxes, prepayments and other 2,578,282 2,505,212
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Total current assets 32,503,719 27,399,218
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Property, plant and equipment: 174,661,695 170,394,608
Less accumulated depreciation 114,498,824 110,936,937
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60,162,871 59,457,671
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Long-term receivables 9,823,117 10,681,972
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Deferred income taxes 10,909,070 10,909,070
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Spare parts inventory and miscellaneous assets 3,565,342 3,305,010
----------------------------------------
Total assets $116,964,119 $111,752,941
========================================
Current liabilities:
Current obligations under capital leases $ 189,506 $ 196,240
Notes payable, banks 3,250,000 750,000
Accounts payable 6,062,676 4,120,600
Accrued liabilities 7,163,976 7,926,105
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Total current liabilities 16,666,158 12,992,945
----------------------------------------
Long-term debt, less current portion 16,000,000 17,000,000
----------------------------------------
Long-term obligations under capital leases,
less current portion 3,970,280 4,059,724
----------------------------------------
Accrued pensions and other liabilities 13,769,555 13,950,361
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Postretirement benefits other than pensions 18,445,317 18,328,367
----------------------------------------
Shareholders' equity:
Common stock 4,558,243 4,558,243
Capital in excess of par value of stock 29,741,074 29,778,768
Retained earnings 30,338,221 27,968,811
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64,637,538 62,305,822
Less:
Treasury stock, at cost 16,105,251 16,408,808
Management Stock Purchase Plan
receivables and deferrals 419,478 475,470
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48,112,809 45,421,544
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Total liabilities and shareholders' equity $116,964,119 $111,752,941
========================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
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For the Thirteen Weeks Ended For the Twenty-Six Weeks Ended
June 24, 2000 June 26, 1999 June 24, 2000 June 26, 1999
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<S> <C> <C> <C> <C>
Gross Sales $ 62,899,396 $ 56,769,425 $124,047,156 $113,915,599
Less discounts and allowances (21,181,024) (18,265,519) (41,985,438) (37,559,044)
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Net Sales 41,718,372 38,503,906 82,061,718 76,356,555
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Costs and expenses:
Cost of sales 26,379,584 24,069,240 52,376,596 47,701,305
Depreciation 1,819,469 1,905,532 3,681,836 3,691,314
Selling, general and
administrative 9,984,356 10,470,880 19,307,783 21,401,425
Interest expense 390,499 267,671 725,550 490,180
Restructure charge - - - 950,000
Other income, net (318,397) (334,327) (624,757) (678,328)
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38,255,511 36,378,996 75,467,008 73,555,896
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Income before provision for
income taxes 3,462,861 2,124,910 6,594,710 2,800,659
Provision for income taxes 1,238,468 733,109 2,347,801 882,579
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Income before cumulative effect of a change
in accounting principle 2,224,393 1,391,801 4,246,909 1,918,080
Cumulative effect of a change in accounting
principle for start-up costs - - - (204,709)
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Net income $2,224,393 $1,391,801 $4,246,909 $1,713,371
==============================================================================
Average common shares outstanding:
Basic 7,831,331 7,825,206 7,827,270 7,825,396
Diluted 7,847,203 7,867,647 7,835,206 7,894,582
Per share of common stock:
Income before cumulative effect of a change
in accounting principle: Basic $0.28 $0.18 $0.54 $0.25
================ ================== ================== ==================
Diluted $0.28 $0.18 $0.54 $0.24
================ ================== ================== ==================
Cumulative effect of a change in accounting
principle for start-up costs:
Basic and Diluted - - - ($0.03)
================ ================== ================== ==================
Net income: Basic and Diluted $0.28 $0.18 $0.54 $0.22
================ ================== ================== ==================
Cash dividend $0.12 $0.12 $0.24 $0.24
================ ================== ================== ==================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
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For the Twenty-six Weeks Ended
June 24, 2000 June 26, 1999
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Cash flows from (used for) operating activities
<S> <C> <C>
Net income $ 4,246,909 $ 1,713,371
