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 30, 2001
-------------
( ) 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
--------------------------------------------------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
2801 Hunting Park Avenue, Philadelphia, Pennsylvania 19129
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(215) 221-8500
--------------------------------------------------------------------------------
(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 8,048,199
--------------------------------------------------------------------------------
(Title of Class) (No. of Shares Outstanding
at August 8, 2001)
INDEX OF EXHIBITS IS LOCATED ON PAGE 9 OF 10.
1 of 10
TASTY BAKING COMPANY AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
June 30, 2001 and December 30, 2000....................................3
Consolidated Condensed Statements of Operations
Twenty-six weeks ended June 30, 2001 and June 24, 2000.................4
Consolidated Condensed Statements of Cash Flows
Twenty-six weeks ended June 30, 2001 and June 24, 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 Risk8
PART II.OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds..............................9
Item 4. Submission of Matters to a Vote of Security Holders....................9
Item 6. Exhibits and Reports on Form 8-K.......................................9
Signatures....................................................................10
2 of 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
June 30, 2001 December 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash $ 305,369 $ 311,242
Accounts and notes receivable, net of
allowance for doubtful accounts 26,159,018 20,771,853
Inventories:
Raw materials 3,977,810 3,433,599
Work in progress 737,173 705,380
Finished goods 2,721,419 1,791,570
--------------------------------------------------------
7,436,402 5,930,549
Deferred income taxes, prepayments and other 3,105,367 3,518,928
--------------------------------------------------------
Total current assets 37,006,156 30,532,572
--------------------------------------------------------
Property, plant and equipment: 182,304,697 178,302,048
Less accumulated depreciation 122,039,596 118,487,509
--------------------------------------------------------
60,265,101 59,814,539
--------------------------------------------------------
Long-term receivables 9,820,778 9,652,433
--------------------------------------------------------
Deferred income taxes 8,533,257 8,533,257
--------------------------------------------------------
Spare parts inventory and miscellaneous assets 3,959,098 3,659,416
--------------------------------------------------------
Total assets $ 119,584,390 $112,192,217
========================================================
Current liabilities:
Current obligations under capital leases $ 206,256 $ 216,820
Notes payable, banks 3,350,000 2,200,000
Accounts payable 7,363,330 5,385,864
Accrued liabilities 6,479,750 7,255,765
--------------------------------------------------------
Total current liabilities 17,399,336 15,058,449
--------------------------------------------------------
Long-term debt, less current portion 13,000,000 13,000,000
--------------------------------------------------------
Long-term obligations under capital leases,
less current portion 3,812,246 3,842,904
--------------------------------------------------------
Accrued pensions and other liabilities 11,652,883 11,728,847
--------------------------------------------------------
Postretirement benefits other than pensions 18,677,031 18,388,339
--------------------------------------------------------
Shareholders' equity:
Common stock 4,558,243 4,558,243
Capital in excess of par value of stock 29,279,673 29,742,434
Retained earnings 35,071,215 32,351,894
--------------------------------------------------------
68,909,131 66,652,571
Less:
Treasury stock, at cost 13,344,785 16,106,361
Management Stock Purchase Plan
receivables and deferrals 521,452 372,532
--------------------------------------------------------
55,042,894 50,173,678
--------------------------------------------------------
Total liabilities and shareholders' equity $ 119,584,390 $112,192,217
========================================================
See accompanying notes to consolidated condensed financial statements.
