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 31, 2001
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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
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TASTY BAKING COMPANY
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(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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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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 7,974,769
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(Title of Class) (No. of Shares Outstanding
at May 14, 2001)
TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 31, 2001 and December 30, 2000...........................3
Consolidated Condensed Statements of Operations
Thirteen weeks ended March 31, 2001 and March 25, 2000.........4
Consolidated Condensed Statements of Cash Flows
Thirteen weeks ended March 31, 2001 and March 25, 2000.........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 Risk..............................................8
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds...........................9
Item 6. Exhibits and Reports on Form 8-K....................................9
Signature...................................................................10
Page 2 of 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
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March 31, 2001 December 30, 2000
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Current assets:
Cash $ 65,505 $ 311,242
Accounts and notes receivable, net of
allowance for doubtful accounts 24,843,322 20,771,853
Inventories:
Raw materials 4,231,606 3,433,599
Work in progress 731,508 705,380
Finished goods 2,257,596 1,791,570
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7,220,710 5,930,549
Deferred income taxes, prepayments and other 3,299,315 3,518,928
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Total current assets 35,428,852 30,532,572
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Property, plant and equipment: 180,065,317 178,302,048
Less accumulated depreciation 120,336,538 118,487,509
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59,728,779 59,814,539
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Long-term receivables 10,044,489 9,652,433
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Deferred income taxes 8,533,257 8,533,257
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Spare parts inventory and miscellaneous assets 3,779,198 3,659,416
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Total assets $ 117,514,575 $112,192,217
========================================================
Current liabilities:
Current obligations under capital leases $ 212,353 $ 216,820
Notes payable, banks 2,750,000 2,200,000
Accounts payable 7,253,024 5,385,864
Accrued liabilities 6,578,599 7,255,765
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Total current liabilities 16,793,976 15,058,449
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Long-term debt, less current portion 14,000,000 13,000,000
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Long-term obligations under capital leases,
less current portion 3,826,978 3,842,904
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Accrued pensions and other liabilities 11,500,889 11,728,847
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Postretirement benefits other than pensions 18,467,011 18,388,339
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Shareholders' equity:
Common stock 4,558,243 4,558,243
Capital in excess of par value of stock 29,404,220 29,742,434
Retained earnings 33,529,908 32,351,894
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67,492,371 66,652,571
Less:
Treasury stock, at cost 14,214,612 16,106,361
Management Stock Purchase Plan
receivables and deferrals 352,038 372,532
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52,925,721 50,173,678
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Total liabilities and shareholders' equity $ 117,514,575 $112,192,217
========================================================
See accompanying notes to consolidated condensed financial statements.
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TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
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For the Thirteen Weeks Ended
March 31, 2001 March 25, 2000
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Gross Sales $65,655,374 $61,147,760
Less discounts and allowances (23,261,285) (20,804,414)
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Net Sales 42,394,089 40,343,346
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Costs and expenses:
Cost of sales 26,413,844 25,997,012
Depreciation 1,849,030 1,862,367
Selling, general and
administrative 10,732,086 9,323,427
Interest expense 282,042 335,051
Other income, net (318,151) (306,360)
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38,958,851 37,211,497
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Income before provision for
income taxes 3,435,238 3,131,849
Provision for income taxes 1,315,787 1,109,333
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Net income $ 2,119,451 $ 2,022,516
====================================================
Average common shares outstanding:
Basic 7,902,402 7,823,210
Diluted 8,022,865 7,823,210
Per share of common stock:
Net income:
Basic $0.27 $0.26
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Diluted $0.26 $0.26
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Cash dividend $0.12 $0.12
===================== =======================
See accompanying notes to consolidated condensed financial statements.
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TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
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For the Thirteen Weeks Ended
March 31, 2001 March 25, 2000
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Cash flows from (used for) operating activities
Net income $ 2,119,451 $ 2,022,516
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,849,030 1,862,367
Amortization 15,939 16,887
Other 530,691 427,811
Changes in assets and liabilities
affecting operations (3,952,023) (3,311,425)
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Net cash from operating activities 563,088 1,018,156
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Cash flows from (used for) investing activities
Purchase of property, plant and equipment (1,763,269) (2,749,240)
Proceeds from owner/operators' loan repayments 782,552 1,108,800
Loans to owner/operators (1,174,608) (1,013,871)
Other 9,554 7,929
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Net cash used for investing activities (2,145,771) (2,646,382)
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Cash flows from (used for) financing activities
Additional long-term debt 1,000,000 2,000,000
Dividends paid (941,437) (938,802)
Payment of long-term debt (20,393) (2,047,889)
Net increase in short-term debt 550,000 2,350,000
Net proceeds from sale of common stock 748,776 -
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Net cash from financing activities 1,336,946 1,363,309
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Net decrease in cash (245,737) (264,917)
Cash, beginning of year 311,242 705,494
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Cash, end of period $ 65,505 $ 440,577
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Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 273,219 $ 298,727
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Income taxes $ 798,400 $ 1,973,925
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Noncash financing activities:
Issuance of common stock for services $ 804,759 -
============================================================
See accompanying notes to consolidated condensed financial statements.
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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 31, 2001 and December 30, 2000, the
results of its operations for the thirteen weeks ended March 31, 2001 and
March 25, 2000 and cash flows for the thirteen weeks ended March 31, 2001
and March 25, 2000. These unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto in the company's 2000 Annual Report to
Shareholders. In addition, the results of operations for the thirteen
weeks ended March 31, 2001 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 31, 2001 and March 25, 2000, 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. New Accounting Standards
------------------------
Statement of Financial Accounting Standards 133, "Accounting for
Derivatives"' as amended by SFAS 137 and SFAS 138 became effective in
January 2001. This pronouncement did not have an impact on the company's
consolidated results of operations, financial position, cash flows or
disclosure requirements. The company has not entered into derivative
financial instruments or hedging arrangements.
