PHILADELPHIA -- Tasty Baking Co. said that preliminary financial data available for its fourth quarter ended December 25, 2010 indicates that as a result of certain production difficulties during the optimization of its new Philadelphia bakery, the company did not achieve the expected operational cash savings from this bakery during the fourth quarter. Because of this and other circumstances, it is considering a merger or sale.
Charles P. Pizzi, president and CEO of Tasty Baking, said, "as of November 1, 2010, our expectation was that a run rate of $13 million in annualized [image-nocss] pre-tax cash savings, net of facility leases but before debt service, would be achieved by the end of the fourth quarter of 2010. Due to unanticipated operational challenges, the run-rate savings at the end of the fourth quarter of 2010 is now expected to be approximately $10 million." Given the operational volatility experienced to date, the Company expects to only report the Company's run-rate savings at the time of each future quarterly earnings release.
Further, due to the lower than expected cost savings as well as due to a number of other factors, including the impact of the recent bankruptcy filing by The Great Atlantic & Pacific Tea Co. Inc. (A&P) and the sharp rise in commodity costs, the company is "currently experiencing extremely tight liquidity."
In response to these circumstances, Tasty Baking is actively pursuing two parallel processes, it said.
First, the company has entered into discussions with its bank group led by Citizens Bank to explore various alternatives to address its current liquidity needs, including increasing the amount of funds available under the company's bank line of credit, as well as addressing the current and future covenant requirements under the company's credit agreement.
Second, it has retained Janney Montgomery Scott LLC as its financial advisor to assist the Company in its evaluation of various possible financial and strategic options including refinancing the company's long-term debt due in September 2012, raising additional capital, a potential combination with another company as part of the consolidation occurring in the baked goods industry or a potential sale of the company.
During the process, the company will continue to operate its two bakeries and produce, distribute and sell its Tastykake products to its customers and consumers.
"While this has been a challenging period for us operationally, we remain focused on growing the business," said Pizzi. "To that end we continue to partner with new grocery and convenience store customers within our core markets, increase penetration with key customers, and launch new products into the marketplace. Finally, despite the challenges we have faced, we have continued to outpace the category and grow our overall market share."
Tasty Baking, founded in 1914 and headquartered in Philadelphia, is one of the country's leading bakers of snack cakes, pies, cookies, and donuts with manufacturing facilities in Philadelphia and Oxford, Pa. Tasty Baking offers more than 100 products under the Tastykake brand.
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