-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lm+Gg1WAmBDodsFHyG8c3osnaKfaJqOTQbE664Vqg6w+KUxpDtmXgNXWq4hWkm9O ClZysjvU69F4HC7bDFMOiQ== 0000950159-04-000721.txt : 20040804 0000950159-04-000721.hdr.sgml : 20040804 20040804130846 ACCESSION NUMBER: 0000950159-04-000721 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040626 FILED AS OF DATE: 20040804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TASTY BAKING CO CENTRAL INDEX KEY: 0000096412 STANDARD INDUSTRIAL CLASSIFICATION: BAKERY PRODUCTS [2050] IRS NUMBER: 231145880 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05084 FILM NUMBER: 04950842 BUSINESS ADDRESS: STREET 1: 2801 HUNTING PARK AVE CITY: PHILADELPHIA STATE: PA ZIP: 19129 BUSINESS PHONE: 2152218500 MAIL ADDRESS: STREET 1: 3413 FOX ST CITY: PHILADELPHIA STATE: PA ZIP: 19129 10-Q 1 tasty10q6-30.txt 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 26, 2004 -------------- ( ) 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___ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 8,080,769 - -------------------------------------------------------------------------------- (Title of Class) (No. of Shares Outstanding as of July 23, 2004) 1 of 16 TASTY BAKING COMPANY AND SUBSIDIARIES INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets June 26, 2004 and December 27, 2003....................................3 Consolidated Statements of Operations Thirteen and Twenty-six weeks ended June 26, 2004 and June 28, 2003....4 Consolidated Statements of Cash Flows Thirteen and Twenty-six weeks ended June 26, 2004 and June 28, 2003....5 Notes to Consolidated Financial Statements...........................6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................10-12 Item 3. Quantitative and Qualitative Disclosures About Market Risk ....................................................13 Item 4. Controls and Procedures...............................................13 PART II.OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds.............................14 Item 4. Submission of Matters to a Vote of Security Holders...................14 Item 6. Exhibits and Reports on Form 8-K...................................14-15 Signature ....................................................................16 2 of 16 Part I. FINANCIAL INFORMATION Item 1. Financial Statements TASTY BAKING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (000's)
- ------------------------------------------------------------------------------------------------------------------------------ June 26, 2004 December 27, 2003 - ------------------------------------------------------------------------------------------------------------------------------ Assets Current assets: Cash $ 99 $ 33 Receivables, less allowance of $4,073 and $3,648, respectively 19,107 19,503 Inventories 5,387 5,730 Deferred income taxes 3,222 3,902 Prepayments and other 3,446 3,271 ---------------------------------------------------- Total current assets 31,261 32,439 ---------------------------------------------------- Property, plant and equipment: Land 1,033 1,098 Buildings and improvements 40,274 40,288 Machinery and equipment 162,988 158,286 ---------------------------------------------------- 204,295 199,672 Less accumulated depreciation 139,709 136,156 ---------------------------------------------------- 64,586 63,516 ---------------------------------------------------- Other assets: Long-term receivables from sales distributors 11,081 11,253 Deferred income taxes 9,215 9,267 Other 1,731 768 ---------------------------------------------------- 22,027 21,288 ---------------------------------------------------- Total assets $ 117,874 $ 117,243 ==================================================== Liabilities Current liabilities: Current obligations under capital leases $ 689 $ 634 Notes payable, banks 3,600 4,900 Accounts payable 7,527 9,261 Accrued payroll and employee benefits 7,430 6,013 Reserve for restructures 718 1,331 Other 2,167 2,280 ---------------------------------------------------- Total current liabilities 22,131 24,419 Long-term debt 10,000 8,000 Long-term obligations under capital leases, less current portion 4,482 4,705 Reserve for restructures, less current portion 814 1,044 Accrued pensions and other liabilities 20,820 19,938 Postretirement benefits other than pensions 16,869 16,718 ---------------------------------------------------- Total liabilities 75,116 74,824 ---------------------------------------------------- Shareholders' equity Common stock 4,558 4,558 Capital in excess of par value of stock 29,327 29,393 Retained earnings 22,969 22,641 ---------------------------------------------------- 56,854 56,592 Less: Accumulated other comprehensive loss 1,236 1,236 Treasury stock, at cost 12,697 12,545 Management Stock Purchase Plan receivables and deferrals 163 392 ---------------------------------------------------- 42,758 42,419 ---------------------------------------------------- Total liabilities and shareholders' equity $ 117,874 $ 117,243 ==================================================== See Notes to Consolidated Financial Statements. 3 of 16
TASTY BAKING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (000's, except per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------- For the Thirteen Weeks Ended For the Twenty-six Weeks Ended June 26, 2004 June 28, 2003 June 26, 2004 June 28, 2003 - ----------------------------------------------------------------------------------------------------------------------------------- Gross Sales $ 64,837 $ 62,944 $ 133,197 $ 127,316 Less discounts and allowances (24,782) (22,753) (52,664) (46,141) ----------------------------------------------------------------------------- Net Sales 40,055 40,191 80,533 81,175 ----------------------------------------------------------------------------- Costs and expenses: Cost of sales 25,680 26,970 51,910 54,955 Depreciation 1,825 1,738 3,555 3,477 Selling, general and administrative 11,519 11,010 23,191 21,798 Restructure charge net of reversals - (95) - (315) Interest expense 326 220 629 421 Gain on sale of routes (75) - (75) - Other income, net (258) (241) (484) (492) ----------------------------------------------------------------------------- 39,017 39,602 78,726 79,844 ----------------------------------------------------------------------------- Income before provision for income taxes 1,038 589 1,807 1,331 Provision for income taxes 384 199 670 459 ----------------------------------------------------------------------------- Net income $ 654 $ 390 $ 1,137 $ 872 ============================================================================= Average common shares outstanding: Basic 8,092 8,098 8,094 8,099 Diluted 8,099 8,101 8,106 8,100 Per share of common stock: Net income: Basic and Diluted $0.08 $0.05 $0.14 $0.11 =============== ============ ========== ========== Cash dividend $0.05 $0.05 $0.10 $0.10 =============== ============ ========== ==========
See Notes to Consolidated Financial Statements. 4 of 16 TASTY BAKING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (000's)
