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					                                                                               Jennifer R. Whicker
                                                                                        LIS 613-01




     Tasty Baking Co., 2801 Hunting Park Ave., Philadelphia, PA 19129
              Phone: (215) 221-8500     Fax: (215) 223-3288
                            www.tastykake.com
                            (NASDAQ: TSTY)

                           Company History and Overview
History1

Based in Philadelphia, Tasty Baking Company is one of the country's oldest and largest
independent baking companies. A baker of individual snack cakes since 1914, the
company manufactures and sells approximately 100 varieties of food products, including
breakfast baked goods, single portion cakes, cookies, pies, brownies, snack bars, pretzels,
and large family sized cakes and pies under the Tastykake, Dutch Mill, Aunt Sweeties,
and Snak n' Fresh brands. From three bakeries, Tasty distributes its products to
supermarkets and convenience stores throughout the Mid-Atlantic States, where it is the
leading producer of snack cakes. An aggressive national distribution program is seeking
to position the Tasty brand as a leader in the Midwest, South, Southwest, West Coast, and
the Hawaiian Islands, as well as in Canada and Puerto Rico. While the Tasty Baking
brands reach a total of 47 states, Tastykake baked goods are still regarded as a
Philadelphia institution, honored alongside such other distinctly local food treats as
cheese steaks, hoagies, and scrapple.

A Strong Start in 1914

Tasty Baking was founded in 1914 by Philip J. Baur and Herbert C. Morris. Baur came
from a German-American family in the process of selling its large Pittsburgh bakery,
while Morris, a Boston egg salesman, was from a well-established Cleveland family.
Together, Baur and Morris decided to develop small cakes, pre-wrapped fresh at a bakery
plant before distribution to the local grocer, in contrast to the loaf cakes that were handled
and cut into portions by the grocers under the unsanitary conditions of the time. Since the
sale of the Baur bakery forbade any Baur to open a bakery within 100 miles of


1
 Gale Group. (2009). Tasty Baking Co. Company Profile. Retrieved January 27, 2009, from the Business
and Company Resource database.




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Pittsburgh, the two decided to make Philadelphia their base. They found a deserted,
burnt-out plant in North Philadelphia with its own railroad siding and set up shop there.

On February 25, 1914, the Tasty Baking Co. was incorporated with capital of $46,000,
half provided by Baur and his father, the other half from Morris's father-in-law, Edward
K. Sober. Baur was responsible for production, Morris for sales, and Morris's wife came
up with the name of the new product, Tastykake. From the onset, the company focused on
using only the finest ingredients delivered fresh daily to the bakery. This included farm
fresh eggs, Grade A creamery butter, real milk, cocoa, spices and natural flavorings.
Sugar and flour were sifted by hand. The early cakes were produced in white, yellow,
chocolate, raisin, molasses, and sponge cake varieties. After baking--at first in a single
oven--the cakes were iced, cut into rectangles, wrapped, packed into boxes, and
distributed to retailers who sold them for ten cents each. In its first year the company had
impressive gross revenues of $300,000. By 1918, sales had reached $1 million.

By April 1915, Tasty Baking was serving stores as far away as Mt. Carmel and Reading,
Pennsylvania; Trenton, New Jersey; and Wilmington, Delaware, as well as 13
Philadelphia routes. Morris would sell an agent only as many cakes as he thought that
agent could sell within the two days between visits. The salesman replaced anything that
had become stale with a new cake and took the stale one back to the plant, where it was
destroyed. All business was transacted in cash. When this system broke down because the
agents got behind on their payments, Tasty Baking decided to hire its own distributors
and pay them a salary, commission, and car allowance. This arrangement remained in
operation until the mid-1980s.

In 1922, Tasty Baking constructed a new, five-story plant on Hunting Park Avenue in
North Philadelphia. Two additions were built within three years. The new plant led to
new products: the Junior, a lemon sponge cake with icing on top; a chocolate cupcake;
and the revolutionary Krimpet, a finger-sized butterscotch sponge cake baked in a fluted
pan. The latter two products sold two for a nickel and became the company's best sellers.
During this decade the Tastykake horse-drawn wagon was a familiar site on Philadelphia
streets. Gasoline-fueled trucks and electric cars and trucks were also used, and Tasty
products moved by rail and ship to more distant areas, but the last horse was not retired
until 1941.

By 1930 the Hunting Park plant had five buildings and 350,000 square feet of floor
space. Annual sales had climbed to $6 million. A lunchbox-size square apple pie, called
the Tasty-Pie, proved a quick success. Newspaper advertisements, billboards, streetcar
placards, and slides shown in movie theaters displayed Tastykake pastries or depicted
children eating the products. The company weathered the Depression without layoffs by
cutting its production costs. During World War II, Tasty Baking employed 203 people,
and company advertising promoted the sale of war bonds.




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The Kaiser Era: 1953-81

After Philip Baur died in 1951, his heirs purchased stock from the holdings of E.K.
Sober's daughter (Herbert Morris's wife), giving the Baur family majority control of the
private company. Vice-President Paul R. Kaiser became president, and Morris, who had
served as president since the company's inception, became chairman of the board. In
April 1954, Kaiser was able to report that the Tastykake territory had grown to cover
parts of nine states and the District of Columbia. By the end of the decade, annual sales
had grown to nearly $22.9 million. Net income first passed the $1 million mark in 1955.

Under the slogan 'Automate or Abdicate' Kaiser advanced a program of installing spiral
metal chutes, powered conveyor belts, and auxiliary equipment. The baking cycle, which
took up to 12 hours in 1935, was cut to as little as 45 minutes in 1956. Acquisition of a
Battle Creek wrapping machine began an era of automatic wrapping. A larger and more
modern laboratory was completed in 1956.

During the 1950s, Tasty Baking's traditional customers, mom-and-pop retail stores, began
to give way to supermarkets. Radio and television were replacing the company's
traditional reliance on billboards and posters. Moreover, Tasty Baking began sponsoring
Philadelphia Phillies baseball telecasts, featuring commercials starring Joe E. Brown,
Betty White, and Shari Lewis with her puppets. Over the next 25 years, the company
extended its sponsorship to baseball's Baltimore Orioles and Washington Senators,
football's Philadelphia Eagles and hockey's Philadelphia Flyers, adding spokespersons
ranging from musical impresario Dick Clark to Philadelphia sports heroes Bobby Clarke,
Richie Ashburn, and Bill White.

As the factory's neighborhood changed, the company sought to establish better public
relations ties with the surrounding African American community. In 1960, a two-month
boycott of Tastykake products, organized by 400 black ministers, ended after Tasty
Baking agreed to add African Americans to its sales, clerical, and other positions.
Moreover, the company chose organized the Allegheny West Foundation to rehabilitate
housing, introduce new businesses, and support other forms of community development
in its home of North Philadelphia. Over the years, Tasty Baking remained committed to
neighborhood improvement and sponsored numerous rehab projects and new
constructions benefiting the North Philadelphia community.

When Tasty Baking went public in 1961, its offered stock sold out the first day, the price
rising immediately from $20 a share to over $27 per share. Officers and directors
continued to hold nearly half the shares, however. In 1965, the company diversified for
the first time by acquiring Phillips & Jacobs, Inc., a producer of industrial chemicals and
wholesale printing supplies, for about $2.5 million in stock. The next year it added a




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Baltimore graphic arts supply business, a potato chip company, and a biscuit business.
The following year it added Philadelphia and Atlanta graphic arts companies.

By 1968, Tasty Baking was serving 30,000 stores in 12 states. Sales in 1967, when net
income was $2.8 million, reached $67.4 million, of which the baking operations
accounted for 57 percent. Graphic arts accounted for 28 percent. The remaining 15
percent came from the acquisition of potato chip and pretzel manufacturers and three
Ohio cookie distributors. The Baur family held 58 percent of the company's voting stock
by 1968, management held 12 percent, and the public held 30 percent.

In March 1970 Kaiser told a group of Philadelphia financial analysts that the Tastykake
division was distributing 35 varieties of small cakes and pies to 28,000 stores in 12 states
on a three-day-a-week basis. He also noted that the graphic arts division was supplying
17,000 items to the printing and allied trades in 14 states. The cookie-distribution
companies were marketing a complete line of cookies, crackers, and biscuits to 4,000
retail outlets in Ohio and western Pennsylvania. Despite this expansion, the ratio of net
profits to sales fell in 1970 for the ninth consecutive year; it was only 2.8 percent,
compared to 5.8 percent in 1962.

Concluding that the potato chip and pretzel businesses were a drain on earnings, Tasty
Baking sold them in 1970. In the same year, Tasty Baking expanded in a new direction
by acquiring Larami Corp., a Philadelphia toy manufacturer, importer, and distributor. By
1972 the company's ratio of net profits to sales had improved slightly, but in the recession
year of 1974 it was down to 2.6 percent: $3.5 million in net income on net sales of $132.1
million. In 1976, when net income peaked at $6.7 million on sales of $157 million, Tasty
Baking made an unwise $5.5-million acquisition of Ole South Foods Co., a frozen dessert
manufacturer. Tasty eventually dissolved Ole South Foods in 1979; that year Tasty lost
$2.2 million on net sales of $169.5 million--its first annual loss.

Charting a New Direction: The 1980s

In 1981, Kaiser's last year as chief executive officer, Tasty Baking charted a new
direction. The aging population of the Mid-Atlantic states, he said, indicated 'a decrease
in the number of teens, and they're the big snack and cake eaters.' The company
introduced a chocolate-covered pretzel and also entered the breakfast food market with
Danish pastries and muffins. Finger-shaped cakes and cupcakes were packaged singly to
attract more unit sales in single person households. Tasty also entered agreements with
distributors as far away as California. In a process learned from Ole South Foods, baked
goods were frozen in Philadelphia, shipped under refrigeration, and thawed at their
destinations. Larami Corp. formed a Hong Kong trading company to import premium
non-toy gifts for direct-mail marketing by Tasty Baking.

Kaiser's 28-year reign came to an end in April 1981, when dissident shareholders, upset




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by three consecutive quarters of losses, forced his resignation. Philip J. Baur, Jr.,
president of the Tastykake division and Kaiser's brother-in-law, succeeded him as
chairman of the board. Nelson G. Harris, the company president since 1979, succeeded
Kaiser as chief executive officer. Under new leadership, Tasty Baking retrenched. In
October 1981, the company retreated from two of its major expansion projects, selling
the toy manufacturer Larami and withdrawing from all but eight of its new markets in 40
states. In an October 1981 New York Times article, Harris explained, 'We went too far too
fast. The problems of distribution and transportation became prohibitive, and there was
the problem of not advertising aggressively enough.'

Although 1982 was a recession year, Tasty Baking halted a five-year decline in unit sales.
Net income rose from $1.7 million in 1982 to $2.4 million in 1983 and $2.9 million in
1984, when net sales reached $222.4 million. Long-term debt was reduced from $19
million to $7 million. Tastykake distribution stabilized at 21 states, including California,
where the company was sponsoring baseball's San Diego Padres. (However, in 1988
California was dropped from distribution.) Also during this time, subsidiary Phillips &
Jacobs began serving the New York City market.

Tasty Baking reorganized its sales organization in 1985. While delivery persons had
typically owned their own trucks and absorbed the cost of store returns, routes were now
offered for sale to the driver-sales reps, who would become independent owner-operators
of their territories. The company offered to finance the sales, with no down payment.
According to Harris, the deliverymen ―paid $50,000 or $60,000 and got something worth
$110,000-$120,000. ... We had 386 routes, and we sold them all. Today [in 1989] we
have about 510 routes, and we've had 50 route splits.‖

The sale of its routes raised $16 million for Tasty Baking and made drivers more dutiful
in tending their accounts. Such dedication was essential to the company, because most
Tasty products contained no preservatives or artificial flavors and thus had shelf lives as
short as four days. Sales rose ten percent immediately. Meanwhile, Harris allotted more
than $40 million to upgrade the Philadelphia plant. Between 1981 and 1988, Harris'
business strategy and initiatives resulted in revenues doubling to $264 million, while
profits rose more than sevenfold, from $1.3 million to $9.5 million.