3 of 10
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
For the Thirteen Weeks Ended For the Twenty-Six Weeks Ended
June 30, 2001 June 24, 2000 June 30, 2001 June 24, 2000
------------------------------------------------------------------------------------------------------------------------------------
Gross Sales $66,520,073 $ 62,899,396 $132,175,447 $124,047,156
Less discounts and allowances (23,495,955) (21,181,024) (46,757,240) (41,985,438)
----------------------------------------------------------------------------------------------
Net Sales 43,024,118 41,718,372 85,418,207 82,061,718
----------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 27,095,930 26,379,584 53,509,774 52,376,596
Depreciation 1,703,058 1,819,469 3,552,088 3,681,836
Selling, general and
administrative 10,258,751 9,984,356 20,990,837 19,307,783
Interest expense 320,355 390,499 602,397 725,550
Other income, net (303,078) (318,397) (621,229) (624,757)
----------------------------------------------------------------------------------------------
39,075,016 38,255,511 78,033,867 75,467,008
----------------------------------------------------------------------------------------------
Income before provision for
income taxes 3,949,102 3,462,861 7,384,340 6,594,710
Provision for income taxes 1,450,570 1,238,468 2,766,357 2,347,801
----------------------------------------------------------------------------------------------
Net income $ 2,498,532 $2,224,393 $4,617,983 $4,246,909
==============================================================================================
Average common shares outstanding:
Basic 7,998,041 7,831,331 7,950,222 7,827,270
Diluted 8,137,241 7,847,203 8,085,533 7,835,206
Per share of common stock:
Net income: Basic $0.31 $0.28 $0.58 $0.54
===================== ====================== ====================== =====================
Diluted $0.31 $0.28 $0.57 $0.54
===================== ====================== ====================== =====================
Cash dividend $0.12 $0.12 $0.24 $0.24
===================== ====================== ====================== =====================
See accompanying notes to consolidated condensed financial statements.
4 of 10
TASTY BAKING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
For the Twenty-six Weeks Ended
June 30, 2001 June 24, 2000
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) operating activities
Net income $ 4,617,983 $ 4,246,909
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,552,088 3,681,836
Amortization 32,988 33,533
Other 707,806 (15,169)
Changes in assets and liabilities
affecting operations (5,278,006) (4,510,187)
------------------------------------------------------------
Net cash from operating activities 3,632,859 3,436,922
------------------------------------------------------------
Cash flows from (used for) investing activities
Purchase of property, plant and equipment (4,002,650) (4,387,036)
Proceeds from owner/operators' loan repayments 2,050,497 2,301,283
Loans to owner/operators (2,218,842) (1,444,774)
Other 14,383 18,353
------------------------------------------------------------
Net cash used for investing activities (4,156,612) (3,512,174)
------------------------------------------------------------
Cash flows from (used for) financing activities
Additional long-term debt 1,000,000 3,000,000
Dividends paid (1,898,662) (1,877,499)
Payment of long-term debt (1,041,222) (4,096,178)
Net increase in short-term debt 1,150,000 2,500,000
Net proceeds from sale of common stock 1,307,764 (36,704)
------------------------------------------------------------
Net cash from (used for) financing activities 517,880 (510,381)
------------------------------------------------------------
Net decrease in cash (5,873) (585,633)
Cash, beginning of year 311,242 705,494
------------------------------------------------------------
Cash, end of period $ 305,369 $ 119,861
============================================================
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 523,439 $ 625,699
============================================================
Income taxes $ 1,958,642 $ 4,432,977
============================================================
Noncash financing activities:
Issuance of common stock for services $ 804,759 $ 319,016
============================================================
See accompanying notes to consolidated condensed financial statements.
5 of 10
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 30, 2001 and December 30, 2000, the
results of its operations for the twenty-six weeks ended June 30, 2001 and
June 24, 2000 and cash flows for the twenty-six weeks ended June 30, 2001
and June 24, 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 twenty-six
weeks ended June 30, 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 twenty-six weeks ended June 30, 2001 and June 24, 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.
6 of 10
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 2001, the company realized net income of $2,498,532
versus $2,224,393 for the second quarter of 2000. Net income per share increased
to $.31 from $.28 per share for the comparable quarter of 2000.
Net income for the twenty-six weeks ended June 30, 2001 was $4,617,983 versus
$4,246,909 for the twenty-six weeks ended June 24, 2000. Net income per share
increased to $.57 in 2001 from $.54 per share for 2000.
