Tasty Baking: Reports 4th Quarter 2009 Results

Philadelphia / PA. (tb) Tasty Baking Company reported net sales of 43,9 million USD for its fourth quarter ended December 26, 2009; a 0,3 percent increase versus the prior year period. For the fourth quarter of 2009, the company reported a net loss of 5,1 million USD compared to a net loss of 4,6 million USD in the fourth quarter of 2008. On a pre-tax basis, results for the fourth quarter of 2009 included 4,5 million USD in accelerated depreciation, 1,8 million USD in rental expense related to both the company´s new manufacturing facility and corporate headquarters at the Philadelphia Navy Yard, and 1,4 million USD in non-cash costs related to spare parts that are not expected to be utilized at the new manufacturing facility. On a pre-tax basis, results for the fourth quarter 2008 included 7,8 million USD in income related to changes in the company´s postretirement medical benefit plan, as well as 1,3 million USD in accelerated depreciation, and 12,6 million USD in pension expense in connection with the company´s method of immediately recognizing gains and losses that fall outside its pension corridor.

President and CEO Charles P. Pizzi: «During the fourth quarter of 2009, we continued to outpace the category in both sales dollars and units for our Route territories as compared to the fourth quarter of the prior year. Continuing to grow the top-line in a profitable manner is a priority for us as we begin to leverage our new manufacturing facility, invest in the business, and develop new products to help keep the brand relevant and top-of-mind with consumers. With regards to the new bakery project, we continue to be on budget and ahead of our original schedule. We currently have four of seven production lines up and running at the new bakery and we have re-located our distribution center to the Philadelphia Navy Yard facility. We still anticipate completing the transition of production in the Spring of 2010».

Results of Operations

Net sales in the fourth quarter of 2009 increased 0,3 percent versus the comparable period in 2008 driven by a 2,2 percent increase in Route net sales while Non-Route net sales declined 5,6 percent compared to the same period a year ago. Route net sales benefited from increased sales volumes, particularly for the company´s Family Pack products, and the benefits of higher selling prices, which were partially offset by higher product returns and promotion expense as compared to the same period a year ago. The decline in Non-Route net sales during the fourth quarter of 2009 resulted primarily from higher promotional expense with third party distributors combined with lower sales volumes within the vending channel.

Total cost of sales, excluding depreciation, for the fourth quarter of 2009 decreased 7,0 percent or 2,3 million USD, versus the fourth quarter of 2008 on a unit volume increase of 0,9 percent. The decrease in cost of sales was driven by a 0,8 million USD reduction in key ingredients and packaging costs combined with a 1,5 million USD decline in fixed manufacturing expenses. Driving the year over year reduction in fixed manufacturing expenses was the 4,8 million USD net impact of a pension corridor charge and postretirement medical insurance plan termination benefit that occurred in the fourth quarter of 2008, but that did not reoccur in the fourth quarter of 2009, 2,9 million USD of which was recorded in cost of sales and 1,9 million USD of which was recorded as a component of selling, general and administrative expenses. Partially offsetting the 2,9 million USD net impact was 1,5 million USD in non-cash rental expense in the fourth quarter of 2009 associated with the commencement of the operating lease for the company´s new manufacturing facility.

Gross profit declined 0,9 million USD or 11,5 percent in the fourth quarter of 2009 as compared to the fourth quarter of 2008. This decline was primarily driven by a 3,3 million USD increase in depreciation expense resulting almost entirely from accelerated depreciation related to the company´s transition to the new manufacturing facility at the Philadelphia Navy Yard. Partially offsetting this increase was a 2,3 million USD reduction in cost of sales.

Selling, general and administrative expense declined 0,8 million USD or 5,4 percent in the fourth quarter of 2009 versus the comparable period in 2008. This decrease was mainly attributable to the 1,9 million USD net impact of a pension corridor charge and postretirement medical insurance plan termination benefit that occurred in the fourth quarter of 2008, but that did not reoccur in the fourth quarter of 2009. This benefit was partially offset by 0,5 million USD in higher salary related expenses, incremental investments in marketing and brand building activities, as well as a 0,3 million USD increase in rental costs associated with the company´s corporate offices.

Senior vice president and CFO Paul D. Ridder: «We remain focused on managing costs and risks, including those associated with the transition to the new manufacturing and distribution facility as well as continuing to identify opportunities to generate further profitable growth across all components of our business».

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