In 1989 Tasty Baking repackaged its Tastykake products in bright yellow instead of the
traditional blue and white. The company also began a new line of cakes and pies, in
flavors that changed monthly, and introduced a line of honey-graham cookies, called
Tasty Bears, aimed at children aged six to 12. The following year the company
introduced both Chocolate Royals, oversized cupcakes filled with chocolate mousse and
topped with icing, and TastyLights, a low-fat cupcake. Finding that the former sold much
better than the latter, leading division president Carl S. Watts concluded: 'There's a
segment that may not want a snack cake every day. But when they do, they want it to be
as indulgent as can be.' By the end of 1990, some 30 percent of Tasty's bakery revenues




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were coming from products introduced since 1982, including Honey Buns and Pastry
Pockets. Watts succeeded Harris as chairman and chief executive officer of the company
in 1992.

Growth Through New Products: 1991-95

In 1991 Tasty Baking introduced its premium Gold Collection line. Several new products
were introduced in 1992, including Tasty Mini Cupcakes, and lemon and jelly filled
reduced-fat Krimpets cupcakes. That year carrot cake and chocolate chunk macadamia
cookie cupcakes were added to the Gold Collection items. During 1993, new products
included Dunkin' Stix, Pound Kake, and Blueberry Mini Muffins. Also in 1993, the
company spun off its printing supplies subsidiary, Phillips & Jacobs, to its shareholders,
who received two shares of its common stock for every three shares of Tasty Baking
common stock.

In 1994, Tasty Baking launched a record six new snack-cake products. These included
Kreme Krimpies, a crumpet-shaped, creme-filled sponge cake; Whirly Twirls, a
chocolate roll cake with white creme filling and a dark chocolate coating; and P.B.
Krunch, a crunchy wafer layered between strips of peanut butter covered with a rippled
chocolate coating. The other three were seasonal products: Bunny Trail Treats, Sparkle
Kakes, and Kringle Kakes, for Easter, the Memorial Day/Fourth of July period, and
Christmas, respectively. St. Patty's Treats were introduced in 1995 to complete the
company's holiday coverage. Thirty-four percent of Tasty's snack-cake sales in 1994
came from Tastykake products that did not exist ten years before.

Stripped of Phillips & Jacobs, Tasty Baking had net sales of $142 million in 1994 and net
income of $5.8 million from continuing operations. Its long-term debt was $10.3 million
in July 1994. Officers and directors controlled about nine percent of the common stock,
whereas institutions held 44 percent.

In 1995 Tasty Baking was selling its products in about 30 states. In addition to its
approximately 25,000 retail outlets in the Mid-Atlantic states, it was selling through
direct alliances with major grocery chains in the Midwest, South, and Southwest. Cakes,
cookies, and doughnuts sold for 25 to 69 cents per package, with family packages and
jumbo packs ranging from $1.99 to $3.39. Pies, pastries, and brownies typically retailed
for 69 cents apiece or per package. Three varieties of English muffins ranged from $1.49
to $1.69 per package. Customers could also order a variety of Tastykake gift packs by
calling a toll-free number. By August, the company had acquired Dutch Mill Baking
Company.

Also that year, responding to the growing fat-free and low-fat food market, Tasty Baking
introduced a new line of eight low-fat snacks. Having failed at an earlier attempt, in 1989,
to launch a line of low-fat products, the company spent nearly a year reengineering its




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product line to eliminate fat without compromising the taste of Tastykake.

Improving and Expanding Operations: 1996-2000

In 1996 Tasty Baking stepped up efforts to improve its packaging facilities, seeking to
ensure product freshness while increasing the speed at which its products could be boxed
or packaged. Also during this time, Tasty Baking acquired a new bakery in Oxford,
Pennsylvania, from competitor Keebler Co., and set about refitting it for the production
of yeast-raised products, including Danish and sweet rolls.

Seeking to attract new customers and bolster sales, the company entered the lucrative
dessert cookie market in 1997 by launching a premium line of chocolate chip and oatmeal
raisin cookies. Packaged in 12-ounce boxes, under the brand name of Tasty Collections,
the premium cookies retailed at $2.99. The company also introduced its Cream Bars, dark
chocolate-covered chocolate cake with vanilla or peanut butter filling. With these new
cookie entries and the popularity of its brand name, the company reasoned, it could carve
out at least some portion of the then $3.6 billion cookie market. While Tasty Baking held
64 percent of the market for sweet cakes in the Mid-Atlantic states, Entenmann's (a unit
of Bestfoods) was the market leader of box-packed homestyle cookies.

Elsewhere, the company continued its expansion efforts. In August 1998, it began selling
Tastykake products in the Chicago area. Also, recent deals struck with two distributors,
Metz Baking of Deerfield, Illinois, and St. Louis-based Earthgrains Co. expanded the
company's distribution to 46 states. In November, Tasty Baking entered yet another
market, food service. Through its Oxford facility, the company began selling breakfast
foods (Danish pastry, bear claws, coffee, and donuts) in bulk pack containers to college
cafeterias, hospitals, and large corporations.

In April 1999, Tasty Baking announced that it would begin offering family-sized
packages of sweet baked goods, starting with eight varieties in its core marketing area.
Expanding its market range into the dinnertime dessert menu, the move also reflected the
company's systematic buildup of product offerings to achieve maximum flexibility in a
variety of eating markets.

By moving specifically into the dessert market, the company hoped to boost revenues,
which had only experienced modest growth over the two previous years: 1.8% ($149.3
million) between 1996 and 1997 and one percent ($150.7 million) between 1997 and
1998. The company also hoped to effectively compete with Entenmanns's bakeries and
increase the productivity at its Oxford plant.

Sales, however, continued to be slow through midyear 1999. A new line of Classic Baked
Goods had performed well; however, sales of the company's core product lines were not
as healthy. In a company statement, Carl S. Watts, Tasty Baking's president and CEO,




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attributed the declines to 'competitive pressures, combined with our recent realignment
and discontinuance of routes in certain sales territories, excessive hot June weather, as
well as our concentrated effort to bring promotional cost under more control, resulted in
this decrease in gross sales.'

During this time, undeterred by sluggish financials, Tasty Baking entered the multi-serve
pie market. Large eight-inch in diameter versions of Tasty's four-ounce, single serve
apple and lemon pie predecessors were initially introduced, with pumpkin pie set for
debut in time for the holiday season. The company planned to make the Oxford plant
more profitable and would eventually bake the larger pies at that facility, while
continuing to produce the single-serve pies at Hunting Park.

The company's 1999 fourth quarter results increased net sales. Initiatives taken by the
company through the first three quarters of 1999 were credited, including improved
profitability of route and national sales operations; restructure of promotional efforts;
improved operating results from the bakery modernization program; and improved
operations at the Oxford facility.

Tasty Baking approached the new millennium boosting its sales opportunities through a
national distribution venture with Aramark Corporation. By agreement, the Tastykake
brand assumed 'preferred vendor' status in Aramark's Refreshment Services division. This
enabled the Tastykakes product to be distributed throughout Aramark's refreshment
services system that distributed more than 1.5 million cups of coffee to 60,000 business
and industry locations throughout the United States.

As market research had indicated that Tasty Baking needed to broaden its Classic Baked
Goods line of family-sized cakes and packaged cookies, the company planned two
extensions of the line: the Raspberry Danish Strip and Cheese Danish Strip. At least five
more extensions, including Danish rings and cinnamon buns, were also planned. Again,
the new marketing initiative was designed to capture market share from its chief rival,
Entenmann's.

New venues for Tasty Baking during this time were Wal-Mart stores nationwide, and
Vons and Ralph's Grocery stores in California. Moreover, the company looked toward
the Hawaiian Islands, where it entered into a distribution agreement with Hawaii Baking
Company, Hawaii's largest baked goods supplier. In addition to introducing its traditional
line of products in California and Hawaii, Tasty Baking planned to add a new product,
Tropical Delights, cupcakes filled with tropical flavors such as papaya, guava, pineapple,
and coconut.




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A New Facility and a Greener Future: 2007 and Beyond 2
On May 9, 2007, Tasty Baking Company announced that it had entered into an agreement
with Liberty Property/Synterra Limited Partnership to relocate its Philadelphia operations
to leased facilities at The Navy Yard, which is a commercial and industrial development
center in Philadelphia. The Navy Yard will be home to a newly constructed, state-of-the-
art Tastykake bakery and a ―green‖ corporate headquarters, representing a milestone in
the company’s history. The plan to relocate the Philadelphia operations is the result of a
comprehensive operational review of strategic manufacturing options, which was
announced a year ago. The company currently produces the vast majority of its products
at a six-story manufacturing facility that was built in 1922 and utilizes 15 production
lines.

The capital investment for the baking equipment and other project-related expenditures
are expected to be approximately $75 million. The project will be funded through the
combination of a multi-bank loan commitment led by Citizens Bank, as well as $32
million in low-interest development loans provided in part by the Commonwealth of
Pennsylvania and the Philadelphia Industrial Development Corporation (PIDC). In
addition, Tasty Baking Company has been awarded a $600,000 Opportunity Grant by the
Commonwealth of Pennsylvania.

―A new manufacturing and distribution facility is the critical next step in the
transformation of Tasty Baking Company and our goal to increase shareholder return,‖
said Mr. Pizzi. ―During the course of the last four years, we have assembled a strong
Board of Directors and management team. Together, we have significantly improved the
company’s financial position and developed a comprehensive technological platform to
operate the business. The new facilities will be instrumental in moving to the next stage
of the company’s growth. We believe that investments in consumer marketing, product
and packaging innovation, and technology will generate increased sales opportunities as
we continue to align Tastykake products with consumer lifestyle trends and lay the
groundwork for future expansion opportunities.‖

Tasty Baking Company has entered into a 26-year lease with Liberty/Synterra for a
345,500 square foot building on 25 acres, which will include the production facility, a
warehouse and a distribution center. The building will be designed and built by
Liberty/Synterra. When complete, the new bakery will house state-of-the-art production
and packaging lines, as well as a distribution center. The design also includes a


2
  Tasty Baking Co. (2007, May 9). News Release: Tasty Baking Co. announces relocation to new, state-of-
the-art facilities in the Navy Yard in Philadelphia. Retrieved February 12, 2009 from
http://www.tastykake.com/RelatedFiles/TSTY%20Manufacturing%20Announcement%20FINAL.pdf.




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mezzanine that will allow public tours to view Tastykake production. Liberty/Synterra
expects to begin site preparation for the project immediately and commence construction
in late 2008, with a scheduled completion in late 2009. Tasty Baking Company expects
the facility to be fully operational in 2010.

In addition to facility leases, Tasty Baking Company plans to purchase new high-tech,
modern baking equipment. This equipment is designed to increase product development
flexibility and efficiency, while enabling the company to provide the same delicious taste
that consumers have enjoyed and trusted for almost 100 years. Tasty Baking Company
has engaged Fluor Corporation to assist with the engineering and installation logistics of
the new bakery. For its corporate headquarters, the company also expects to lease from
Liberty/Synterra 35,000 square feet in a new office building to be constructed in The
Navy Yard Corporate Center. The new building will be developed as a high-performance,
LEED-certified (Leadership in Energy and Environmental Design) "green" facility. It will
employ energy efficient HVAC, water conservation, recycled building materials, and
day-light harvesting, among other environmentally efficient features.