- ---------------------------------------------------------------------------------------------------------------------------------- For the Twenty-six Weeks Ended June 26, 2004 June 28, 2003 (a) - ---------------------------------------------------------------------------------------------------------------------------------- Cash flows from (used for) operating activities Net income $ 1,137 $ 872 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,555 3,477 Gain on sale of route (75) - Restructure charge net of reversals - (315) Restructure payments (843) (1,410) Pension expense 1,055 1,040 Deferred taxes 733 (89) Other 42 (367) Changes in assets and liabilities: Decrease (increase) in receivables 395 (483) Decrease in inventories 343 686 Decrease (increase) in prepayments and other (1,139) 2,270 Increase (decrease) in accrued payroll, accrued income taxes, accounts payable and other current liabilities (431) 1,055 -------------------------------------------------- Net cash from operating activities 4,772 6,736 -------------------------------------------------- Cash flows from (used for) investing activities Proceeds from sale of property, plant and equipment 67 - Purchase of property, plant and equipment (4,730) (2,342) Proceeds from independent sales distributor loan repayments 1,930 1,747 Loans to independent sales distributors (1,683) (1,847) Other (14) 8 -------------------------------------------------- Net cash used for investing activities (4,430) (2,434) -------------------------------------------------- Cash flows from (used for) financing activities Dividends paid (809) (810) Payment of long-term debt (167) (1,092) Net decrease in short-term debt (1,300) (2,600) Additional long-term debt 2,000 - -------------------------------------------------- Net cash used for financing activities (276) (4,502) -------------------------------------------------- Net increase (decrease) in cash 66 (200) Cash, beginning of year 33 282 -------------------------------------------------- Cash, end of period $ 99 $ 82 ================================================== Supplemental Cash Flow Information Cash paid during the period for: Interest $ 615 $ 363 ================================================== Income taxes $ 43 $ 55 ================================================== Noncash investing and financing activities: Capital leases $ 155 $ - ================================================== Loans to independent sales distributors $ 73 $ - ================================================== (a) Amounts have been reclassified for the twenty-six weeks ended June 28, 2003, for comparative purposes. See Notes to Consolidated Financial Statements.
5 of 16 TASTY BAKING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's, except share and per share amounts) 1. Significant Accounting Policies ------------------------------- Interim Financial Information In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal and recurring adjustments, necessary to present fairly the financial position of the company as of June 26, 2004, and December 27, 2003, the results of its operations for the thirteen and twenty-six weeks ended June 26, 2004, and June 28, 2003, and cash flows for the twenty-six weeks ended June 26, 2004, and June 28, 2003. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto in the company's 2003 Annual Report to Shareholders. In addition, the results of operations for the thirteen and twenty-six weeks ended June 26, 2004, are not necessarily indicative of the results to be expected for the full year. Property and Depreciation During the first quarter of 2004, the company performed a comprehensive review of the estimated useful lives of all asset classes. As a result, the company evaluated the utilization of certain machinery and equipment and determined that its useful lives should be extended to 15 years from 7 years, consistent with similar assets already being depreciated over 15 years. The useful lives of buildings and improvements were standardized at 39 years from 15 to 35 years. These changes in estimates resulted in a decrease of depreciation expense of $804 for the twenty-six weeks ended June 26, 2004. Also, depreciation expense increased by $762 during the twenty-six weeks ended June 26, 2004, due to a change in estimated useful lives of certain machinery, leasehold improvements and the current Enterprise Resource Planning (ERP) system which is expected to be replaced within the next year. The company is currently evaluating the scope, timeline and specific implementation date for the new ERP system and anticipates implementation in the fourth quarter of 2004. 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. Dilution is the result of outstanding stock options. 6 of 16 Stock-Based Compensation In December of 2002, the FASB issued Statement No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB Statement No. 123 (FAS 148)." The provisions of this statement are effective for fiscal years beginning after December 15, 2003. The company measures stock-based compensation and reports the calculated differences between the reported and pro forma impact of the fair-value method on the interim and annual financial reports as required.
Thirteen Weeks Ended Twenty-Six Weeks Ended 6/26/04 6/28/03 6/26/04 6/28/03 ------- ------- ------- ------- Net income as reported $ 654 $ 390 $ 1,137 $ 872 Deduct: Total stock-based employee compensation expense determined under fair-value net of related tax effects (66) (24) (127) (45) ----------------------------- ---------------------------- Pro forma net income $ 588 $ 366 $ 1,010 $ 827 ============================= ============================ Earnings per share: Basic and Diluted - as reported $ 0.08 $ 0.05 $ 0.14 $ 0.11 ============================= ============================ Basic and Diluted - pro forma $ 0.07 $ 0.05 $ 0.12 $ 0.10 ============================= ============================
Pension Plan The company's funding policy for its pension plan is to contribute amounts deductible for federal income tax purposes plus such additional amounts, if any, as the company's actuarial consultants advise to be appropriate. The company accrues normal periodic pension expense or income during the year based upon certain assumptions and estimates from its actuarial consultants in accordance with Statement of Financial Accounting Standard No. 87, "Employers' Accounting for Pensions." These estimates and assumptions include discount rate, rate of return on plan assets, compensation increases, mortality and employee turnover. In addition, the rate of return on plan assets is directly related to changes in the equity and credit markets, which can be very volatile. The use of the above estimates and assumptions, market volatility and the company's election to immediately recognize all gains and losses in excess of its pension corridor in the current year may cause the company to experience significant changes in its pension expense or income from year to year. Expenses or income that fall outside the corridor are recognized only in the fourth quarter of each year. Recent Accounting Statements In April 2004, the FASB released FASB Staff Position (FSP) No. FAS 106-2 to address the accounting and disclosure requirements of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"), which was signed into law on December 8, 2003. The Act established a prescription drug benefit under Medicare Part D, and a Federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The company sponsors medical programs for certain of its retirees and expects that this legislation may reduce the costs for some of these programs. The FSP is effective for interim or annual periods beginning after June 15, 2004. The expected effects of the Act will be factored into the company's 2004 year-end measurement of postretirement medical obligations and related expense calculation for 2005. The company is currently evaluating the impact of FSP 106-2, but does not expect a material impact on the financial statements. 7 of 16 2. Restructure Charges ------------------- During the fourth quarter of 2003, the company incurred a $429 pre-tax restructure charge related to specific arrangements made with senior executives who departed the company. During the fourth quarter of 2002, the company incurred a $4,936 pre-tax restructure charge related to the closing of twelve thrift stores and the specific arrangements made with senior executives who departed the company in the fourth quarter of 2002. There were 29 employees terminated as a result of this restructure, of which 25 were thrift store employees and 4 were corporate executives. During the second quarter of 2002, the company closed six thrift stores and eliminated certain manufacturing and administrative positions. There were 67 employees terminated as a result of this restructure, of which 42 were temporary employees, 13 were thrift store employees and 12 were corporate and administrative employees. Costs related to these events were included in a pre-tax restructure charge of $1,405. During the fourth quarter of 2001, the company closed its Dutch Mill Baking Company production facility. In addition, the company closed two thrift stores. Costs related to these events were included in a pre-tax restructure charge of $1,728.
