Tasty Baking net falls 49% in year
February 28, 2008
by Eric Schroeder
PHILADELPHIA — Net income of Tasty Baking Co. in the year ended Dec. 29 was $2,128,000, equal to 26c per share on the common stock, down 49% from $4,196,000, or 52c per share, in fiscal 2006.
Pressuring earnings in 2007 was incremental deppreciation associated with the company’s planned move of its Philadelphia baking plant in 2010. The depreciation reflects the curtailed useful life at the company’s existing plant. For the year, the incremental depreciation resulted in a 4 percentage point reduction in gross margins at the company.
In the fourth quarter ended Dec. 29, Tasty Baking posted income of $99,000 on sales of $39,269,000, which compared with income of $1,601,000 on sales of $40,916,000 during the final period last year. The sales decline in the most recent quarter was attributed in large part to a 16.1% decline in non-route net sales and 0.2% drop in route net sales.
Gross margins in the fourth quarter of 2007 were 8 points beneath the same quarter a year earlier. The decline was precipitated principally (5.8 points) by higher ingredient and packaging costs as well as by the incremental depreciation (3.3 points) associated with the move. Helping mitigate these earnings drags were price increases and reduced manufacturing expenses.
"During the fourth quarter of 2007 we faced significant challenges as industry-wide commodity cost increases continued and negatively impacted gross margin," said Charles P. Pizzi, president and chief executive officer. "While we were disappointed with our non-route sales decline in the fourth quarter, we have seen this business return to more normalized sales levels thus far in the first quarter of 2008. In our route geography, we gained market share in the fourth quarter and remain optimistic about the sales growth prospects for both our non-route and route territories.
"I believe we have the right strategy and team to face the current challenges and to take Tasty Baking to the next level as we work toward completing our new manufacturing facility, which remains on time and on budget."
Looking ahead to 2008, Tasty Baking said it expects total net sales to grow by approximately 3% to 4%, while total volumes are expected to decline 1% to 2% due to implemented price increases. Gross profit is expected to decline by $3 million.