The successful implementation of the new manufacturing operation in 2010 is expected
to increase the company’s overall operational efficiency. The new one-story facility with
highly automated baking equipment will allow the company to reduce its production lines
from 15 to 7 in the new facility, while providing capacity for future sales growth. Tasty
anticipates that there will be a reduction of approximately 215 positions related to the
transition to this new facility. Over the next three years, the company will manage
attrition and contract labor in an effort to minimize the impact to its employees.
The synergistic impact of the new design, modern equipment and updated distribution
center will help drive the return on this project.

David S. Marberger, Executive Vice President and Chief Financial Officer of Tasty
Baking Company, said, ―When completed, we anticipate annual pre-tax cash savings of
approximately $13 to $15 million, net of the facility leases and before debt service. The
annual cash savings realized will allow us to make meaningful investments to grow the
sales and profits of the business. The $32.6 million of public investment in this project
has enabled Tasty Baking to leverage the significant private investments and has helped
reduce the cost of debt related to this transaction. Also, the new facility will be located in
a Keystone Opportunity Investment Zone, which will provide tax abatement through
expiration in the year 2018.‖




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Timeline3

Incorporated in Pennsylvania on Feb. 25, 1914.
On Apr. 27, 1965, Co. acquired Phillips & Jacobs, Inc. for 135,000 Class A common
shares.
In 1966, Co. acquired Bowden Graphic Arts Supply Co. through the issuance of 18,360
Class A shares, B&B Biscuit Co. and Buckeye Biscuit Co. for $1,000,000 cash and
31,875 Class A shares (sold in 1986).
In 1967, Co. acquired Dixie Plate Graining Co. for 76,478 Class A common shares
On July 30, 1970, Co. acquired Larami Corp., a Philadelphia toy manufacturer, importer
and distributor for 236,000 Co.'s Class A common shares (Sold Sept. 5, 1981 for 200,000
shares of Co.'s Class A common stock).
On Jan. 1, 1973, Co. acquired B&T Grinding and Supply Co. (B&T) in exchange for a
final issuance of 20,000 shares of its unissued Class A common stock On Dec. 28, 1975,
B&T Grinding & Supply Co. was merged into Phillips & Jacobs, Inc.
In May 1976, Co. acquired Ole South Foods Co. for $5,500,000 cash. In Jan. 1978, Co.
acquired the remaining 20% interest of Ole South Foods Co., and subsequently, on Dec.
30, 1978, Ole South Foods Co., was merged into Tastykake, Inc. as a division.
Operations were discontinued in Apr., 1979.
In 1986, Co. sold the net assets of Buckeye Biscuit Co. a wholly-owned subsidiary for
$4,355,000 in cash.
In 1986, Co. sold Bowden Graphic Arts Supply Co. and B&B Biscuit Co.
On Sept. 25, 1987, Phillips & Jacobs, Inc., a wholly-owned subsidiary of Co., through a
newly formed corporation, Dixie Type & Supply Co., Inc. acquired the assets, business
and assumed certain liabilities of the Dixie Type & Supply Division of Citation Carolina
Corp for $5,000,000 in cash.
In Oct. 1987, Co. announced that its graphic arts division has, through an asset purchase,
acquired Dixie Type & Supply Inc., of Birmingham, AL for $5,000,000.
In Dec. 1988, Co. consolidated with its wholly owned subsidiary, Tastykake Inc.,
effective Jan. 1, 1989. Tastykake now operates as a division of Co.




3
 Mergent. (2009). Tasty Baking Co.: History. Retrieved February 23, 2009, from
http://www.mergentonline.com.libproxy.highpoint.edu/.




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On Aug. 3, 1990, Phillips & Jacobs, Inc., a wholly-owned subsidiary, acquired all of the
outstanding shares of capital stock of Onondaga Litho Supply Company, Inc. for
$1,150,000.
In Oct. 1992, Phillips & Jacobs, Inc., a wholly-owned subsidiary, acquired CM Graphics,
of Cherry Hill, NJ.
On Aug. 1, 1993, Co. completed the spin-off of its wholly owned subsidiary, Phillips &
Jacobs, Incorporated. Co.'s shareholders of record on July 21, 1993, received two shares
of Phillips & Jacobs, Inc. common stock for every three shares of Co.'s common stock
held.
On Aug. 29, 1995, Co. acquired all of the outstanding shares of Dutch Mill Baking
Company, Inc. in exchange for 45,948 shares of Co.'s common stock valued at $649,000.
On May 9, 2007, Tasty Baking Company announced that it had entered into an agreement
with Liberty Property/Synterra Limited Partnership to relocate its Philadelphia operations
to leased facilities at The Navy Yard.
On April 20, 2009, Tasty Baking Company relocated its headquarters to the new Navy
Yard facilities. The remaining operations are expected to relocate to the Navy Yard by
June 2010.


Potential Risks and Uncertainties4

Increased Competition May Impair Profitability
We are engaged in a highly competitive business. The number of choices facing the
consumer on how to spend snack food dollars has increased significantly over the last
several years, particularly with the introduction of more convenient packaging of
traditional products, both sweet and salty. Although the number of competitors varies
among marketing areas, certain competitors are national companies with multiple
production facilities, nationwide distribution systems, and nationally recognized brands
with large advertising and promotion budgets. From time to time, we experience price
pressure in certain of our markets as a result of competitors’ promotional pricing
practices. Increased competition could result in lower sales, profits and market share.

Change in Top Customers’ Buying Patterns May Adversely Affect Our Sales and
Profits
Our top twenty customers represented 57.7% of our 2007 net sales and 56.7% of our
2006 net sales. Our largest customer, Wal-Mart, represented 18.4% of our net sales in


4
 Tasty Baking Co. (2008). Tasty Baking Co. Annual Report 2007. Retrieved January 27, 2009, from
http://www.tastykake.com/annualreportssecfilings.aspx.




                                                                                                  12
                                                                       Jennifer R. Whicker
                                                                                LIS 613-01
2007 and 2006. If any of the top twenty customers change their buying patterns with us,
our sales and profits could be adversely affected.

Increased Commodity Prices May Impact Profitability
We are dependent upon sweeteners, eggs, oils, and flour for our ingredients. Many
commodity prices have been volatile and continue to be volatile. Further substantial
increases in commodity prices may have an adverse impact on our profitability.

Change in Consumer Preferences May Adversely Affect Our Financial and
Operational Results
Our success is contingent upon our ability to forecast the tastes and preferences of
consumers and offer products that appeal to their preferences. Consumer preference
changes due to taste, nutritional content or other factors, and the Company’s failure to
anticipate, identify or react to these changes could result in reduced demand for our
products, which could adversely affect our financial and operational results. The current
consumer focus on wellness may affect demand for our products. We continue to explore
the development of new products that appeal to consumer preference trends while
maintaining our product quality standards.

Collectability of Long-term Receivables May Adversely Affect Our Financial
Position
Our long-term receivables represent loans issued to our independent sales distributors for
the purchase of route territories and delivery vehicles. These loans are issued through a
wholly-owned subsidiary, TBC Financial Services, Inc. Current lending guidelines
require significant collateral to minimize our risk in the event of default by an
independent sales distributor and our loss history has been minimal. The ability to collect
the entire loan portfolio, however, is directly related to the success of our current route
distribution system and the independent sales distributor’s ability to repay the loan, which
is directly related to the economic success of the route. In addition, any external event or
circumstance that impacts the independent sales distributors may also affect the
collectability of long-term receivables.

Our Brand Recognition May Not Extend Beyond Our Core Market
Historically, route sales by independent sales distributors have accounted for the largest
part of our revenues. Prior to 2003 as we expanded outside of our core Mid-Atlantic route
market, the percentage of volume began to shift toward more non-route business, causing
some erosion of our gross margin. We continue to evaluate existing and new business
possibilities outside the core market utilizing third party distributors. We also sell
products through distributorships and major grocery chains that have centralized
warehouse distribution capabilities throughout the continental United States and Puerto
Rico. If we are unable to further develop brand recognition in the expanded markets,
sales and profitability could be adversely affected.




                                                                                         13
                                                                         Jennifer R. Whicker
                                                                                  LIS 613-01
Limited Product Shelf Life May Adversely Affect Sales Potential
Our products have limited shelf life. Production planning and monitoring of demand is
essential to effective operations, both to fulfill customer demand and to minimize the
levels of inventory and returns. Delays in getting products to market for any reason,
including transportation disruptions or bad weather, may cause loss of sales, which could
adversely affect our operating results.

Product Recall or Safety Concerns May Adversely Affect Our Financial and
Operational Results
We may recall certain of our products should they be mislabeled, contaminated, damaged
or if there is a perceived safety issue. A perceived safety issue, product recall or an
adverse result in any related litigation could have a material adverse effect on our
operations, financial condition and financial results.

Loss of Facilities Could Adversely Affect Our Financial and Operational Results
We have two production facilities: one each in Philadelphia and Oxford, Pennsylvania.
The Philadelphia facility is a multi-storied manufacturing facility where our signature
products are exclusively manufactured. The Oxford facility is a single-story
manufacturing facility with expansion possibilities. Our data processing operations are
located in our Fox Street building in Philadelphia with off-site data backup. The loss of
either production facility or the facility housing the data processing operation could have
an adverse impact on our operations, financial condition and results of operations.

Indebtedness incurred in Connection with our Strategic Manufacturing Initiative
Could Adversely Affect Our Financial and Operational Results
On May 9, 2007 we announced that we had entered into agreements to relocate our
Philadelphia operations. Higher levels of indebtedness associated with this initiative
could increase our vulnerability to general adverse economic and industry conditions;
limit our flexibility in planning for and reacting to changes in our business and the
industry in which we operate; and require that we use a larger portion of our cash flow to
pay principal and interest, thereby reducing availability of cash to fund working capital,
capital expenditures and other operating needs.

The Inability to Successfully Implement our Strategic Manufacturing Initiative
Could Adversely Affect Our Financial and Operational Results
We are dependent upon third parties to construct the new facility and to deliver the high-
tech, modern baking equipment. Unanticipated delays in the completion of the facility or
delivery of new equipment could substantially increase the costs and ultimately the
indebtedness associated with the initiative. Unexpected increases in equipment or
installation costs could also substantially increase the indebtedness associated with the
initiative. Unfavorable deviations from expected equipment performance or unforeseen
difficulties associated with transitioning to a new facility could significantly increase the
costs of future production. Such unanticipated delays, cost increases or unfavorable




                                                                                           14
                                                                        Jennifer R. Whicker
                                                                                 LIS 613-01
deviations in equipment performance could also restrict the Company’s ability to increase
revenues and profitability as well as have an adverse impact on our financial condition
and results of operations.

A Change in Interest Rates May Adversely Affect Our Financial and Operational
Results
Increases in interest rates will increase our recognition of interest expense related to long-
term debt and the interest income related to our long-term receivables. A decrease in
interest rates used to set the pension discount rate could increase pension liability and
adversely impact the relationship of our unrecognized gain or loss to the pension corridor.