Restructure Reserve Activity Lease Fixed Obligations Severance Assets Other Total ----------- --------- ------ ----- ----- Balance Dec. 28, 2002 $ 2,078 $ 3,403 $326 $178 $ 5,985 Q1 2003 Reclass of PP&E - - (326) - (326) Q1 2003 Reversal of Reserve (220) - - - (220) Q1 2003 Payments (165) (475) - (41) (681) -------- -------- -------- -------- -------- Balance March 29, 2003 1,693 2,928 - 137 4,758 Q2 2003 Reversal of Reserve (95) - - - (95) Q2 2003 Payments (229) (460) - (40) (729) -------- -------- -------- -------- -------- Balance June 28, 2003 1,369 2,468 - 97 3,934 Q3 2003 Reversal of Reserve (129) - - - (129) Q3 2003 Payments (154) (363) - (18) (535) -------- -------- -------- -------- -------- Balance Sept. 27, 2003 1,086 2,105 - 79 3,270 Q4 2003 Restructure Charges - 429 - - 429 Q4 2003 Reclass of SERP - (683) - - (683) Q4 2003 Reversal of Reserve (56) - - - (56) Q4 2003 Payments (217) (366) - (2) (585) -------- -------- -------- -------- -------- Balance Dec. 27, 2003 813 1,485 - 77 2,375 Q1 2004 Payments (125) (387) - (16) (528) -------- -------- -------- -------- -------- Balance March 27, 2004 688 1,098 - 61 1,847 Q2 2004 Payments (112) (187) - (16) (315) -------- -------- -------- -------- -------- Balance June 26, 2004 $ 576 $ 911 $ - $ 45 $ 1,532 ======== ======== ======== ======== ========
The balance of the severance charges is expected to be paid as of December 2005 and the balance of the lease obligations and other charges is expected to be paid as of November 2006. 3. Inventories ----------- Inventories are classified as follows: 6/26/04 12/27/03 ------------------------------------- Finished goods $ 1,786 $ 2,397 Work in progress 623 740 Raw materials and supplies 2,978 2,593 ------------------------------------- $ 5,387 $ 5,730 ===================================== 8 of 16 4. Stock Option Plans ------------------ On May 7, 2004, 8,000 options were granted to an employee of the company under the 2003 Long Term Incentive Plan. Under this grant, the options vest in three equal installments beginning on the first anniversary date with a five year retention period from the date of grant. The option price is determined by the Compensation Committee of the Board and, in the case of incentive stock options, will be no less than the fair market value of the shares on the date of grant. Options lapse at the earlier of the expiration date of the option term specified by the Compensation Committee of the Board (not more than ten years from the date of grant in the case of incentive stock options) or three months following the date on which employment with the company terminates. 5. Pension and Supplemental Retirement Costs ----------------------------------------- In December 2003, the FASB issued a revised SFAS No. 132 R, "Employers' Disclosure about Pensions and Other Postretirement Benefits," which requires additional disclosures for benefits plans. The standard requires interim disclosure of the various components of net periodic pension cost and expanded annual disclosures, such as describing the types of plan assets, investment strategy and plan obligations. The required interim disclosure is included below. Annual disclosures will be provided in the 2004 Form 10-K. Components of Net Periodic Cost Twenty-Six Weeks Ended 6/26/04 6/28/03 ------- ------- Service cost $ 705 $ 668 Interest cost 2,574 2,430 Expected return on plan assets (2,248) (2,086) Amortization of prior service costs (2) (4) Amortization of net (gain) loss 26 32 ------------------------------ Net periodic benefit cost $ 1,055 $ 1,040 ============================== Employer Contributions The company previously disclosed in its financial statement for the year ended December 27, 2003, that it was not required to make contributions to its pension plan in 2004. As of June 26, 2004, no contributions have been made. The company will evaluate whether or not to make a contribution to the plan before September 15, 2004. 6. Postretirement Benefits Other than Pensions ------------------------------------------- Components of Net Periodic Postretirement Benefit Cost Twenty-Six Weeks Ended 6/26/04 6/28/03 ------- ------- Service cost $ 208 $ 168 Interest cost 471 494 Net amortization and deferral - (65) ------------------------------ Net periodic benefit cost $ 679 $ 597 ============================== Employer Contributions Estimated company contributions for the twenty-six weeks ended June 26, 2004, are $579. 9 of 16 TASTY BAKING COMPANY AND SUBSIDIARIES (000's, except share and per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------- Results of Operations Overview Net income for the second quarter of 2004 was $654 or $.08 per diluted share, which included a $75 gain from the sale of one route to a sales distributor in Maryland. Net income for the second quarter of 2003 was $390 or $.05 per diluted share, which included a $95 pre-tax restructure charge reversal due to the favorable settlement of certain thrift store lease contracts. Net income for the twenty-six weeks ended June 26, 2004, was $1,137 or $.14 per diluted share, which included a $75 gain from the sale of one route to a sales distributor in Maryland. Net income for the twenty-six weeks ended June 28, 2003, was $872 or $.11 per diluted share, which included a $315 pre-tax restructure charge reversal due to the favorable settlement of certain thrift store lease contracts. Sales Gross sales increased by 3.0% in the second quarter of 2004 relative to the comparable quarter in 2003. Route sales increased by 2.5%, primarily driven by the impact of the new route territories in Pittsburgh and Cleveland. Without the increase from the new route territories, same route sales decreased 0.1% compared to the second quarter of 2003. Gross sales in non-route areas increased in the second quarter of 2004 by 4.6% compared to 2003. Gross sales increased by 4.6% in the twenty-six weeks ended June 26, 2004, compared to the same period in 2003. Year to date route sales increased by 7.3% compared to the same period in 2003, primarily driven by the impact of the new route territories in Pittsburgh and Cleveland in 2004 and list price increases instituted on the Family Pack and single-serve pie product lines. Without the increase from the new route territories, year to date same route sales increased 4.5% compared to the same period of 2003. Year to date gross sales in non-route areas decreased during the twenty-six weeks ended June 26, 2004, by 2.7% as compared to the same period in 2003, primarily due to the exit from business on the West Coast during the first quarter of 2003. In the second quarter of 2004, net sales decreased by 0.3% compared to the second quarter of 2003. For the twenty-six weeks ended June 26, 2004, net sales decreased by 0.8% compared to the same period in 2003. The decreases in net sales were due to increased price promotion spending in the route areas offset partially by the positive impact of list price increases instituted on Family Pack product lines. The decreases in net sales also were impacted by increased product returns in the route territories and discounts associated with the new markets in Pittsburgh and Cleveland. Cost of Sales Cost of sales for the second quarter of 2004 decreased by 4.8%. As a percentage of gross sales, cost of sales decreased 3.2 percentage points to 39.6% in the second quarter from 42.8% in the second quarter of 2003. Cost of sales for the twenty-six weeks ended June 26, 2004, decreased by 5.5%. As a percentage of gross sales, cost of sales year to date decreased 4.2 percentage points to 39.0% from 43.2% in the same period in 2003. These decreases are primarily the result of sales volume reductions along with packaging and productivity initiatives, partially offset by the increased cost of eggs, oils, and butter. 