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TASTY BAKING COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Results of Operations
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Net income for the first quarter of 2001 was $2,119,451 or $.26 per share. Net
income for the first quarter of 2000 was $2,022,516 or $.26 per share. However,
during the first quarter of 2001, the $14.00 and $16.00 stock price targets
pertaining to the 1999 conditional stock grant were achieved and a resulting
pre-tax charge of $805,000 of compensation expense was recorded. While the
company anticipated achieving the $14.00 per share price target in the first
quarter, it did not anticipate achieving the $16.00 per share price target in
the same quarter, and as a result the first quarter 2001 was impacted by $.03
per share. Therefore, without the additional expense related to the $16.00 per
share price target, net income per share would have been $.29. The achievement
of the $16.00 target completes the 1999 conditional stock grant.
For the first quarter, gross sales increased 7.4% to $65,655,374, compared to
$61,147,760 last year. The increase in gross sales was primarily the result of
price increases instituted at the end of the fourth quarter of 2000. Gross
sales, less discounts and allowances, resulted in an increase in net sales of
5.1% to $42,394,089, compared to $40,343,346 reported last year. The percentage
increase in net sales was lower than the percentage increase in gross sales due
to the effect of returns and commissions.
Cost of sales, as a percentage of gross sales, was 40.2% and 42.5% for the first
quarters of 2001 and 2000, respectively. The decrease in the percentage in 2001
was primarily the result of the price increase.
Selling, general and administrative expenses for the first quarter of 2001
increased by $1,408,659 or 15.1% compared to the first quarter of 2000. Part of
the increase can be attributed to the compensation expense from the 1999
conditional stock grant. The company also experienced additional costs relative
to market expansion and sales growth including freight expenses compounded by
fuel surcharges, and an increase in the provision for doubtful accounts relative
to the increase in accounts receivable.
Interest expense decreased for the first quarter of 2001 versus the first
quarter of 2000 as a result of decreased average interest rates as well as lower
average borrowing levels.
The effective tax rate was 38.3% for the quarter ended March 31, 2001 and 35.4%
for the quarter ended March 25, 2000, which compares to a federal statutory rate
of 34%. The difference between the effective rate and the statutory rate in the
first quarter of 2001 was the effect of state taxes. The difference between the
effective rate and the statutory rate in the first quarter of 2000 was the
effect of state taxes partially offset by tax benefits arising from passive
income.
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Financial Condition
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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 31, 2001, net cash from operating activities
decreased by $455,068 to $563,088 from $1,018,156 for the same period in 2000.
The decrease in 2001 compared to 2000 was due to a number of factors. There was
a decrease in accrued payroll in the first quarter of 2001 due to the payment in
2001 of management bonuses accrued in 2000. No such bonuses were accrued at
year-end 1999, so there was no corresponding cash payment in the first quarter
of 2000. In addition, there were increases in inventories and prepayments
relative to the comparable quarter last year. These decreases in cash from
operating activities were partially offset by an increase in accrued income
taxes from a reduction in cash paid for income taxes.
Net cash used for investing activities for the thirteen weeks ended March 31,
2001 decreased by $500,611 relative to the same period in 2000 principally due
to lower capital expenditures in the current year partially offset by a decrease
in proceeds from owner/operator loan payoffs.
Net cash from financing activities for the thirteen weeks ended March 31, 2001
decreased by $26,363 relative to the same thirteen weeks in 2000. The proceeds
from the sale of common stock from the exercise of stock options were offset by
a net decrease in short and long-term debt relative to the prior year.
For the remainder of 2001 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.
Forward-Looking Statements
--------------------------
Certain statements in this filing that are not historical facts are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve risks and
uncertainties, which could cause actual results to differ from those projected.
Factors that could cause actual results to differ materially from those
expressed or implied by such forward-looking statements include changes in
general economic or business conditions, the availability of capital upon terms
acceptable to the company, the availability and prices of raw materials, the
level of demand for the company's products, legal proceedings to which the
company is or may become a party, the actions of competitors and customers,
changes in consumer tastes or eating habits, the success of plant modernization
and business strategies implemented by the company, and the ability to develop
and market in a timely and efficient manner new products which are accepted by
consumers.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
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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.
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TASTY BAKING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
During the quarter, the company sold 86,846 shares of its common
stock to various officers and one former director of the company
pursuant to the exercise of outstanding stock options. All shares
were sold for cash and the aggregate price paid for the shares
sold was $999,768.50. The options were originally granted under
the terms and conditions of the company's various stock option
plans and the stock option awards made from time to time to
directors. The original stock option awards and the subsequent
sale of common stock by the company are exempt from registration
as transactions by the issuer not involving a public offering as
provided under Section 4(2) of the Securities Act of 1933, as
amended, and the regulations and rulings thereunder. All proceeds
from the sale of the common stock will be used for general
corporate purposes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Reports on Form 8-K
The company did not file a report on Form 8-K during the thirteen
weeks ended March 31, 2001.
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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
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(Company)
May 14, 2001 /S/ John M. Pettine
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(Date) JOHN M. PETTINE
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
May 14, 2001 /S/ Daniel J. Decina
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(Date) DANIEL J. DECINA
VICE PRESIDENT, FINANCE AND
CHIEF ACCOUNTING OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
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