Terms of Indebtedness Impose Significant Restrictions on Our Business
Our bank credit facility, PIDC Local Development Corporation credit facility and the
Machinery and Equipment Loan Fund loan with the Commonwealth of Pennsylvania (the
―Agreements‖) contain various covenants that limit our ability to, among other things,
incur or become liable for additional indebtedness; create or suffer to exist certain liens;
enter into business combinations or asset sale transactions; make restricted payments,
including dividends over a specified amount; make investments; enter into transactions
with affiliates; and enter into new businesses. These restrictions could limit our ability to
obtain future financing, sell assets, make acquisitions or needed capital expenditures,
withstand a future downturn in our business or the economy in general, conduct
operations or otherwise take advantage of business opportunities that may arise. The
Agreements also require us to maintain certain financial ratios. Our ability to remain in
compliance with our financial ratio requirements in the future could be affected by events
beyond our control, such as general economic conditions, a significant increase in the
cost of our raw materials or a material increase in our pension or post-retirement
obligations. Failure to maintain any applicable financial ratios may prevent us from
borrowing additional amounts under our bank credit facility and could result in a default
under the Agreements, which could cause the indebtedness outstanding under the
Agreements to become immediately due and payable if the appropriate waiver could not
be obtained by the Company. If we were unable to repay those amounts, our banks could
initiate a bankruptcy or liquidation proceeding. If the banks were to accelerate the
repayment of all outstanding borrowings under the Agreements, we may not have
sufficient assets to repay those amounts and any others that default as a result thereof.
In addition, if we amend our Agreements or seek a waiver for any events of default, we
may incur additional fees and/or higher interest rates on all or a portion of our
outstanding borrowings.

Changes in Governmental Laws and Regulations Could Adversely Affect Our
Financial and Operational Results
Our business is subject to regulation by various federal, state and local government
entities and agencies, including regulation of our products, properties, employees,
distribution and overall operations. Changes in laws and regulations and the manner in




                                                                                           15
                                                                       Jennifer R. Whicker
                                                                                LIS 613-01
which they are interpreted or applied may alter the environment in which we operate and
may affect results of operations or increase liabilities. These include changes in food and
drug laws, laws related to advertising and marketing practices, accounting standards,
taxation requirements, competition laws, employment laws and environmental laws.

Litigation Could Adversely Affect Our Financial and Operational Results
We are involved in certain legal and regulatory actions, all of which have arisen in the
ordinary course of our business. We are unable to predict the outcome of these matters,
but do not believe that the ultimate resolution of these matters will have a material
adverse effect on our consolidated financial position or results of operations. However, if
one or more of these matters were determined adversely to us, the ultimate liability
arising therefrom could be material to our financial condition and results of operations. In
addition, we may become subject to additional litigation at any time which could have an
adverse material impact on us.

Changes in Pension Expense Assumptions and Estimates May Adversely Affect Our
Operational Results
Accounting for pension expense requires the use of estimates and assumptions including
discount rate, rate of return on plan assets, compensation increases, mortality and
employee turnover, all of which affect the amount of expense recognized by us. In
addition, the rate of return on plan assets is directly related to changes in the equity and
credit markets, which can be volatile. The use of the above assumptions, market volatility
and our election in 1987 to recognize all pension gains and losses in excess of our
pension corridor in the current year, may cause us to experience significant changes in
our pension expense from year to year, which could adversely affect our operating
results. Most other public companies elected an amortization method that allows
recognition of pension gains and losses to be amortized over longer periods of time, up to
15 years.

Increases in Employee and Employee-Related Costs Could Adversely Affect Our
Financial and Operational Results
Health care and other employee-related costs may continue to rise and any substantial
increase in costs may have an adverse impact on our profitability. In addition, a shortage
of qualified employees, a substantial increase in the cost of qualified employees, or any
adverse affect resulting from third-party labor negotiations could have an adverse affect
on our operations and financial results.

Loss or Impairment of Intellectual Property and Trade Secrets Could Adversely
Affect Our Brands and Our Business
We have taken efforts to protect our trademarks, copyrights and trade secrets as we
consider our intellectual property rights important to our success. However, other parties
may take actions or, without authority, make use of our intellectual property that could




                                                                                         16
                                                                                Jennifer R. Whicker
                                                                                         LIS 613-01
impair the value of our proprietary rights or the reputation of our brands. Any such
impairment could adversely affect our business.

Changes in Economic Conditions Could Adversely Affect Our Financial and
Operational Results
Our business may be adversely affected by changes in economic and business conditions
nationally and particularly within our core market. In addition, the business strategies
implemented by management to meet these business conditions and other market
challenges may have a significant impact upon our future financial condition and results
of operations.

Management’s Overview of the Company’s Financial Condition5
($’s in 000’s, share, per share amounts and square footage unless otherwise noted)
All disclosures are pre-tax, unless otherwise noted

Net income for the fiscal year ended December 29, 2007, was $2,128 or $0.26 per fully
diluted share. Net income for 2007 included $2.1 million, or $0.26 per common share, of
incremental depreciation, after-tax, resulting from the change in the estimated useful lives
of certain assets at the Company’s Philadelphia operations in the second quarter of fiscal
2007. The change in estimated useful lives resulted from the Company’s plan to move
from its present Philadelphia facilities. Net income for the fiscal year ended December
30, 2006 was $4,196 or $0.51 per fully-diluted share. Net income for 2006 included $1.0
million or $0.12 per common share of after-tax income from the termination of a real
estate option on the Company’s corporate offices and distribution center.

Sales
Gross sales increased 1.6% in 2007 as compared to 2006 based on a sales volume
increase of 0.4%. The increase in Route gross sales was driven by the growth in Family
Pack Cake and the sugar-free Sensables line. In addition, Route gross sales benefited
from higher product prices for Family Pack Cake and Donuts as compared to 2006.
Partially offsetting the growth in Routes was the decrease in Non-route sales. Non-route
sales declined primarily due to the Company’s largest Non-route customer reducing
warehouse inventory levels and offering fewer promotional events during the fourth
quarter of 2007. Net sales increased 1.3% in 2007 compared to 2006, due to the impact of
higher gross sales, partially offset by a 2.2% increase in promotional spending, resulting
primarily from changes in product mix. Route net sales increased 1.8% while Non-route
net sales declined 0.4%.



5
 Tasty Baking Co. (2008). Tasty Baking Co. Annual Report 2007. Retrieved January 27, 2009, from
http://www.tastykake.com/annualreportssecfilings.aspx.




                                                                                                  17
                                                                      Jennifer R. Whicker
                                                                               LIS 613-01
Cost of Sales
Cost of sales, excluding depreciation, increased 4.7% in fiscal 2007 as compared to fiscal
2006. This was caused by a 10.1% increase in per case variable manufacturing costs,
partially offset by a 6.8% reduction in fixed manufacturing costs. The increase in variable
manufacturing cost was primarily due to increased ingredient costs, including eggs,
grains and oils, while the reduction in fixed manufacturing costs was due to favorable
changes in compensation and other employee related costs, the full benefits of which are
not expected to recur in future periods.

Gross Margin
For fiscal 2007, gross margin declined 4.0 percentage points to 30.4% of net sales from
34.4% of net sales in fiscal 2006. Increased ingredient and packaging costs accounted for
4.1 percentage points of decline, while incremental depreciation resulting from the
change in useful lives of certain assets at the Company’s Philadelphia bakery accounted
for approximately 2.0 percentage points of decline. Offsetting this were reductions in
fixed manufacturing costs, as well as the benefit of selling price increases.

Selling, General and Administrative Expenses
Selling, general and administrative expenses declined by $3,853 or 7.4% to $48,285 in
fiscal 2007 as compared to $52,138 in fiscal 2006. This reduction was primarily
attributable to lower employee related costs due in part to changes in the Company’s
vacation plans, which resulted in a benefit of approximately $1.0 million, as well as $0.8
million in benefit from state franchise tax credits that were generated by certain of the
Company’s charitable contributions in 2007 and prior years.

Depreciation
Depreciation expense increased 51.0% to $9,917 in fiscal 2007, from $6,566 in fiscal
2006. The increase was due to a change in the useful lives of certain assets at the
Philadelphia operation which will not be relocated to the new facilities. The Company
expects that the impact of incremental depreciation resulting from the change in useful
lives will be approximately $5.2 million annually through June 2010, when the new
facility is expected to be fully operational.

Other Items
In July 2006, the Company received $1,600 in cash from Keystone Redevelopment
Partners, LLC (―Keystone‖) in consideration for granting Keystone an option to acquire
the Company’s Fox Street property on which its corporate offices and a distribution
center are located. On December 26, 2006, the Company received notification from
Keystone that it would not exercise its option. Based upon the termination notice, the
Company recorded pre-tax gain of $1,600 during the fourth quarter of 2006.

Other income, net, decreased slightly to $900 in fiscal 2007 from $936 in fiscal 2006.




                                                                                          18
                                                                       Jennifer R. Whicker
                                                                                LIS 613-01
Interest expense declined by $70 in fiscal 2007 as compared to fiscal 2006, due primarily
to favorable changes in interest rates.

The effective tax rates for fiscal 2007 and fiscal 2006 were 24.7% and 36.2% of income
before provision for income taxes, respectively. These rates compare to a federal
statutory rate of 34.0%. In the fourth quarter of 2007, the Company recorded a favorable
income tax expense adjustment of $386 related to fiscal 2006, which was not material to
2006 or 2007. This adjustment is discussed in more detail in Note 16 to the Company’s
audited consolidated financial statements in this Annual Report on Form 10-K.

Liquidity and Capital Resources
Current assets at December 29, 2007 were $30,984 compared to $29,161 at December 30,
2006, and current liabilities at December 29, 2007 were $16,954 compared to $19,791 at
December 30, 2006. The change in current assets was primarily driven by an increase in
accounts receivable resulting from the timing of collections. In fiscal 2007 current
liabilities decreased $2,837 driven primarily by the change in the Company’s vacation
benefit plan.

On May 9, 2007 the Company announced that as part of its comprehensive operational
review of strategic manufacturing alternatives, it entered into an agreement to relocate its
Philadelphia operations to the Philadelphia Navy Yard. This agreement provides for a 26-
year lease for a yet to be constructed 345,500 square foot bakery, warehouse and
distribution center located on approximately 25 acres which the Company expects to be
fully operational in 2010. The lease provides for no rent payments in the first year of
occupancy. Rental payments increase from $3.5 million in the second year of occupancy
to $7.2 million in the final year of the lease.

As part of this initiative, the Company also entered into a 16-year agreement for $9.5
million in financing at a fixed rate of 8.54% to be used for leasehold improvements. This
agreement provides for no principal or interest payments in the first year of occupancy
and then requires equal monthly payments of principal and interest aggregating $1.2
million annually over the remainder of the term.

The Company also entered into an agreement to relocate its corporate headquarters to the
Philadelphia Navy Yard. This lease agreement provides for not less than 35,000 square
feet of office space. The lease will commence upon the later of substantial completion of
the office space or April 2009, and will end at the same time as the new bakery lease. The
lease provides for no rent payment in the first six months of occupancy. Rental payments
increase from approximately $0.9 million in the second year of occupancy to
approximately $1.6 million in the final year of the lease.

In connection with these agreements, the Company provided a $1.1 million letter of
credit, which will increase to $8.1 million by the beginning of 2009. The outstanding




                                                                                         19
                                                                      Jennifer R. Whicker
                                                                               LIS 613-01
amount of the letter of credit will be reduced starting in 2026 and will be eliminated by
the end of the lease term. As of December 29, 2007 the outstanding letter of credit under
this arrangement totaled $1.1 million.

In addition to the facility leases, the Company expects to purchase high-tech, modern
baking equipment. This equipment is designed to increase product development
flexibility and efficiency, while maintaining existing taste and quality standards. The
Company anticipates that this project, when completed, will generate approximately
$13.0 to $15.0 million in pre-tax cash savings, after taking into account the impact of the
new leases, but before any debt service requirements resulting from the investment in the
project. The investment for this project, in addition to any costs associated with the
agreements described above, is projected to be approximately $75 million through 2010.
In September 2007, to finance this investment and refinance the Company’s existing
revolving credit facilities, as well as to provide for financial flexibility in running the
ongoing operations and working capital needs, the Company closed on a multi-bank
credit facility and low-interest development loans provided in part by the Commonwealth
of Pennsylvania and the Philadelphia Industrial Development Corporation.