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,681,836 3,691,314
Amortization 33,533 39,180
Cumulative effect of change in accounting principle - 204,709
Other (15,169) 1,188,834
Changes in assets and liabilities
affecting operations (4,510,187) 831,662
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Net cash from operating activities 3,436,922 7,669,070
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Cash flows from (used for) investing activities
Purchase of property, plant and equipment (4,387,036) (10,157,952)
Proceeds from owner/operators' loan repayments 2,301,283 2,664,073
Loans to owner/operators (1,444,774) (2,624,268)
Other 18,353 21,402
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Net cash used for investing activities (3,512,174) (10,096,745)
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Cash flows from (used for) financing activities
Additional long-term debt 3,000,000 5,000,000
Dividends paid (1,877,499) (1,878,433)
Payment of long-term debt (4,096,178) (1,281,438)
Net increase in short-term debt 2,500,000 300,000
Other (36,704) 16,110
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Net cash from (used for) financing activities (510,381) 2,156,239
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Net decrease in cash (585,633) (271,436)
Cash, beginning of year 705,494 372,871
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Cash, end of period $ 119,861 $ 101,435
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Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 625,699 $ 562,821
=====================================
Income taxes $ 4,432,977 $ 77,561
=====================================
Noncash financing activities:
Issuance of common stock for services $ 319,016 $ -
=====================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
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 June 24, 2000 and December 25, 1999, the
results of its operations for the twenty-six weeks ended June 24, 2000
and June 26, 1999 and cash flows for the twenty-six weeks ended June 24,
2000 and June 26, 1999. These unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto in the company's 1999 Annual Report to
Shareholders. In addition, the results of operations for the twenty-six
weeks ended June 24, 2000 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 twenty-six weeks ended June 24, 2000 and June 26, 1999, 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 presented as 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. Potential common
shares which would result from the exercise of stock options are not
included in the computation of diluted per share amounts when the
options' exercise price is greater than the average market price of the
common shares.
3. Restructure Charge
During the first quarter of 1999, the company discontinued forty-three
route territories in certain areas not achieving appropriate levels of
profitability, assigning most of those territories to regional
distributorships. As a result, the company incurred a charge of $950,000
resulting in a reduction in net income of $570,570 or $.07 per share,
primarily relating to costs associated with the repurchase of some
owner/operator territories as well as severance payments and other
related costs. All the costs accrued under this charge have been
satisfied.
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<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 second quarter of 2000, the company realized net income of $2,224,393
versus $1,391,801 for the second quarter of 1999. Net income per share increased
to $.28 from $.18 per share for the comparable quarter of 1999.
Net income for the twenty-six weeks ended June 24, 2000 was $4,246,909 or $.54
per share. Net income for the twenty-six weeks ended June 26, 1999 was
$1,713,371 or $.22 per share. Included in net income for 1999 were two
non-recurring charges. The company discontinued forty-three route territories in
certain areas not achieving appropriate levels of profitability, assigning most
of those territories to certain other independent regional distributorships.
This resulted in an after-tax charge of $570,570 or $.07 per share, primarily
relating to costs associated with the repurchase of some owner/operator
territories as well as employee severance payments and other related costs. The
second charge relates to the adoption of a new accounting regulation, which
required the write off of the remaining start-up costs pertaining to the
company's acquisition of its Oxford facility. This charge is reflected as a
cumulative effect of a change in accounting principle which resulted in an
after-tax charge to net income in the amount of $204,709 or $.03 per share.
After eliminating the effect of these two non-recurring charges, the comparable
1999 results were $2,488,650 or $.32 per share.
For the second quarter, gross sales increased 10.8% to $62,899,396, compared to
$56,769,425 last year. The company also experienced unit sales growth of 10%.