10 of 16 Gross Margin Gross margin after depreciation, as a percentage of net sales, was 31.3% and 28.6% for the second quarters of 2004 and 2003, respectively. The 2.7 percentage point improvement resulted from the combined effect of the Family Pack price increase and the decrease in cost of sales resulting from the company's productivity initiatives. These positive improvements were partially offset by increased price promotion spending and increased product returns. Gross margin after depreciation, as a percentage of net sales, was 31.1% and 28.0% for the twenty-six weeks ended June 26, 2004, and June 28, 2003, respectively. The 3.1 percentage point improvement resulted from the combined effect of the Family Pack price increase and the decrease in cost of sales resulting from the company's productivity initiatives. These positive improvements were partially offset by increased price promotion spending and increased product returns. Selling, General and Administrative Expenses Selling, general and administrative expenses for the second quarter of 2004 increased by $509 or 4.6% compared to the second quarter of 2003. Selling, general and administrative expenses for the twenty-six weeks ended June 26, 2004, increased by $1,393 or 6.4% compared to the same period in 2003. These increases were due to investments in personnel to fill key positions and increases in selling expenses related to the expansion of the direct store delivery system into the Pittsburgh and Cleveland markets. Depreciation Depreciation expense in the second quarter of 2004 increased 5.0% compared to the second quarter of 2003. This increase is primarily due to the amortization of new handheld equipment implemented during the second quarter of 2004. Depreciation expense for the twenty-six weeks ended June 26, 2004, increased 2.2% compared to the same period in 2003. During the first quarter, the company performed a comprehensive review of the estimated useful lives of all asset classes. As a result, the company evaluated the utilization of certain machinery and equipment and determined that its useful lives should be extended to 15 years from 7 years, consistent with similar assets already being depreciated over 15 years. The useful lives of buildings and improvements were standardized at 39 years from 15 to 35 years. These changes in estimates resulted in a decrease in depreciation expense of $804 for the twenty-six weeks ended June 26, 2004. Also, depreciation expense increased by $762 during the twenty-six weeks ended June 26, 2004, due to a change in estimated useful lives of certain machinery, leasehold improvements and the current Enterprise Resource Planning (ERP) system which is expected to be replaced within the next year. The company is currently evaluating the scope, timeline and specific implementation date for the new ERP system and anticipates implementation in the fourth quarter of 2004. Non-Operating Items Interest expense increased by 48.3% in the second quarter of 2004 compared to the second quarter of 2003. Interest expense increased by 49.4% in the twenty-six weeks ended June 26, 2004, compared to the same period in 2003. These increases are due to increased average borrowing levels and increased average interest rates. The company is exposed to market risk relative to its interest expense as its notes payable and long-term debt have floating interest rates that vary with the conditions in the credit market. It is expected that a one percentage point increase in interest rates would result in additional quarterly expense of approximately $38. The effective income tax rate was 37% for the twenty-six weeks ended June 26, 2004, and 35% for the same period in 2003, which compares to a federal statutory rate of 34%. Differences between the effective tax rates and the statutory tax rate arise from the effect of state income taxes. 11 of 16 Liquidity and Capital Resources Historically, the company has been able to generate sufficient amounts of cash from operations. Bank borrowings are used to supplement cash flow from operations during periods of cyclical shortages. A credit facility is maintained with two banks and certain capital and operating leases are utilized. Details of the credit facility can be found in the company's Form 10-K for the year ended December 27, 2003. The company expects to be in compliance with its Covenants this year. Net cash from operating activities for the twenty-six weeks ended June 26, 2004, decreased by $1,964 compared to the same period in 2003. This decrease was driven by an unfavorable change in assets and liabilities in 2004 compared to 2003. The unfavorable change in assets and liabilities resulted primarily from a decrease in accounts payable during 2004 compared to a significant increase in 2003. Prepayments increased in 2004 relative to 2003 due to the payment of a long-term maintenance contract and costs for new package designs across the entire product line. These unfavorable changes were partially offset by an increase in net income and a decrease in accounts receivable compared to an increase in the prior year, due to increased management focus on cash collections. Net cash used for investing activities for the twenty-six weeks ended June 26, 2004, increased by $1,996 relative to the same period in 2003 principally due to an increase of $2,388 in capital expenditures for the new ERP system and a new production line at the company's Oxford manufacturing location. Net cash used for financing activities for the twenty-six weeks ended June 26, 2004, decreased by $4,226 relative to the comparable period in 2003, due to a $2,000 increase in long-term borrowing, a $1,300 decrease in repayments for short-term borrowing, and $925 reduction in long-term repayments relative to the prior year. For the remainder of 2004, the company anticipates that cash flow from operations, along with the continued availability of credit under the company's credit facility, will provide sufficient cash to meet operating and financing requirements. Forward-Looking Statements Certain matters discussed in this Report, including those under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbor created by that Act. These forward-looking statements may include comments about legal proceedings, competition within the baking industry, availability and pricing of raw materials and capital, sales growth by distribution through direct sales programs, private label, institutional sales and other channels of distribution, changes in the company's business strategies and other statements contained herein that are not historical facts. Because such forward-looking statements involve risks and uncertainties, various factors could cause actual results to differ materially from those expressed or implied by such forward-looking statements which include changes in general economic or business conditions nationally and in the company's primary markets, 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, the outcome of legal proceedings to which the company is or may become a party, the actions of competitors within the packaged food industry, changes in consumer tastes or eating habits, the success of business strategies implemented by the company to meet future challenges, and the ability to develop and market in a timely and efficient manner new products which are accepted by consumers. The reader should review "Management's Discussion and Analysis" and "Risk Factors" in the company's 2003 Annual Report to Shareholders and "Management's Discussion and Analysis" in the company's annual report on Form 10-K for the year ended December 27, 2003, for a more complete discussion of other risk factors which may affect the company's financial position or operating performance. 12 of 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk ----------------------------------------------------------- The company is exposed to market risk relative to its interest expense as its notes payable and long-term debt have floating interest rates that vary with the conditions in the credit markets and the company's financial performance. It is expected that a one percentage point increase in interest rates would result in additional quarterly expense of approximately $38. 