Cash and Cash Equivalents
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. The Company maintains a Bank Credit Facility, a PIDC
Credit Facility and MELF Loan, as defined below, and utilizes certain capital and
operating leases. Contractual obligations arising under these arrangements and related
commitment expirations are detailed below in Notes 6 through 8 to the Company’s
audited consolidated financial statements.

Cash overdrafts are recorded within current liabilities. Cash flows associated with cash
overdrafts are classified as financing activities.

On September 6, 2007, the Company entered into a 5 year, $100 million secured credit
facility, consisting of a $55 million fixed asset line of credit, a $35 million working
capital revolver and a $10 million low-interest loan from the agent bank in partnership
with the Commonwealth of Pennsylvania (the ―Bank Credit Facility‖). The Bank Credit
Facility is secured by a blanket lien on the Company’s assets and contains various non-
financial and financial covenants, including a fixed charge coverage covenant, a funded
debt covenant a minimum liquidity ratio covenant and a minimum level of earnings
before interest, taxes, depreciation and amortization (―EBITDA‖) covenant. Interest rates
for the fixed asset line of credit and working capital revolver are indexed to LIBOR and
include a spread above that index from 75 to 275 basis points based upon the Company’s
ratio of debt to EBITDA. The fixed asset line of credit and the working capital revolver
include commitment fees from 20 to 50 basis points based upon the Company’s ratio of
debt to EBITDA. The $10 million low-interest loan is at a fixed rate of 5.5% per annum.




                                                                                           20
                                                                      Jennifer R. Whicker
                                                                               LIS 613-01
On September 6, 2007, the Company entered into a 10 year, $12 million secured credit
agreement with the PIDC Local Development Corporation (―PIDC Credit Facility‖). The
PIDC Credit Facility bears interest at a blended fixed rate of 4.5% per annum and
contains customary representations and warranties as well as customary affirmative and
negative covenants essentially similar to those in the Bank Credit Facility. Negative
covenants include, among others, limitations on incurrence of liens and secured
indebtedness by the Company and/or its subsidiaries, other than in connection with the
Bank Credit Facility and the MELF Loan, as defined below.

On September 6, 2007, the Company entered into a 10 year, $5 million Machinery and
Equipment Loan Fund secured loan with the Commonwealth of Pennsylvania (―MELF
Loan‖). This loan bears interest at a fixed rate of 5.0% per annum and contains customary
representations and warranties as well as customary affirmative and negative covenants.
Negative covenants include, among others, limitations on incurrence of liens and secured
indebtedness by the Company, other than in connection with the Bank Credit Facility and
the PIDC Credit Facility. Contemporaneously with the closing under the MELF Loan, the
Company received a commitment from the Commonwealth of Pennsylvania Machinery
and Equipment Loan Fund to extend a second $5 million loan to the Company. This
second loan with the Machinery and Equipment Loan Fund is expected to close in
September 2008, and be on substantially the same terms and conditions as the MELF
Loan.

On September 6, 2007, the Company entered into an agreement which governs the shared
collateral positions under the Bank Credit Facility, the PIDC Credit Facility, and the
MELF Loan (―the Intercreditor Agreement‖), and establishes the priorities and
procedures that each lender has in enforcing the terms and conditions of each of their
respective agreements. The Interecreditor Agreement permits the group of banks and
their agent bank in the Bank Credit Facility to have the initial responsibility to enforce
the terms and conditions of the various credit agreements, subject to certain specific
limitations, and allows such bank group to negotiate amendments and waivers on behalf
of all lenders, subject to the approval of each lender.

Net cash generated from operating activities in fiscal 2007 of $7,897 decreased by $4,216
compared to fiscal 2006. The decrease was primarily due to an increase in receivables,
inventories and prepayments and other assets of $1,868, $792 and $721, respectively.

Net cash used for investing activities in 2007 of $9,553 increased by $5,232 compared to
2006. The increase was due to the purchase of machinery and equipment to be used at the
Company’s new manufacturing facility in the Philadelphia Navy Yard.

Net cash from financing activities in 2007 of $1,701 increased by $9,732 as compared to
fiscal 2006. The increase was due to the additional long-term borrowings resulting from
implementation of the Company’s new manufacturing strategy.




                                                                                       21
                                                                              Jennifer R. Whicker
                                                                                       LIS 613-01


The company anticipates that for the foreseeable future cash flow from operations, along
with the continued availability under the Bank Credit Facility, the PIDC Credit Facility
and the MELF Loan will provide sufficient cash to meet operating and financing
requirements.

Properties Owned 6

                   Location                                     Primary Facility Use
2801 Hunting Park Ave., Philadelphia, PA           Corporate offices; production of cakes,
                                                   pies, snack bars and donuts
3413 Fox St., Philadelphia, PA                     Executive, sales and finance offices; data
                                                   processing operations, office services,
                                                   warehouse, shipping and distribution
                                                   operations
700 Lincoln St., Oxford, PA                        Tasty Baking Oxford offices; production of
                                                   honey buns, cakes, mini donuts and donut
                                                   holes

These properties are encumbered by a shared first priority lien under the Company’s bank
credit facility and PIDC Local Development Corporation credit facility.

In addition, the Company leases various other properties used principally as local pick-up
and sales distribution points. In May 2007 the Company announced that as part of its
comprehensive operational review of strategic manufacturing alternatives, it entered into
an agreement to relocate its Philadelphia operations to the Philadelphia Navy Yard. This
agreement provides for a 26-year lease for a yet to be constructed 345,500 square foot
bakery, warehouse and distribution center located on approximately 25 acres. Site
preparation has begun and construction is expected to be completed by the end of 2009.
The Company expects the new facility to be fully operational in 2010. This facility is
expected to replace the Company’s current manufacturing facility located at 2801
Hunting Park Avenue, Philadelphia, and also accommodate the Company’s current
distribution operations taking place at 3413 Fox Street, Philadelphia.

The Company also entered into an agreement to relocate its corporate headquarters,
currently located at 3413 Fox Street, Philadelphia, PA, to the Philadelphia Navy Yard.
This lease agreement provides for not less than 35,000 square feet of office space that


6
 Tasty Baking Co. (2008). Tasty Baking Co. Annual Report 2007. Retrieved January 27, 2009, from
http://www.tastykake.com/annualreportssecfilings.aspx.




                                                                                                  22
                                                                                    Jennifer R. Whicker
                                                                                             LIS 613-01
commences upon the later of substantial completion of the office space or April 2009,
and will end at the same time as the new bakery lease.

Items Sold Under the Tastykake Brand 7

                       Product                                              Varieties
Krimpets                                                Butterscotch, Jelly, Doublicious
                                                        Butterscotch, Alex’s Lemon
Kandy Kakes                                             Peanut Butter, Chocolate, Twice Filled
                                                        Peanut Butter
Cupcakes                                                Chocolate, Kreme Filled Koffee Kake,
                                                        Cream Filled Buttercream, Cream Filled
                                                        Chocolate, Vanilla Lovers, Chocolate
                                                        Lovers
Pies                                                    Lemon, Apple, Tasty Klair, Cherry,
                                                        Coconut Crème, Blueberry, Peach, French
                                                        Apple
Juniors                                                 Chocolate, Coconut, Koffee Kake
Snak Bars                                               Oatmeal Raisin, Chocolate Chip, Fudge,
                                                        Ginger Snap,
Kreamies                                                Banana, Chocolate
Sugar Free                                              Chocolate Chip Finger Cake, Orange
                                                        Finger Cake, Chocolate Chocolate Chip,
                                                        Cream Filled Koffee Kake, Cream Filled
                                                        Chocolate Cupcake, Chocolate Chip
                                                        Cookie Bars, Chocolate Chocolate Chip
                                                        Cookie Bars
Lo Fat and 100 Calorie                                  Lo Fat Raspberry Koffee Kake, Lo Fat
                                                        Vanilla Choc-Iced Cupcake, 100 Calorie
                                                        Chocolate Chip Cookie Sticks, 100 Calorie
                                                        Fudge Brownie Cookie Sticks, 100 Calorie
                                                        Carrot Cake




7
    Tastykake. (2009). Tastykake Products. Retrieved February 12, 2009, from https://shop.tastykake.com/.




                                                                                                            23
                                                                                Jennifer R. Whicker
                                                                                         LIS 613-01
Subsidiaries8




                  Important Information, Sales and Personnel

SIC/NAICS Numbers
Primary SIC Number: 2051-98, Bread/Other Bakery Prod – Ex Cookies (Mfr)9
Secondary SIC Numbers:10
       2052, Cookies & Crackers-Manufacturers

Primary NAICS Number: 311812, Commercial Bakeries11
Secondary NAICS Numbers:12
       311821, Cookie & Cracker Manufacturing
       31141, Frozen Food Manufacturing
       311520, Ice Cream and Frozen Dessert Manufacturing
       311811, Bread and Bakery Product Manufacturing
       454113, Mail-Order Houses



8
  Mergent. (2009). Tasty Baking Co.: Long Term Debt. Retrieved February 25, 2009, from
http://www.mergentonline.com.libproxy.highpoint.edu/.
9
  ReferenceUSA. (2009). Tasty Baking Co. profile. Retrieved January 27, 2009, from
http://www.referenceusa.com/.
10
   Hoover’s. (2009). Tasty Baking Co. Hoover’s Company Records – Industry Classification. Retrieved
January 27, 2009, from LexisNexis Academic Database.
11
   ReferenceUSA
12
   Hoover’s.




                                                                                                      24
                                                                                 Jennifer R. Whicker
                                                                                          LIS 613-01
Personnel

Executives:13

            Name                  Age                    Title                      Remuneration
Charles P. Pizzi                  57     President, CEO                         $1,217,506
Laurence Weilheimer               45     Senior Vice President,                 -
                                         Secretary, Legal Council
Autumn R. Bayles                  37     Senior Vice President                  $309,002
Robert V. Brown                   48     Vice President                         $214,621
Christopher J. Rahey              53     Vice President                         $211,583
Paul D. Ridder                    36     Senior Vice President, CFO             -
David A. Vidovich                 43     Vice President                         -
James E. Ksansnak                 68     Chairman of the Board                  $48,932
Mark G. Conish                    55     Director                               $30,069
James C. Hellauer                 69     Director                               $32,078
Ronald J. Kozich                  68     Director                               $52,127
James E. Nevels                   56     Director                               $29,536
Mark T. Timble                    53     Director                               19,515
Judith M. von Seldeneck           67     Director                               $45,627
David J. West                     45     Director                               $32,594

Auditor: PricewaterhouseCoopers, LLP14

Corporate employees: 87815




13
   LexisNexis. (2009). Tasty Baking Co. Disclosure Report. Retrieved January 27, 2009, from LexisNexis
Academic Database.
14
   Bureau van Dijk. (2009). Tasty Baking Co. [company profile]. Retrieved January 27, 2009, from Osiris
database.
15
   ReferenceUSA.