The increase in gross sales for the second quarter of 2000 is a continuation of
a turnaround that began in the fourth quarter of 1999. Increased promotions and
growing relationships with large distributors have contributed to sales growth.
Gross sales, less discounts and allowances, resulted in an increase in net sales
of 8.3% to $41,718,372, compared to $38,503,906 reported last year. The increase
in net sales reflected the increase in gross sales which was partially offset by
the increase in promotions.
Cost of sales, as a percentage of gross sales, was 41.9% and 42.4% for the
second quarters of 2000 and 1999, respectively. The improvement in 2000 over
1999 can be attributed to the increase in sales volume relative to the fixed
portion of cost of sales.
Selling, general and administrative expenses for the second quarter of 2000
decreased by $486,524 or 4.6% compared to the second quarter of 1999. The
decrease can be primarily attributed to a decrease in advertising and other
selling expenses.
Interest expense increased for the second quarter of 2000 versus the second
quarter of 1999 as a result of increased average interest rates.
The effective tax rate was 35.8% for the quarter ended June 24, 2000 and 34.5%
for the quarter ended June 26, 1999 which compares to a federal statutory rate
of 34%. The difference between the effective rate and the statutory rate in the
second quarters of 2000 and 1999 was the effect of state taxes.
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 24, 2000, net cash from operating activities
decreased by $4,232,148 to $3,436,922 from $7,669,070 for the same period in
1999. The decrease in 2000 compared to 1999 was due to a number of factors. The
increase in net income for 2000 was offset by a negative change in assets and
liabilities, mostly resulting from an increase in accounts receivable, which can
be attributed to the increase in sales activity, an increase in cash paid for
income taxes and an increase in inventory compared to 1999. This decrease was
slightly offset by an increase in accounts payable and other current
liabilities.
Net cash used for investing activities for the twenty-six weeks ended June 24,
2000 decreased by $6,584,571 relative to the same period in 1999 principally due
to less capital expenditures in the current year. During the twenty-six weeks
ended June 26, 1999, a higher level of capital expenditures were required due to
the computer system upgrade and the first phase of the bakery modernization
project.
Net cash from financing activities for the twenty-six weeks ended June 24, 2000
decreased by $2,666,620 relative to the same twenty-six weeks in 1999. The
decrease is primarily the result of a decrease in the level of net borrowings
relative to the prior year.
For the remainder of 2000 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.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The company has certain floating rate debt notes. Under current market
conditions, the company believes that changes in interest rates would not have a
material impact on the consolidated financial statements of the company. The
company also has notes receivable from owner operators whose rates adjust every
three years, and, therefore, would partially offset the fluctuations in the
company's interest rates on its notes payable. The company also has the right to
sell these notes receivable, and could use these proceeds to liquidate a
corresponding amount of the debt notes payable.
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 28, 2000.
(b) The directors elected at the meeting were:
For Against Withheld
James L. Everett, III 6,695,052 --- 63,654
Nelson G. Harris 6,695,782 --- 62,924
Carl S. Watts 6,605,345 --- 153,361
Other directors whose terms of office continued after the meeting are as
follows: Fred C. Aldridge, Jr., G. Fred DiBona, Jr., John M. Pettine,
Philip J. Baur, Jr, and Judith M. von Seldeneck.
(c) Other matters voted upon at the meeting and the results of those votes
were as follows:
For Against Abstain
Approval of PricewaterhouseCoopers
LLP, as independent certified
public accountants 6,711,277 28,701 18,728
The foregoing matters are described in detail in the company's proxy statement
dated March 31,2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 10 - By-laws of the Registrant as
amended on March 31, 2000
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The company did not file a report on Form 8-K during the
twenty-six weeks ended June 24, 2000.
Exhibit Index
Exhibit 10 - By-laws of the Registrant as amended on March 31, 2000
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 company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TASTY BAKING COMPANY
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(Company)
August 8, 2000 /S/ John M. Pettine
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(Date) JOHN M. PETTINE
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
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