Tasty Baking '06 net up sharply despite dip in sales

by Eric Schroeder
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PHILADELPHIA — Net income of Tasty Baking Co. in the year ended Dec. 31, 2006, was $4,196,000, equal to 52c per share on the common stock, up sharply from $1,843,000, or 23c per share in fiscal 2005.

Net sales were $167,715,000, down 3% from $172,273,000 in 2005. Route net sales for the year were down 2.3% versus fiscal 2005. Non-route sales for the year fell 3.7%.

"We continued to make strong progress in 2006 by improving our operational performance," said Charles P. Pizzi, president and chief executive officer. "Margins are up, profits are up, and we believe we are in solid financial shape as evidenced by our improved balance sheet and cash flow. Our strategy has been to improve profits and margins to fund more marketing investment to build the Tastykake brand. In line with this strategy, we are excited about our 2007 advertising campaign, which will include Tastykake’s first comprehensive television promotion in approximately 20 years."

In the fourth quarter ended Dec. 31, Tasty Baking posted income of $1,601,000 on sales of $40,916,000, which compared with income of $167,000 on sales of $44,964,000 during the final period last year.

During the fourth quarter of 2006, Tasty Baking said it benefited from a pre-tax gain of $1.6 million related to a terminated option on its corporate office and distribution center.

David S. Marberger, executive vice-president and chief financial officer, said price increases implemented during the year reduced the company’s volumes, but was "a necessary step to improve the company’s profitability and margins."

"Now that the company has made great strides in improving its margin structure, we are in a better position to benefit from a growth in sales," Mr. Marberger said. "Also, our strong cash flow in 2006 enabled the company to reduce debt by approximately $5 million or 20%."

Looking ahead to 2007, Mr. Pizzi said Tasty Baking is focused on leveraging momentum to grow net sales. He did not provide guidance on 2007 operating results, though, noting that it would not be appropriate to do so given the company’s current evaluation of its long-term manufacturing strategy.

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