                                                                                                      25
                                                                  Jennifer R. Whicker
                                                                           LIS 613-01




16




Sales 17

2007 Sales: $169,918,000
2007 Operating Income: $3,335,000



                         Comprehensive Financials

Balance Sheet18

                                    ASSETS (in thousands)
                                          12/29/2007         12/30/2006      12/31/2005
                                         US DOLLARS         US DOLLARS      US DOLLARS
 Cash                                  57                 12              251
 Marketable Securities                 -                  -               -
 Receivables                           19,358             17,769          18,389
 Inventories                           7,719              6,926           6,472
 Raw Materials                         4,706              5,192           4,743
 Work in Progress                      161                159             173
 Finished Goods                        2,852              1,575           1,556
 Notes Receivable                      -                  -               -




16
   ReferenceUSA.
17
   LexisNexis.
18
   LexisNexis.




                                                                                  26
                                                                   Jennifer R. Whicker
                                                                            LIS 613-01
Other Current Assets & Prepaid
Expenses                                 3,850           4,454             3,896
Total Current Assets                     30,984          29,161            29,008
Property, Plant & Equipment              186,864         169,044           180,107
Accumulated Depreciation                 112,774         103,660           113,859
Net Property, Plant & Equipment          74,090          65,384            66,248
Investments & Advances to Subsidiaries   -               -                 -
Other Non-Current Assets                 9,889           10,960            10,700
Deferred Charges                         6,396           4,596             13,251
Intangibles                              -               -                 -
Deposits & Other Assets                  3,162           2,190             2,100
Total Assets                             124,521         112,291           121,307

                                  LIABILITIES (in thousands)
                                           12/29/2007        12/30/2006        12/31/2005
                                          US DOLLARS        US DOLLARS       US DOLLARS
Notes Payable                           890               2,165            3,482
Accounts Payable                        6,210             3,875            3,934
Current Long Term Debt                  -                 631              631
Current Portion of Cap Leases           431               327              534
Accrued Expenses                        9,423             12,793           10,544
Income Taxes                            -                 -                -
Other Current Liabilities               -                 -                247
Total Current Liabilities               16,954            19,791           19,372
Mortgages                               -                 1,926            2,034
Deferred Charges/Income                 -                 -                -
Convertible Debt                        -                 -                -
Long Term Debt                          25,697            16,251           20,524
Non-Current Capital Leases              1,003             208              534
Other Long Term Liabilities             33,431            25,846           41,554
Total Liabilities                       77,085            64,022           84,018
Minority Interest (Liabilities)         -                 -                -
Other Liabilities                       634               1,996            -6,739
Total Liabilities & Net Worth           124,521           112,291          121,307

                                    EQUITY (in thousands)
                                          12/29/2007         12/30/2006      12/31/2005
                                         US DOLLARS         US DOLLARS      US DOLLARS
Preferred Stock                        -                  -                -
Common Stock Net                       4,558              4,558            4,558
Capital Surplus                        28,683             28,951           28,910
Retained Earnings                      25,119             25,028           22,472
Treasury Stock                         11,558             12,264           11,912
Shareholders' Equity                   47,436             48,269           37,289




                                                                                     27
                                                                   Jennifer R. Whicker
                                                                            LIS 613-01


Income Statement19

                                            12/29/2007       12/30/2006       12/31/2005
                                           US DOLLARS       US DOLLARS       US DOLLARS
 Net Sales                               169,918          167,715          172,273
 Cost of Goods                           108,381          103,495          111,690
 Gross Profit                            61,537           64,220           60,583
 R & D Expenditures                      -                -                -
 Sell, General & Admin Expenses          48,285           52,290           50,990
 Income Before Deprec & Amort            13,252           11,930           9,593
 Depreciation & Amortization             9,917            6,566            6,503
 Non-Operating Income                    900              2,688            948
 Interest Expense                        1,410            1,480            1,370
 Income Before Tax                       2,825            6,572            2,668
 Provision for Income Taxes              697              2,376            825
 Minority Interest                       -                -                -
 Investments Gains/Losses                -                -                -
 Other Income                            -                -                -
 Net Income Before Extra Items           2,128            4,196            1,843
 Extra Items & Discontinued Ops          -                -                -
 Net Income                              2,128            4,196            1,843

Cash Flow Statement20

                                             12/29/2007      12/30/2006        12/31/2005
                                           US DOLLARS       US DOLLARS       US DOLLARS
 Net Income (Loss)                       2,128            4,196            1,843
 Depreciation/Amortization               9,917            6,566            6,503
 Net Inc (Dec) in Assets/Liab            -4,417           2,434            -2,892
 Cash Provided by (Used in) Disc
 Operations                              -                -                -
 Other Adjustments, Net                  269              -1,083           -5,630
 Cash Provided by (Used in) Operations   7,897            12,113           -176
 Inc (Dec) in Property & Plant           -10,470          -5,809           -5,838
 Acq/Disp Subsid or Oth Bus              -                -                -
 Inc (Dec) in Investments                -                -                -
 Other Cash Inflow (Outflow)             917              1,488            -4,704
 Net Cash Prov by (Used in) Investing    -9,553           -4,321           -10,542
 Issuances (Purchases) Equity Security   -                -159             -93
 Issuances (Repayments) Debt Security    6,612            -4,915           12,870
 Inc (Dec) Bank, Oth Borrowings          -1,906           -1,317           -384


19
     LexisNexis
20
     LexisNexis.




                                                                                     28
                                                                  Jennifer R. Whicker
                                                                           LIS 613-01
 Dividends/Other Distribution           -1,650          -1,640            -1,632
 Other Cash Inflow (Outflow)            -1,355          -                 -
 Net Cash Prov by (Used in) Financing   1,701           -8,031            10,761
 Effect of Exchange Rates on Cash       -               -                 -
 Net Change Cash/Cash Equivalents       45              -239              43
 Cash/Cash Equiv Start of Year          12              251               208
 Cash/Cash Equiv at Year End            57              12                251

Ratios21
                                           12/29/2007       12/30/2006        12/31/2005
 Quick Ratio                            1.15            0.9               0.96
 Current Ratio                          1.83            1.47              1.5
 Sales/Cash                             2,981.02        9,999.99          686.35
 SG&A/Sales                             0.28            0.31              0.3
 Receivables Turnover                   8.78            9.44              9.37
 Receivables Days Sales                 41.01           38.14             38.43
 Inventories Turnover                   22.01           24.22             26.62
 Inventories Days Sales                 16.35           14.87             13.52
 Net Sales/Working Capital              12.11           17.9              17.88
 Net Sales/Net Plant & Equipment        2.29            2.57              2.6
 Net Sales/Current Assets               5.48            5.75              5.94
 Net Sales/Total Assets                 1.36            1.49              1.42
 Net Sales/Employees                    193             -                 164
 Total Liabilities/Total Assets         0.62            0.57              0.69
 Total Liabilities/Invested Capital     1.04            0.99              1.44
 Total Liabilities/Common Equity        1.63            1.33              2.25
 Times Interest Earned                  3               5.44              2.95
 Current Debt/Equity                    0.01            0.02              0.03
 Long Term Debt/Equity                  0.54            0.34              0.55
 Total Debt/Equity                      0.57            0.36              0.6
 Total Assets/Equity                    2.63            2.33              3.25
 Pretax Income/Net Sales                0.02            0.04              0.02
 Pretax Income/Total Asset              0.02            0.06              0.02
 Pretax Income/Invested Capital         0.04            0.1               0.05
 Pretax Income/Common Equity            0.06            0.14              0.07
 Net Income/Net Sales                   0.01            0.03              0.01
 Net Income/Total Assets                0.02            0.04              0.02
 Net Income/Invested Capital            0.03            0.06              0.03
 Net Income/Common Equity               0.04            0.09              0.05
 R & D Expenditures/Net Sales           -               -                 -
 R & D Expenditures/Net Income          -               -                 -
 R & D Expenditures/Employees           -               -                 -
 Price Earnings Ratio                   -46.429         -                 -



21
     LexisNexis.




                                                                                   29
                                                                               Jennifer R. Whicker
                                                                                        LIS 613-01

Long Term Debt22

Dec. 29, 2007, $27,131,000 (including current portion of $431,000) comprised of:
    $16,780,000 secured credit facility, bearing interest rate of 6.75% at Dec. 29,
         2007.
    $8,917,000 secured fixed asset loan, bearing interest rate of 6.85% at Dec. 29,
         2007.
    $20,000 5.7% capital lease obligation, due Mar. 2008.
    $1,336,000 capital lease obligation, bearing interest at rates ranging from 7.5%
         to 9.5%, due from Dec. 2009 to Dec. 2012.
    $78,000 capital lease obligation, bearing interest at rates ranging from 13.5% to
         14.5%, due from Mar. 2008 to Nov. 2010.



                                 Investment Information

Common Stock23




22
   Mergent. (2009). Tasty Baking Co.: Long Term Debt. Retrieved February 10, 2009, from
http://www.mergentonline.com.libproxy.highpoint.edu/.
23
   Mergent. (2009). Tasty Baking Co.: Capital Stock. Retrieved February 12, 2009, from
http://www.mergentonline.com.libproxy.highpoint.edu/.




                                                                                               30
                                                                                 Jennifer R. Whicker
                                                                                          LIS 613-01
Dividends and Returns24




24
  Morningstar. (2009). Tasty Baking Co. [dividends and returns]. Retrieved February 12, 2009, from
http://library.morningstar.com/.




                                                                                                     31
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         LIS 613-01




                32
                                                                                    Jennifer R. Whicker
                                                                                             LIS 613-01
Valueline Report25




25
     Valueline. (2009). Valueline Report. Retrieved February 11, 2009, from http://www.valueline.com/.




                                                                                                         33
Jennifer R. Whicker
         LIS 613-01




                34
                                                                                Jennifer R. Whicker
                                                                                         LIS 613-01
5 Year Stock Growth26




26
  Morningstar. (2009). Tasty Baking Co. [quote]. Retrieved February 12, 2009, from
http://library.morningstar.com/.




                                                                                                35
                                                                               Jennifer R. Whicker
                                                                                        LIS 613-01
Mutual Fund Facts27




27
  MFFAIS. (2009). Tasty Baking Co. (TSTY). Retrieved February 19, 2009, from
http://www.mffais.com/tsty.html.




                                                                                               36
                                                                         Jennifer R. Whicker
                                                                                  LIS 613-01




Historical Stock Data for the Life of this Project28

 Date            Open     High       Low        Close       Volume

     23-Apr-09   4.52     4.52       4.26       4.26        3,427

     22-Apr-09   4.34     4.50       4.23       4.26        10,500

     21-Apr-09   4.35     4.35       4.20       4.35        2,756

     20-Apr-09   4.30     4.30       4.17       4.17        4,800

     17-Apr-09   4.08     4.35       4.03       4.15        6,168

     16-Apr-09   4.42     4.42       4.04       4.10        36,238

     15-Apr-09   4.35     4.40       4.25       4.30        4,860

     14-Apr-09   4.33     4.40       4.15       4.17        8,083

     13-Apr-09   4.28     4.48       4.20       4.22        4,480

     10-Apr-09   4.49     4.49       4.49       4.49                 -

      9-Apr-09   4.44     4.49       4.15       4.49        4,853



28
  Google Finance. (2009). Historical prices for TSTY. Retrieved April 23, 2009, from
http://www.google.com/finance/historical?cid=549386&startdate=Jan+22%2C+2009&enddate=Apr+23%2
C+2009.