For the second quarter, gross sales increased 5.8% to $66,520,073, compared to
$62,899,396 last year. The increase in gross sales for the second quarter of
2001 is primarily due to price increases instituted in the fourth quarter of
2000. Gross sales, less discounts and allowances, resulted in an increase in net
sales of 3.1% to $43,024,118, compared to $41,718,372 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 40.7% and 41.9% for the
second quarters of 2001 and 2000, respectively. The improvement in 2001 over
2000 can be attributed to the price increases.
The company has evaluated the utilization of certain fixed assets and has
determined that their useful lives should be extended to seven years from five
years. As a result, depreciation expense decreased by $161,000 for the second
quarter of 2001.
Selling, general and administrative expenses for the second quarter of 2001
increased by $274,395 or 2.7% compared to the second quarter of 2000 generally
as the result of expenses associated with market expansion.
Interest expense decreased for the second quarter of 2001 versus the second
quarter of 2000 as a result of decreased average interest rates as well as lower
average borrowing levels.
The effective tax rate was 36.7% for the quarter ended June 30, 2001 and 35.8%
for the quarter ended June 24, 2000, which compares to a federal statutory rate
of 34%. The difference between the effective rate and the statutory rate in the
second quarter of 2001 was the effect of state taxes. The difference between the
effective rate and the statutory rate in the second quarter of 2000 was the
effect of state taxes partially offset by tax benefits arising from passive
income.
7 of 10
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 30, 2001, net cash from operating activities
increased by $195,937 to $3,632,859 from $3,436,922 for the same period in 2000.
The increase in 2001 compared to 2000 was due to an increase in net income and
favorable non-cash adjustments to net income. These increases to cash from
operating activities were offset by a negative change in assets and liabilities
affecting operations consisting of an increase in accounts receivable and
inventory offset by a decrease in cash paid for income taxes and an increase in
accounts payable.
Net cash used for investing activities for the twenty-six weeks ended June 30,
2001 increased by $644,438 relative to the same period in 2000. The increase was
principally due to an increase in loans to owner/operators offset by a decrease
in the purchase of equipment compared to the prior year.
Net cash from financing activities for the twenty-six weeks ended June 30, 2001
increased by $1,028,261 relative to the same twenty-six weeks in 2000. The
increase is primarily the result of proceeds from the sale of treasury stock
through the exercise of executive stock options.
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
---------------------------------------------------------
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
TASTY BAKING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
During the quarter, the company sold 50,575 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 $558,987.50. 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 4. Submission of Matters to a Vote of Security Holders
(a) The company's annual meeting of shareholders was held on April 27, 2001.
(b) The directors elected at the meeting were:
For Against Withheld
Philip J. Baur, Jr. 6,538,159 --- 29,579
Judith M. Von Seldeneck 6,536,498 --- 31,240
Other directors whose terms of office continued after the meeting are as
follows: Carl S. Watts, Fred C. Aldridge, Jr., Esq., G. Fred DiBona,
Jr., Ronald J. Kozich and John M. Pettine.
(c) Other matters voted upon at the meeting and the results of those
votes were as follows:
For Against Abstain
Adoption of the Tasty Baking Company
Restricted Stock Incentive Plan 5,367,862 1,158,828 41,039
Approval of PricewaterhouseCoopers LLP, as
independent certified public accountants 6,535,829 12,606 19,299
The foregoing matters are described in detail in the company's proxy statement
dated March 30, 2001.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 10 - Tasty Baking Company Restricted Stock
Incentive Plan
(b) Reports on Form 8-K
The company did not file a report on Form 8-K during the twenty-six
weeks ended June 30, 2001.
9 of 10
TASTY BAKING COMPANY AND SUBSIDIARIES
SIGNATURES
----------
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)
August 13, 2001 /S/ John M. Pettine
----------------------------------- -----------------------------------------
(Date) JOHN M. PETTINE
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
August 13, 2001 /S/ Daniel J. Decina
----------------------------------- -----------------------------------------
(Date) DANIEL J. DECINA
VICE PRESIDENT, FINANCE AND
CHIEF ACCOUNTING OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
10 of 10