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 independent sales distributors whose rates adjust every three years, which 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 notes payable. Item 4. Controls and Procedures ----------------------- The company maintains a system of disclosure controls and procedures designed to provide reasonable assurance as to the reliability of its consolidated financial statements and other disclosures included in this report. The company established a disclosure controls committee, which consists of certain members of management. The company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the design and operation of the company's disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective at a reasonable level of assurance for gathering, analyzing and disclosing material information the company is required to disclose in the reports it files with the Securities and Exchange Commission (SEC) pursuant to the Securities and Exchange Act of 1934, within the time periods specified in the SEC's rules and forms. In addition, the company reviewed its internal control over financial reporting and there have been no changes during the period covered by this report in the company's internal control over financial reporting, to the extent that elements of internal control over financial reporting are subsumed within disclosure controls and procedures, that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting. 13 of 16 TASTY BAKING COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds ----------------------------------------- On May 7, 2004, shareholders approved the amendment of the company's articles of incorporation to increase the number of authorized shares of common stock from 15,000,000 to 30,000,000. This increase in the number of authorized shares of common stock provides the company with greater flexibility in connection with raising additional capital through the issuance of common stock, financing acquisitions with common stock, issuing common stock for stock dividends, stock splits and employee incentive plans, and issuing common stock in the event the rights under the company's shareholder rights plan, adopted July 30, 2003, become exercisable. It is possible that the additional shares of common stock could have an anti-takeover effect if used in conjunction with the shareholder rights plan or otherwise to discourage an attempt to acquire or takeover the company through dilution of the potential acquirer's stock ownership. Except as required by applicable law or New York Stock Exchange listing standards, the board of directors has the authority to issue the additional shares without further action by shareholders. Any issuance of shares, other than on a pro-rata basis to all shareholders, would reduce each shareholder's percentage interest in the company. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The company's annual meeting of shareholders was held on May 7, 2004. (b) The directors elected at the meeting were: For Against Withheld --- ------- -------- Philip J. Baur, Jr. 5,336,788 - 927,316 Judith M. von Seldeneck 5,763,256 - 500,849 David J. West 5,762,868 - 501,238 Other directors whose terms of office continued after the meeting are as follows: James E. Ksansnak, Fred C. Aldridge, Jr., G. Fred DiBona, Jr., Ronald J. Kozich, and Charles P. Pizzi. (c) Other matters voted upon at the meeting and the results of those votes were as follows:
For Against Abstain --- ------- ------- Approval of Amendment of Company's Articles Of Incorporation to increase the number of authorized shares of common stock from 15,000,000 to 30,000,000 5,375,217 850,532 38,352 Ratification of PricewaterhouseCoopers LLP as independent auditors 6,156,982 97,076 10,045
Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: Exhibit 3 - By-Laws of the company as amended July 28, 2004 Exhibit 31.1 - Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.2 - Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 14 of 16 Exhibit 32 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K The company filed the following reports on Form 8-K during the thirteen weeks ended June 26, 2004: On April 27, 2004, the company furnished a report on Form 8-K under Item 12, Results of Operation and Financial Condition, attaching a press release announcing its financial results for the first quarter ended March 27, 2004. On June 18, 2004, the company furnished a report on Form 8-K under Item 4, Changes in Registrant's Certifying Accountant. On June 14, 2004, the Tasty Baking Company 401(k) Thrift Plan (the "Plan") dismissed PricewaterhouseCoopers LLP (PwC) as the independent accountant for the Tasty Baking Company 401(k) Thrift Plan. PwC was also dismissed as the independent accountant for the Tasty Baking Company Pension Plan. On June 14, 2004, the Plan engaged Mitchell & Titus, LLP to audit the Plan for the year ended December 31, 2003. Mitchell & Titus, LLP was also engaged to audit the Tasty Baking Company Pension Plan and the Tasty Baking Oxford, Inc. 401(k) Savings Plan for the year ended December 31, 2003. On June 28, 2004, the company furnished a report on Form 8-K/A to amend Item 4, Changes in Registrant's Certifying Accountant, as originally filed with the SEC, and to include Item 7, Financial Statements, Pro Forma Financial Information and Exhibits. Item 7 included Exhibit 16.1, which was a letter from PwC to the SEC dated June 25, 2004, confirming PwC's agreement with the company's disclosures. 15 of 16 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 ---------------------------------------- (Company) August 4, 2004 /s/ David S. Marberger - ---------------------- ---------------------------------------- (Date) DAVID S. MARBERGER SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Principal Financial and Accounting Officer) 16 of 16 EX-3 2 ex3.txt TASTY BAKING COMPANY ----------------- BY-LAWS ----------------- ARTICLE I OFFICES -------- Section 1. Registered Office. The principal office shall be at 2801 Hunting Park Avenue in the City of Philadelphia, Commonwealth of Pennsylvania. The location of the principal office shall, at all times, be within the limits of the Commonwealth of Pennsylvania. Section 2. Other Offices. The corporation may also have offices at such other places both within and without the Commonwealth of Pennsylvania, as the Board of Directors may, from time to time, determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS ----------------------------- Section 1. Place of Meetings. All meetings of the shareholders shall be held in the City of Philadelphia, Pennsylvania, or at such other places within or without the Commonwealth of Pennsylvania as the Board of Directors may designate. Section 2. Annual Meeting. The annual meeting of the shareholders shall be held on such day in the months of April, May or June as the Board of Directors shall designate, when they shall elect directors and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation may be called at any time by the Chairman of the Board or a majority of the Board of Directors, or shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast at the particular meeting, upon written request delivered to the Secretary of the corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the shareholders to be held at such time, not less than ten nor more than sixty days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request may issue the call. The business transacted at all special meetings of shareholders shall be limited to the purposes stated in the notice thereof. Section 4. Notice of Meetings. Written notice of every meeting of the shareholders, specifying the place, date and hour and the general nature of the business of the meeting, shall be served upon or mailed, postage prepaid, at least ten days prior to the meeting, unless a greater period of notice is required by statute, to each shareholder. Section 5. List of Shareholders. The officer having charge of the transfer books for shares of the corporation shall prepare and make at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to notice of the meeting and a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address and the number of shares held by each 1 which lists shall be kept on file at the principal office of the corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such lists shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. Section 6. Quorum; Adjournments. The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on a particular matter, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by statute or by the articles of incorporation or by these by-laws. If, however, any