                                                                                           37
                                                 Jennifer R. Whicker
                                                          LIS 613-01

 8-Apr-09   4.39   4.40   4.17   4.25   5,427

 7-Apr-09   4.25   4.29   4.20   4.22   6,089

 6-Apr-09   4.22   4.33   4.00   4.26   18,760

 3-Apr-09   4.46   4.46   4.22   4.22   4,134

 2-Apr-09   4.35   4.57   4.20   4.42   20,371

 1-Apr-09   4.23   4.50   4.20   4.23   4,603

31-Mar-09   4.33   4.33   4.20   4.27   4,393

30-Mar-09   4.27   4.39   4.21   4.23   1,300

27-Mar-09   4.40   4.40   4.23   4.23   2,748

26-Mar-09   4.27   4.40   4.19   4.40   3,374

25-Mar-09   4.49   4.49   4.15   4.15   10,227

24-Mar-09   4.30   4.51   4.16   4.45   11,002

23-Mar-09   4.31   4.34   4.05   4.25   2,000

20-Mar-09   4.46   4.47   4.00   4.18   8,473

19-Mar-09   4.50   4.57   4.20   4.20   3,065

18-Mar-09   4.48   4.55   4.15   4.55   5,633

17-Mar-09   4.10   4.50   4.10   4.50   3,850

16-Mar-09   4.11   4.29   4.02   4.05   16,712

13-Mar-09   4.15   4.31   4.08   4.14   2,989

12-Mar-09   4.19   4.19   4.02   4.03   8,800

11-Mar-09   4.27   4.28   4.05   4.05   9,342

10-Mar-09   4.44   4.44   4.02   4.08   4,800

 9-Mar-09   4.35   4.57   4.06   4.06   8,408

 6-Mar-09   4.02   4.50   4.02   4.50   11,709

 5-Mar-09   4.29   4.30   4.07   4.25   2,100

 4-Mar-09   4.39   4.41   4.08   4.31   5,808




                                                                 38
                                                     Jennifer R. Whicker
                                                              LIS 613-01

 3-Mar-09   4.50   4.50   4.15   4.26   4,840

 2-Mar-09   4.57   4.57   4.08   4.32   7,899

27-Feb-09   4.18   4.60   4.18   4.60   7,773

26-Feb-09   4.04   4.04   4.04   4.04            -

25-Feb-09   4.11   4.18   4.04   4.04   3,817

24-Feb-09   4.19   4.19   4.02   4.03   6,489

23-Feb-09   4.19   4.20   4.06   4.11   6,698

20-Feb-09   4.19   4.20   4.05   4.06   6,138

19-Feb-09   4.48   4.48   4.02   4.02   24,507

18-Feb-09   4.25   4.50   4.25   4.50   2,489

17-Feb-09   4.50   4.53   4.25   4.35   8,988

13-Feb-09   4.35   4.50   4.18   4.50   3,738

12-Feb-09   4.31   4.49   4.05   4.48   5,223

11-Feb-09   4.47   4.54   4.41   4.53   1,230

10-Feb-09   4.11   4.50   4.11   4.43   1,497

 9-Feb-09   4.20   4.30   4.15   4.19   2,300

 6-Feb-09   4.44   4.45   4.15   4.24   4,550

 5-Feb-09   4.56   4.56   4.10   4.10   939

 4-Feb-09   4.10   4.10   4.10   4.10            -

 3-Feb-09   4.05   4.10   4.05   4.10   5,506

 2-Feb-09   4.22   4.22   4.05   4.05   2,461

30-Jan-09   4.30   4.40   4.05   4.10   5,427

29-Jan-09   4.00   4.41   4.00   4.40   6,999

28-Jan-09   4.17   4.54   3.91   3.92   16,457

27-Jan-09   4.20   4.40   4.20   4.30   7,245

26-Jan-09   3.95   4.20   3.92   4.16   1,952




                                                                     39
                                                                                  Jennifer R. Whicker
                                                                                           LIS 613-01

     23-Jan-09   4.20         4.20        3.90         3.91         5,595

     22-Jan-09   3.77         4.20        3.77         4.19         7,600



One thousand shares of TSTY stock were ―purchased‖ at the open of business on January
22, 2009, for $3.77 a share. They were ―sold‖ at the open of business on April 23, 2009,
for $4.52, resulting in a profit of $750.00.



                                     Industry Information
Bakery Products29

INDUSTRIAL CODES

NAICS: 31-1811 Retail Bakeries, 31-1812 Commercial Bakeries, 31-1813 Frozen Cakes,
Pies, and Other Pastries
SIC: 2051 Bread, Cake, and Related Products, 2053 Frozen Bakery Products, Except
Bread
NAICS-Based Product Codes: 31-18110, 31-18121, 31-18122, 31-18123, 31-18124,
31-18125, 31-18127, 31-1812A, and 31-1812D

PRODUCT OVERVIEW

In modern industrial practice, bakeries are establishments producing bread, rolls, cakes,
pies, and other sweet goods; however, those producing cookies and crackers are not.
Restaurants and eateries that bake their own goods for consumption on the premises are
also excluded from the bakery category.

The U.S. Census Bureau groups the following industries into the broader Bread and
Bakery Product Manufacturing industry: Retail Bakeries, Commercial Bakeries, and
producers of Frozen Cakes, Pies, and Other Pastries. A single company can and
sometimes does participate in all three of these segments simultaneously. Retail bakeries,
the original of all bakeries, were making a major comeback in the United States in the
early twenty-first century. In these establishments bread and rolls are baked on the

29
  Bakery Products. (2008). In Arsen Darnay & Patricia Bungert (Eds.), Encyclopedia of Products &
Industries - Manufacturing, Vol. 1. (55-62). Detroit: Gale. Retrieved February 25, 2009, from Gale Virtual
Reference Library via Gale:
<http://find.galegroup.com/gvrl/infomark.do?&contentSet=EBKS&type=retrieve&tabID=T001&prodId=G
VRL&docId=CX2831100013&source=gale&userGroupName=gree35277&version=1.0>




                                                                                                       40
                                                                       Jennifer R. Whicker
                                                                                LIS 613-01
premises from flour (not from purchased dough) and are sold in the shop up front. If such
an organization packages some of its product and delivers it to grocery stores for sale
there, it must report that portion of its business as commercial baking. If some of the
company's sweet products are frozen for later sale, the company is also participating in
the frozen industry.

The U.S. commercial bakeries category is made up of approximately 2,400 companies
operating nationally or regionally, producing packaged, branded products and selling
them through grocery stores and supermarkets. These companies also make most of the
frozen cakes, pies, and pastries. By contrast, the U.S. retail bakery category comprises
nearly 7,000 companies, which share a much smaller market. They sell locally or, at best,
serve a major metropolitan area. They specialize in more expensive products and serve a
predominantly affluent market, although that pattern was changing in the early 2000s.
Large grocery chains may also participate in retail baking when they bake bread, rolls,
and cakes on the premises. A hybrid form, partial baking or par-baking, exists as well,
where, for example, a distant bakery specializing in making French baguettes, will
produce the dough, partially bake the bread, and ship this product to distant retailers in
frozen form. The par-bread is put in the oven on the grocery store's premises and baking
is finished on site for sale as freshly-baked bread to the customer.

Beginning in the 1990s and continuing in the first decade of the twenty-first century, the
bakery products sector was experiencing shocks and undergoing transformations owing
to demographic, health-related, and life-style changes in the United States. For this
reason it is illuminating to look at bakery products in the context of other food industries
that also convert basic grains into food. Eight major industries are involved, with bakery
products representing three of the eight. In terms of shipment dollars in 2005 bakery
products represented more than half (52%) of the eight-industry group. The others
include breakfast cereals (17.6%), cookies and crackers (17.4%), flour mixes and dough
manufacturing (6.6%), dry pasta manufacturing (3.2%), and tortillas (3.2%). To provide
perspective the performance of bakery products will be compared to the products of these
other industries.

Depending on how it is manufactured and packaged, pizza is sometimes included under
Flour Mixes and Dough Manufacturing, sometimes under Frozen Foods Manufacturing
(which excludes frozen sweet bakery products), and other times under Food
Manufacturing, Not Elsewhere Classified. Doughnuts are included under commercial
bakeries under a category known as Other Sweet Goods. In the adoption of the North
American Industry Classification System (NAICS) in 1997, the United States introduced
a brand new category, Snack Food Manufacturing. After that date hard pretzels were
classified as snacks but soft pretzels continued to be part of bakery products produced
either by commercial or retail bakeries.




                                                                                          41
                                                                        Jennifer R. Whicker
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A Look at Grains

Grains are the chief source of energy in food. As our cars burn hydrocarbons to move us
around, our bodies burn carbohydrates. Both of these fuels are rich in carbon and
hydrogen, but carbohydrates also incorporate oxygen. Ideally 55 to 75 percent of food
energy should reach us in the form of carbohydrates, and grains are rich in this form of
energy.

Wheat is the principal grain in the U.S. diet; however, since the middle part of the
twentieth century the American diet has undergone a change. In 1967 wheat represented
80 percent of all grain consumed in the United States, corn 9 percent, and rice 6 percent.
Contrast these numbers with 2005 and wheat still tops the list at 70 percent, though with
a 10 percent decline, while corn consumption rose to 16 percent, rice rose to 11 percent,
oats, barley, and rye round out the remaining 3 percent.

Grains are complex packages devised by nature in which the species that produce them
carry their unique genetic codes. The three parts of all grains are: (1) the outer hull or
bran, (2) the inner structure that holds the DNA, the germ, and (3) the intermediate mass
of the grain, called the endosperm or kernel. The bran is rich in minerals, fiber, and three
vitamins: thiamin, riboflavin, and niacin (B1, B2, and B3). The germ carries the same
vitamins plus vitamin E, proteins, and fat. The kernel holds most of the grain's mass in




                                                                                          42
                                                                        Jennifer R. Whicker
                                                                                 LIS 613-01
the form of carbohydrates and proteins. In obtaining refined flours producers remove the
bran and the germ.

White flour comes from refined grains. The word enriched is sometimes used because
vitamins removed in processing are added back in. Bakeries refined flour in efforts to
improve the taste, texture, and appearance of bread and other baked products. Whole
grain flours tend to be darker, less sweet, and slightly bitter. The nutritional content of
refined flour, and consequently the products baked from it, is lower than that found in
whole grains and also higher in carbohydrate content. Nutritional and medical experts
promote use of whole grains in an effort to increase nutritional content, including fiber,
which promotes good digestion. Grain refining increases the relative proportion of
carbohydrates in the flour and reduces the total protein content.

Major Products

Considering the grain-using industries as a group, sixteen major product categories
represented nearly 81 percent of total shipment dollars in 2002. Of these sixteen, eight
were produced by the bakery industries, including white bread, dark wheat bread, rye
bread, rolls, cakes and pies, other sweet goods, and the retail baking category as a whole.
Bakery products accounted for 50 percent of group volume, indicating the dominant
position of the baking sector in the distribution of grains.

The largest category, rolls, represents 13.8 percent of the group's shipments. Nearly half
of the products in this category are hamburger and hot dog buns, which because of their
role in the fast-food industry, explains their prominence. Bagels and English muffins are
the largest product line, making up the other half of the rolls category.

The second largest category is white bread (12.1%). Cookies, wafers, and cones (not
included in the bakery products industry) follow closely behind (11.8%). Dark breads
(3.3%), including the nutritionally richer whole-wheat breads, rank twelfth of sixteen and
rye bread (0.7%) rank last.

All of the products in the Retail Bakeries industry are 5.7 percent of the industry group's
shipments. Within that industry the three largest product groupings are breads and rolls,
cakes, other sweet goods including sweet rolls, coffee cakes, doughnuts, and cookies.

Nutritional and Consumption Issues

Data available from the USDA for 1970 and 2004 show per capita consumption of
carbohydrates and proteins by major food groups.




                                                                                              43
                                                                      Jennifer R. Whicker
                                                                               LIS 613-01




In 1970 the leading source of food energy, carbohydrates, was the sugars and sweeteners
category (39.1% of total carbohydrates consumed) followed closely by grain products
(33.9%) and then, at a distance, by vegetables (10.5%), dairy products (6.9%), and fruits




                                                                                       44
                                                                       Jennifer R. Whicker
                                                                                LIS 613-01
(6%). By 2004, grain products had become the largest source of carbohydrates (39.8%),
representing the largest gain in share, 5.9 percent, of any food group. People changed
what they ate in response to very complex communications from public and private
authorities concerning what is healthy and what is not. In the same period, however,
people increased how much they ate, bumping its daily per capita consumption of
carbohydrates from 394 to 481 grams, a 22 percent increase. Grain processors, including
the bakery products industries, benefited from both the shift to grains and from increased
consumption.

