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 25, 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 7,821,771
- --------------------------------------------------------------------------------
(Title of Class) (No. of Shares Outstanding
at May 8, 2000)
INDEX OF EXHIBITS IS LOCATED ON PAGE 8 OF 9.
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TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 25, 2000 and December 25, 1999................................3
Consolidated Condensed Statements of Operations
Thirteen weeks ended March 25, 2000 and March 27, 1999..............4
Consolidated Condensed Statements of Cash Flows
Thirteen weeks ended March 25, 2000 and March 27, 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 ................8
Item 6. Exhibits and Reports on Form 8-K....................................8
Signature.....................................................................9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
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March 25, 2000 December 25, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Current assets:
<S> <C> <C>
Cash $ 440,577 $ 705,494
Accounts and notes receivable, net of
allowance for doubtful accounts 23,941,787 19,682,733
Inventories:
Raw materials 3,160,317 3,193,027
Work in progress 913,624 568,416
Finished goods 1,313,010 744,336
--------------------------------------------------------
5,386,951 4,505,779
Deferred income taxes, prepayments and other 2,814,739 2,505,212
--------------------------------------------------------
Total current assets 32,584,054 27,399,218
--------------------------------------------------------
Property, plant and equipment: 173,143,846 170,394,608
Less accumulated depreciation 112,799,302 110,936,937
--------------------------------------------------------
60,344,544 59,457,671
--------------------------------------------------------
Long-term receivables 10,585,881 10,681,972
--------------------------------------------------------
Deferred income taxes 10,909,070 10,909,070
--------------------------------------------------------
Spare parts inventory and miscellaneous assets 3,367,309 3,305,010
--------------------------------------------------------
Total assets $117,790,858 $111,752,941
========================================================
Current liabilities:
Current obligations under capital leases $ 192,873 $ 196,240
Notes payable, banks 3,100,000 750,000
Accounts payable 6,352,367 4,120,600
Accrued liabilities 7,832,666 7,926,105
--------------------------------------------------------
Total current liabilities 17,477,906 12,992,945
--------------------------------------------------------
Long-term debt, less current portion 17,000,000 17,000,000
--------------------------------------------------------
Long-term obligations under capital leases,
less current portion 4,015,202 4,059,724
--------------------------------------------------------
Accrued pensions and other liabilities 14,256,959 13,950,361
--------------------------------------------------------
Postretirement benefits other than pensions 18,516,878 18,328,367
--------------------------------------------------------
Shareholders' equity:
Common stock 4,558,243 4,558,243
Capital in excess of par value of stock 29,778,768 29,778,768
Retained earnings 29,052,525 27,968,811
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63,389,536 62,305,822
Less:
Treasury stock, at cost 16,431,908 16,408,808
Management Stock Purchase Plan
receivables and deferrals 433,715 475,470
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46,523,913 45,421,544
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Total liabilities and shareholders' equity $117,790,858 $111,752,941
========================================================
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
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For the Thirteen Weeks Ended
March 25, 2000 March 27, 1999
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<S> <C> <C>
Gross Sales $61,147,760 $57,146,174
Less discounts and allowances (20,804,414) (19,293,525)
-----------------------------------------------
Net Sales 40,343,346 37,852,649
-----------------------------------------------
Costs and expenses:
Cost of sales 25,997,012 23,632,065
Depreciation 1,862,367 1,785,783
Selling, general and
administrative 9,323,427 11,000,903
Interest expense 335,051 222,508
Restructure charge - 950,000
Other income, net (306,360) (414,359)
-----------------------------------------------
37,211,497 37,176,900
-----------------------------------------------
Income before provision for
income taxes 3,131,849 675,749
Provision for income taxes 1,109,333 149,470
-----------------------------------------------
Income before cumulative effect of a change
in accounting principle 2,022,516 526,279
Cumulative effect of a change in accounting
principle for start-up costs - (204,709)
-----------------------------------------------
Net income $ 2,022,516 $ 321,570
===============================================
Average common shares outstanding:
Basic 7,823,210 7,825,586
Diluted 7,823,210 7,921,517
Per share of common stock:
Income before cumulative effect of a change
in accounting principle: Basic and Diluted $0.26 $0.07
=================== =====================
Cumulative effect of a change in accounting
principle for start-up costs: Basic and Diluted - (0.03)
=================== =====================
Net income: Basic and Diluted $0.26 $0.04
=================== =====================
Cash dividend $0.12 $0.12
=================== =====================
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
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For the Thirteen Weeks Ended
March 25, 2000 March 27, 1999
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<S> <C> <C>
Cash flows from (used for) operating activities
Net income $ 2,022,516 $ 321,570
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,862,367 1,785,783
Amortization 16,887 19,895
Cumulative effect of change in accounting principle - 204,709
Other 427,811 1,535,039
Changes in assets and liabilities
affecting operations (3,311,425) (954,717)
----------------------------------------------------------
Net cash from operating activities 1,018,156 2,912,279
----------------------------------------------------------
Cash flows from (used for) investing activities
Purchase of property, plant and equipment (2,749,240) (6,633,880)
Proceeds from owner/operators' loan repayments 1,108,800 1,138,842
Loans to owner/operators (1,013,871) (1,354,956)
Other 7,929 12,171
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Net cash used for investing activities (2,646,382) (6,837,823)
----------------------------------------------------------
Cash flows from (used for) financing activities
Additional long-term debt 2,000,000 5,000,000
Dividends paid (938,802) (939,107)
Payment of long-term debt (2,047,889) (1,140,457)
Net increase in short-term debt 2,350,000 700,000
Other - (18,216)
----------------------------------------------------------
Net cash from financing activities 1,363,309 3,602,220
----------------------------------------------------------
Net decrease in cash (264,917) (323,324)
Cash, beginning of year 705,494 372,871
----------------------------------------------------------
Cash, end of period $ 440,577 $ 49,547
==========================================================
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 298,727 $ 223,376
==========================================================
Income taxes $ 1,973,925 $ 9,884
==========================================================
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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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 25, 2000 and December 25, 1999, the
results of its operations for the thirteen weeks ended March 25, 2000 and
March 27, 1999 and cash flows for the thirteen weeks ended March 25, 2000
and March 27, 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 thirteen
weeks ended March 25, 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 thirteen weeks ended March 25, 2000 and March 27, 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 those 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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TASTY BAKING COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net income for the first quarter of 2000 was $2,022,516 or $.26 per share. Net
income for the first quarter of 1999 was $321,570 or $.04 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 first quarter results were $1,096,849
or $.14 per share.