meeting of the shareholders cannot be organized because a quorum has not attended, the shareholders entitled to vote thereat, present in person or by proxy, shall have power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors such meeting may be adjourned from day to day or for such longer periods not exceeding fifteen days each as the holders of a majority of the votes present in person or by proxy and entitled to vote shall direct, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. Voting. When a quorum is present or represented at any meeting, any action to be taken shall be authorized by a majority of the votes cast at such a meeting by all shareholders entitled to vote thereon, unless the question is one upon which, by express provision of the statutes or of the articles of incorporation or of these by-laws, a different vote is required in which case such express provision shall govern and control the decision of such question. In each election for directors, every shareholder entitled to vote shall have the right, in person or by proxy, to multiply the number of votes to which he may be entitled by the total number of directors to be elected in the same election, and he may cast the whole number of such votes for one candidate or he may distribute them among any two or more candidates. The candidates receiving the highest number of votes up to the number of directors to be elected shall be elected. Section 8. Proxies. Each shareholder shall at every meeting of the shareholders be entitled to vote in person or by proxy, but no proxy shall be voted on after three years from its date, unless coupled with an interest, and, except where the transfer books of the corporation have been closed or a date has been fixed as a record date for the determination of its shareholders entitled to vote, transferees of shares which are transferred on the books of the corporation within ten days next preceding the date of such meeting shall not be entitled to vote at such meeting. Section 9. Judges of Election. In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may and, on the request of any shareholder entitled to vote or his proxy, shall make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders entitled to vote or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them, if requested by the chairman of the meeting or any shareholder entitled to vote or his proxy. If there be three judges of election, the decision, act or certificate of a majority, shall be effective in all respects as the decision, act or certificate of all. 2 ARTICLE III BOARD OF DIRECTORS ------------------ Section 1. General Powers. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised and done by the shareholders. Section 2. Size of Board; Election of Directors; Board Classification. The number of directors which shall constitute the board shall never be less than three (3) and shall never be more than ten (10). The Board of Directors may by a vote of not less than a majority of the authorized number of directors increase or decrease the number of directors from time to time, without a vote of the shareholders; provided, however, that any such decrease shall not eliminate any director then in office. Effective with the election of directors at the annual meeting of shareholders to be held in 1986, the directors shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the manner specified in these by-laws; one class to hold office initially for a term expiring at the annual meeting of shareholders to be held in 1987, another class to hold office initially for a term expiring at the annual meeting of shareholders to be held in 1988, and another class to hold office initially for a term expiring at the annual meeting of shareholders to be held in 1989, with the members of each class to hold office until their successors are elected and qualified. The number of directors in each class shall be determined by a vote of not less than a majority of the authorized number of directors. At the annual meeting of shareholders of the corporation to be held in 1987 and thereafter, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a three year term and until their successors are elected and qualified. Section 3. Removal of Directors. Except as otherwise prescribed in the articles of incorporation, notwithstanding anything contained in these by-laws to the contrary, and notwithstanding the fact that a lesser percentage may be permitted by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to remove any director from office without assigning any cause for such removal at any annual or special meeting of shareholders. Except as otherwise prescribed in the articles of incorporation, notwithstanding anything contained in these by-laws to the contrary, and notwithstanding the fact that a lesser percentage may be permitted by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or adopt any provisions inconsistent with, or repeal Section 2 or Section 3 of this Article III, or any provision thereof at any annual or special meeting of shareholders. Section 4. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum. Any director so elected shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. Section 5. Chairman of the Board. The Board of Directors, immediately after each annual meeting of shareholders, shall elect a Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors and all meetings of the shareholders and shall perform such other duties and have such other powers as the Board of Directors may prescribe from time to time. The Chairman of the Board need not be an employee of the corporation. 3 Section 6. Regular Meetings. The Board of Directors of the corporation may hold regular meetings either within or without the Commonwealth of Pennsylvania. Regular meetings of the Board of Directors may be held at the principal office of the corporation or at such other place and at such times as shall from time to time be determined by the board. Notwithstanding the foregoing, the first meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of the shareholders at the corporation's principal office unless a different time and place shall be fixed by the shareholders at the meeting at which such directors were elected and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the whole board shall be present. In the event such meeting is not held at such time and place, or in the event of the failure of the shareholders to fix a different time or place for such first meeting of the newly elected Board of Directors, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for such meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 7. Special Meetings. The Board of Directors of the corporation may hold special meetings either within or without the Commonwealth of Pennsylvania. Special meetings of the Board may be called by the Chairman of the Board or Chief Executive Officer on one day's notice to each director, either personally or by mail, by telegram or by telecopier; special meetings shall be called by the Chairman of the Board or Secretary in like manner and on like notice on the written request of two directors, which request shall state the purpose or purposes of the proposed meeting. Section 8. Quorum. At all meetings of the board a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as may be otherwise specifically provided in these by-laws, by statute or by the articles of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Action by Consent. If all the directors shall severally or collectively consent in writing to any action to be taken by the corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors. Section 10. Emergency Action. In the event a national disaster or national emergency is proclaimed by the President or Vice-President of the United States, the directors, even though there may be less than a quorum present, may take all actions which they could have taken if a quorum had been present. Section 11. Telephonic Meeting. One or more directors may participate in a meeting of the board or any committee of the board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other. Section 12. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole board, designate two or more of its number to constitute an Executive Committee which, to the extent provided in such resolution shall have and exercise the authority of the Board of Directors in the management and business of the corporation. Vacancies in the membership of the committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the board when required. 4 Section 13. Other Committees. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more additional committees, each committee to consist of two or more of the directors. Any such committee shall have such powers as are granted to it by such resolution of the board or by subsequent resolutions passed by a majority of the whole board. Nothing herein shall limit the authority of the Board of Directors to appoint other committees consisting, in whole or in part, of persons who are not directors to carry out such functions as the board may designate. Unless otherwise provided in any resolution of the Board of Directors designating a committee pursuant to this Section 13 of Article III, a quorum for the transaction of business by such committee shall be fifty percent of the members of such committee then in office, and the acts of a majority of the members of such committee present at any meeting for which there is a quorum shall be the acts of the committee. All such committees shall keep regular minutes of their proceedings and report the same to the board when required. Section 14. Compensation. The Board of Directors shall have the power to fix, and from time to time to change, the compensation of the directors of the corporation which compensation may include, but is not limited to, an annual retainer fee and a fee for attendance at regular or special meetings of the board and of any committees of the board. ARTICLE IV NOTICES AND WAIVERS ------------------- Section 1. Notices. Notices to directors and shareholders shall be in writing and delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram or by telecopier. Section 2. Waivers. Whenever any notice is required to be given under the provisions of the statutes or of the articles of incorporation or of these by-laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS -------- Section 1. Appointment of Officers. The officers of the corporation shall be chosen annually by the Board of Directors and shall be a Chief Executive Officer, a President, a Vice President, a Secretary and a Treasurer who need not be members of the Board. The Board of Directors may choose additional vice presidents and one or more assistant secretaries and assistant treasurers. The Board of Directors may also appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. The officers of the corporation shall hold office until their successors are chosen and qualify. Section 2. Compensation. The salaries of all officers of the corporation shall be fixed by the Board of Directors. Section 3. Removal and Vacancies. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote or a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. Section 4. Chief Executive Officer. The Chief Executive Officer shall have general supervisory responsibility and authority over the officers of the corporation, shall see that all orders and resolutions of 5 the Board of Directors are carried into effect, shall preside at all meetings of the Board of Directors in the absence of the Chairman, and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. The Board of Directors shall determine the person or persons who shall perform the duties and exercise the powers of the Chief Executive Officer in the absence or disability of the Chief Executive Officer. The Chief Executive Officer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. Section 5. President. The President shall be the chief operating officer of the corporation, shall, under the direction of the Chief Executive Officer, have general and active management of the business of the corporation and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. The Board of Directors shall determine the person or persons who shall perform the duties and exercise the powers of the President in the absence or disability of the President. Section 6. Vice President. The Vice President or Vice Presidents shall perform such duties and have such powers as the Board of Directors may from time to time prescribe. Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the Executive Committee when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of an assistant Secretary. Section 8. Assistant Secretary. The assistant Secretary, or if there are more than one, the assistant secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 9. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements; shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation; and if required by the Board of Directors, shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration of the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 10. Assistant Treasurer. The assistant Treasurer, or if there shall be more than one, the assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. 6 ARTICLE VI CERTIFICATES OF SHARES ---------------------- Section 1. Share Certificates. The certificates of shares of the corporation shall be numbered and registered in a share register as they are issued. They shall exhibit the name of the registered holder and the number and class of shares and the series, if any, represented thereby and the par value of each share or a statement that such shares are without par value as the case may be. Every share certificate shall be signed by the Chairman of the Board and the Treasurer and shall be sealed with the corporate seal which may be facsimile, engraved or printed. Section 2. Facsimile Signatures. Where a certificate is signed (1) by a transfer agent or (2) by a transfer agent and/or registrar, the signature of such Chairman of the Board and Treasurer may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. Section 3. Lost Certificates. The Board of Directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, destroyed or wrongfully taken, upon the making of an affidavit of that fact by the person claiming the share certificate to be lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken, certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate or certificates alleged to have been lost, destroyed or wrongfully taken. Section 4. Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars on behalf of the corporation. Section 5. Transfer of Shares. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. Record Date. The Board of Directors may fix a time, not more than seventy-five days, prior to the date of any meeting or shareholders or the date fixed for the payment of any dividend or distribution or the date for the allotment of rights or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting or entitled to receive payment of any such dividend or distribution or to receive any such allotment of rights or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation against transfers of shares during the 7 whole or any part of such period and in such case written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder of record at the address appearing on the records of the corporation or supplied by him to the corporation for the purpose of notice. Section 7. Registered Shareholders. The corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, and shall not be liable for any registration or transfer of shares which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with actual knowledge that a fiduciary or nominee of a fiduciary is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that its participation therein amount to bad faith. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS -------------------------------------------------------- Section 1. Indemnification. (a) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe this conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expense (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. No such indemnification against expenses shall be made, however, in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Common Pleas of the county in which the registered office of the corporation is located or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Common Pleas or such other court shall deem proper. Section 2. Determination of Indemnification. Indemnification under Sections 1(a) and 1(b) of this Article shall be made by the corporation when ordered by a court or upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable 8 standard of conduct set forth in those Sections. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 3. Additional Indemnification. In addition to and notwithstanding the limited indemnification provided in Sections 1(a) and 1(b) of this Article, the corporation shall indemnify and hold harmless its present and future officers and directors of, from and against any and all liability, expenses (including attorneys' fees), claims, judgments, fines and amounts paid in settlement, actually incurred by such person in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including but not limited to any action by or in the right of the corporation), to which such person is, was or at any time becomes, a party, or is threatened to be made a party, by reason of the fact that such person is, was or at any time becomes a director or officer of the corporation, or is or was serving or at any time serves at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other person of any nature whatsoever. Nothing contained in this Section 3 shall authorize the corporation to provide, or entitle any officer or director to receive, indemnification for any action taken, or failure to act, which action or failure to act is determined by a court to have constituted willful misconduct or recklessness. Section 4. Advance of Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding of the kind described in Sections 1(a), 1(b) and 3 of this Article shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking, by or on behalf of the person who may be entitled to indemnification under those Sections, to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. Section 5. Heirs, Executors and Administrators. The indemnification, advancement of expenses and limitation of liability provided in this Article shall continue as to a person who has ceased to be a director or officer of the corporation and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 6. Rights Not Exclusive. Nothing herein contained shall be construed as limiting the power or obligation of the corporation to indemnify any person in accordance with the Pennsylvania Business Corporation Law as amended from time to time or in accordance with any similar law adopted in lieu thereof. The indemnification and advancement of expenses provided under this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any agreement, vote of shareholders or directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding that office. Section 7. Indemnification Rights under Pennsylvania Business Corporation Law. The corporation shall also indemnify any person against expenses, including attorneys' fees, actually and reasonably incurred by him in enforcing any right to indemnification under this Article, under the Pennsylvania Business Corporation Law as amended from time to time or under any similar law adopted in lieu thereof. Section 8. Reliance. Any person who shall serve as director, officer, employee or agent of the corporation or who shall serve, at the request of the corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be deemed to do so with knowledge of and in reliance upon the rights of indemnification 9 provided in this Article, in the Pennsylvania Business Corporation Law as amended from time to time and in any similar law adopted in lieu thereof. INSURANCE --------- Section 9. Insurance. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability. LIMITATION OF DIRECTORS' LIABILITY ---------------------------------- Section 10. Limitation of Directors' Liability. No director of this corporation shall be personally liable for monetary damages as such for any action taken or failure to take any action, on or after January 27, 1987, unless (a) the director has breached or failed to perform the duties of his office under Section 8363 of Title 42 of the Pennsylvania Consolidated Statutes Annotated (relating to the standard of care and justifiable reliance of directors); and (b) the breach or failure to perform constitutes self dealing, willful misconduct or recklessness; provided, however, that the provisions of this Section 10 shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, state or federal law. ARTICLE VIII GENERAL PROVISIONS ------------------ Section 1. Dividends. Dividends upon the shares of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in its shares, subject to the provisions of the articles of incorporation. Section 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Annual Report. The directors shall send, or cause to be sent, to the shareholders, within one hundred twenty (120) days after the close of the fiscal year of the corporation, a financial report as of the closing date of the preceding fiscal year. Section 4. Checks. All checks or demands for money and notes of the corporation shall be signed manually or by facsimile signature of such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. Section 6. Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Pennsylvania." The seal 10 may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 7. Shareholder Equity Protection Act. In accordance with Section 910A(1) of the PA Business Corporation Law, the provisions of Section 910 shall not apply to the corporation. Section 8. 1990 Anti-Takeover Amendments to Pennsylvania Business Corporation Law. (a) The provisions of Section 1715 of Title 15 of the Pennsylvania Consolidated Statutes shall be applicable to the corporation. (b) Subchapter G of Chapter 25 of Title 15 of the Pennsylvania Consolidated Statutes as enacted by Act No. 36 of 1990, shall not be applicable to the corporation. (c) Subchapter H of Chapter 25 of Title 15 of the Pennsylvania Consolidated Statutes as amended by Act No. 36 of 1990, shall not be applicable to the corporation. ARTICLE IX AMENDMENTS ---------- Section 1. Amendments. These by-laws may be altered, amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened after notice to the shareholders of that purpose or by a majority vote of the members of the Board of Directors at any regular or special meeting duly convened after notice to the directors of that purpose, subject always to the power of the shareholders to change such action by the directors. 11 EX-31 3 tasty10qex31-1.txt EXHIBIT 31.1 Certification 302 I, Charles P. Pizzi, President and Chief Executive Officer of Tasty Baking Company, certify that: I have reviewed this quarterly report on Form 10-Q of Tasty Baking Company; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting. Date: August 4, 2004 --------------- /s/ Charles P. Pizzi -------------------- Charles P. Pizzi President and Chief Executive Officer Exhibit 31.1 EX-31 4 tasty10qex31-2.txt EXHIBIT 31.2 Certification 302 I, David S. Marberger, Senior Vice President and Chief Financial Officer of Tasty Baking Company, certify that: I have reviewed this quarterly report on Form 10-Q of Tasty Baking Company; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting. Date: August 4, 2004 --------------- /s/ David S. Marberger ---------------------- David S. Marberger Senior Vice President and Chief Financial Officer Exhibit 31.2 EX-32 5 tasty10qex32.txt CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 To my knowledge, this Quarterly Report on Form 10-Q for the thirteen weeks ended June 26, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in this Report fairly represents, in all material respects, the financial condition and results of operations of Tasty Baking Company. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the company specifically incorporates it by reference. By: /s/ Charles P. Pizzi ---------------------------- Charles P. Pizzi President and Chief Executive Officer By: /s/ David S. Marberger ---------------------------- David S. Marberger Senior Vice President, Chief Financial Officer, and Chief Accounting Officer Date: August 4, 2004 ---------------- Exhibit 32 -----END PRIVACY-ENHANCED MESSAGE-----