For the first quarter, gross sales increased 7% to $61,147,760, compared to
$57,146,174 last year. The company also experienced unit sales growth of 10%.
The increase in gross sales for the first quarter of 2000 is a continuation of a
turnaround that began in the fourth quarter of 1999. In addition, improved
production capabilities, compared to the difficulties that were experienced
during the implementation of the first phase of the bakery modernization project
in the first quarter of last year, also contributed to the increase. Gross
sales, less discounts and allowances, resulted in an increase in net sales of
6.6% to $40,343,346, compared to $37,852,649 reported last year. The increase in
net sales was consistent with the increase in gross sales.
Cost of sales, as a percentage of gross sales, was 42.5% and 41.4% for the first
quarters of 2000 and 1999, respectively. The increase in 2000 was the result of
permanent and temporary selling price reductions coupled with a change in the
sales mix in the first quarter of 2000 compared to the first quarter of 1999.
Selling, general and administrative expenses for the first quarter of 2000
decreased by $1,677,476 or 15.2% compared to the first quarter of 1999. The
decrease can be primarily attributed to savings from the route restructure that
was done during the first quarter of 1999.
Interest expense increased for the first quarter of 2000 versus the first
quarter of 1999 as a result of increased average interest rates as well as
higher average borrowing levels.
The effective tax rate was 35.4% for the quarter ended March 25, 2000 and 22.1%
for the quarter ended March 27, 1999 which compares to a federal statutory rate
of 34%. The difference between the effective rate and the statutory rate in the
first quarter of 2000 was the effect of state taxes. The difference between the
effective rate and the statutory rate in the first quarter of 1999 was due to
low taxable income compounded by the effect of state tax benefits arising from
passive income.
7 of 9
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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 25, 2000, net cash from operating activities
decreased by $1,894,123 to $1,018,156 from $2,912,279 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, and an increase in cash paid
for income taxes compared to 1999. In addition, an accrual for the 1999
restructure charge, which was paid during the second quarter of 1999, was
included in the 1999 first quarter adjustments to net income.
Net cash used for investing activities for the thirteen weeks ended March 25,
2000 decreased by $4,191,441 relative to the same period in 1999 principally due
to less capital expenditures in the current year. In the first quarter of 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 thirteen weeks ended March 25, 2000
decreased by $2,238,911 relative to the same thirteen weeks in 1999. The
decrease is primarily the result of a net decrease in short and long-term debt
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 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.
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 company did not file a report on Form 8-K during the thirteen
weeks ended March 25, 2000.
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 company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TASTY BAKING COMPANY
----------------------------------------
(Company)
May 8, 2000 /S/ John M. Pettine
- -------------------- --------------------------------------------
(Date) JOHN M. PETTINE
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000096412
<NAME> TASTY BAKING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> Dec-30-2000
<PERIOD-START> Dec-26-1999
<PERIOD-END> Mar-25-2000
<CASH> 441
<SECURITIES> 0
<RECEIVABLES> 26,567
<ALLOWANCES> (2,625)
<INVENTORY> 5,387
<CURRENT-ASSETS> 32,584
<PP&E> 173,144
<DEPRECIATION> (112,799)
<TOTAL-ASSETS> 117,791
<CURRENT-LIABILITIES> 17,478
<BONDS> 21,015
0
0
<COMMON> 4,558
<OTHER-SE> 41,966
<TOTAL-LIABILITY-AND-EQUITY> 117,791
<SALES> 40,343
<TOTAL-REVENUES> 40,649
<CGS> 25,997
<TOTAL-COSTS> 25,997
<OTHER-EXPENSES> 1,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 335
<INCOME-PRETAX> 3,132
<INCOME-TAX> 1,109
<INCOME-CONTINUING> 2,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,023
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.26
</TABLE>