In 1970 the three largest sources of protein were: meat, poultry, and fish (39.7% of total
protein consumed); dairy products (22.3%); and grain products (18.2%). By 2004, meats
had fractionally increased their share (to 40.3%), but grains had become the second-
highest source of protein (21.8%) up nearly 4 percent, while the dairy category (19%)
slipped more than 3 percent. Because of the shifts between food groups and increased
consumption, people began to eat more protein—up from 98 grams in 1970 to 113 grams
in 2004, an increase of 15 percent. Grain processors benefited from this shift as well.

MARKET

The eight industries that form the grain-processing group had total shipments in 2005 of
$65.1 billion. Of this total the three bakery products industries were 52 percent—retail
bakeries with $3.0 billion, commercial bakeries with $25.5 billion, and frozen cakes, pies,
and pastries industry with $5.4 billion for a total of $33.9 billion in shipments.

Industry Growth

From 1995 to 2005 the grain-processing group as a whole experienced compounded
growth in shipments at the rate of 2.7 percent per year. This gain was the result of some
of the component industries growing energetically, some showing only moderate
advances, and one industry losing market share.
The largest industry, commercial bakeries, grew at an annual rate of 2.5 percent, thus
slightly under-performing the industry group as a whole. Retail bakeries did much better,
growing at 4.3 percent per year. These two industries achieved growth of 2.7 percent
annually matching that of the total group. Taking into consideration frozen products, the
composite of the three bakery products industries was 3.4 percent per year. Frozen cakes,
pies, and pastries had very strong growth, 7.8 percent yearly, thus lifting bakery products
above the eight-industry average.

Tortilla manufacturing saw the most rapid growth among the eight industries, with 8.2
percent per year. This was still a relatively small industry in the first decade of the
twenty-first century ($2.1 billion in 2005), but it is a growing industry. Frozen products
($5.5 billion) came second in overall growth, at 7.8 percent. Third in annual growth rate
was the breakfast cereal industry ($11.5 billion), which grew at a rate of 2.9 percent per




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year. In total size the cereals industry, was second only to commercial bakeries. Cookie
and cracker manufacturing ($11.4 billion) grew 2.7 percent annually, matching the
performance of the two bakery categories combined. Dry pasta manufacturing ($2.1
billion) had growth of 1.8 percent per year. The flour and flour mixes industry ($5.4
billion) lost shipments volume at the rate of 3.2 percent annually. The decline in the flour
and flour mixes industry reflects broad trends in food toward more purchasing of finished
products and away from purchases that demand labor in preparation. This contributed to
the strong advance of frozen bakery products.

Looking at eight-year growth trends across industries as a whole, bakery products had
moderate growth—below the 5 percent most industries hope to achieve. Retail bakeries
outperformed commercial bakeries because companies that comprise the retail industry
are smaller, are vertically integrated into direct sales, and have more rapid feedback, so
are better able to discern consumer trends rapidly and to respond accordingly.

Product Growth

Of the sixteen large product groups, frozen sweet goods had the most rapid growth in the
1997–2002 period (8.2% per year), tortillas came next (7.1%), and retail-bakery products
came third (4.7%). White bread, while the largest of the product segments, experienced
relatively small growth for its size (1%). The second-largest product segment—cookies,
wafer, and cones—fared slightly better (1.5%). Rye bread and crackers and biscuits
turned in the lowest levels of positive growth (0.2% each). At the bottom of the listing
were flour mixes and cake mixes, which lost market share (−6.3% and −6.5% per year
respectively).

Bread sold by commercial bakeries grew slowly from 1997 to 2005. Mass produced
bread is a mature industry receiving pressure from competing products including rolls,
the products of retail bakers, cookies, and frozen cakes and pies. Growth in the bakery
products industry comes from these products, not from bread. Tortillas, though a
relatively small industry also represent a growing competitor to bread.

The two largest product lines of the breakfast cereal industry, corn flakes and wheat
flakes, were also growing slowly in this period at 1.2 percent and 0.7 percent per year
respectively; however the cereal industry was growing more rapidly in other sectors of
their industry, including breakfast bars and other non-traditional breakfast products that
have not yet forged a distinct category of their own.

KEY PRODUCERS/MANUFACTURERS

Throughout the latter half of the twentieth century, the leading bakery products
manufacturer in the United States was Interstate Brands Corporation (IBC), producer of
Wonder Bread (the top-ranked brand), Home Pride (second), Merita (eighth), and nine




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other bread brands, four major cake brands, and many other baked products. IBC began
in the 1930s and is headquartered in Kansas City, Missouri. In 2004 IBC went into
voluntary bankruptcy and by mid-2007 had not yet emerged. IBC filed for Chapter 11
citing declining sales, a high fixed-cost structure, excess industry capacity, rising health
and pension costs, and increasing cost of ingredients. Sales of IBC stock on the New
York Stock Exchange had been suspended. In 2006 the company reported sales of $3.06
billion. Despite IBC woes, Milling & Baking News, citing statistics from Information
Resources, reported that IBC continued as the nation's leading vendor of bread.
Until 1985 Sara Lee Corporation was known as Consolidated Foods. It had acquired
Kitchens of Sara Lee in 1956 and later took Sara Lee as its name. The company was
ranked second in bread production in 2006. A $15.9 billion company, its bakery
operations accounted for $1.87 billion of its total sales. Sara Lee is a diversified food
company with major meat, coffee, and sweet product brands.

A close third in total bread sales in the United States in 2006 was George Weston
Bakeries, Inc., a part of George Weston Ltd., which is a major Canadian bakery, founded
in 1882, with total sales of Can$32 billion. George Weston sold its bakery operations in
the western part of the United States to Bimbo USA in 2002, but continues to sell
products in the rest of the country. Weston's top brand, Arnold, is the fourth ranked bread
brand in the United States. It also sells Brownberry, Dutch Country, Freihofer's, and
Stroehmann brands of bread, Entenmann's pastries, and the Thomas brand English muffin
line.

The fourth-ranked bread producer in the United States in 2006 was Flowers Foods
Bakeries Group, founded in 1919 in Thomasville, Georgia. The company had sales of
$1.89 billion and owned the third- and sixth-ranked bread brands, Nature's Own and
Sunbeam. Early to recognize opportunities presented by a growing health consciousness
in the United States, Flowers was first to introduce an entirely sugar-free version of
Nature's Own and, in 2003, also introduced a low-carbohydrate, high-fiber version of the
brand. The company also makes and sells Mi Casa tortillas, Cobblestone Mill rolls, and a
line of frozen specialties.




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Bimbo USA is a major regional baked products company serving twenty-two western
states from 14 bakeries. Bimbo USA is owned by Mexico-based Grupo Bimbo, which is
the third-largest bakery giant in the world and serves Latin America, North America, and
Europe. Bimbo USA's 2005 sales were $1.27 billion. In addition to brands acquired from
George Weston (Oroweat, Mrs. Bairds, Entenmann's, and Thomas), Bimbo USA's major
brands include Bimbo, Francisco, Tia Rosa, and Marinela.

In 1937 Margaret Rudkin founded Pepperidge Farm, Inc. She started the company
because she was trying to create bread for one of her sons who had allergies, preventing
him from eating breads with preservatives. Rudkin's labors produced a natural bread of
such high quality that her friends and neighbors urged her to try to make and sell it.
Pepperidge Farm, named after pepperidge (sour gum) trees growing on the farm where
the Rudkins had settled, was acquired by Campbell Soup Company in 1960. Pepperidge
reported sales of approximately $1 billion in 2001. In addition to lines of bread, the
company also sells cookies, crackers, and frozen meals and baked products.

Engelbert and Joseph Franz are credited with inventing the modern form of the
hamburger bun early in the twentieth century. The company they founded, United States
Bakery, sells under the brand names of Franz, Williams', and Snyder's. The company's
2006 sales were $275 million. United States Bakery is also a producer of pastries and




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cookies. Other brand names by which the bakery's products are known are Aunt Hattie's,
Bay City, Seattle International, Svenhard's, and New York Bagel Boys.

Los Angeles-based La Brea Bakery, owned by the IAWS Group, PLC, an Irish
corporation, is the leading supplier of partially baked goods that it prepares and ships to
restaurants and retail bakeries. La Brea perfected par-baking when it discovered that
partially baked bread, cooled and rapidly frozen, would turn out perfectly when baked the
rest of they way. Par-baked bread is 80 percent baked initially. La Brea calls itself an
artisan bakery because it specializes in baguettes, batards, rolls, sourdough breads, and
extra-large loaves that look and taste as if just produced in a European bakery. La Brea
makes and ships virtually all fresh-baked products supermarkets and other baker-sellers
offer to their customers.

MATERIALS & SUPPLY CHAIN LOGISTICS

Bakery products are typically produced in close proximity to the markets in which they
are bought and consumed. Baked goods were produced at 10,360 locations in 2002, for
example, and of these 1,769 employed twenty or more people. In 2005 large metro areas,
those with population of 250,000 or more, numbered 171 in the United States, suggesting
that there are more than enough large bakeries to supply every town of some size and
several small bakeries to supplement the output of the large ones, with some exceptions.
According to Census Bureau data, in 2002 Idaho, Montana, Wyoming, North and South
Dakota, Kansas, Mississippi, and Maine did not have any bakeries; their bakery products
reached them by truck. In 2002 more than 440 flour milling operations supplied the
nation's bakeries.

DISTRIBUTION CHANNEL

Unless the product is sold directly to the consumer by a retail bakery operating its own
store, most products of this industry reach the customer by means of routes—organized
truck deliveries from the bakery to retailers. Bakeries may own routes—Interstate Brands
Corp. for example, owns 52 bakeries supported by 9,000 routes, while Bimbo USA has
14 bakeries and operates 3,000 routes. Direct Store Delivery (DSD) entrepreneurs may
also in-dependently own routes and may combine a number of products on a single route
or serve one bakery exclusively. Frozen bakery products require refrigerated route
deliveries. Par-baked bread moves through the frozen bakery products distribution
system.

Bakery products also have a specialized retail segment, the baked goods stores. These
operations, in distinction to retail bakeries, do not make the products they sell but
specialize in selling breads, rolls, cakes, pies, and pastries. In 2002 nearly 4,500 such
stores operated across the country. These retailers, like grocery stores and supermarkets,
received their product from routes operated by bakeries. Special distribution




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arrangements are typical in the case of fast food chains whether the product is a bun
(hamburger, hot dog, sub-sandwich) or doughnuts. Dunkin Donuts, for instance, operates
its own wholly-owned distribution centers to supply its retail outlets.

KEY USERS

Nearly everyone eats bread. Consumption issues turn around how much and what kind of
bread to eat. The difficulties experienced by parts of the industry, the relatively strong
performance of retail bakeries, the introduction and promotion of whole wheat, sugar-
free, and low-carb brands indicates that people are favoring newer brands, more
traditional types of bread (even at higher prices), and are at least weakening the sales of
white bread made with bleached flour.

ADJACENT MARKETS

Adjacent to bakery products are other markets that use grains, including the two largest,
pasta and tortillas. Tortillas are rapidly growing as a category whereas pasta is largely
flat. Both industries, however, are under the same pressures as bakery products and
changing in similar ways, most prominently by replacing refined flour with whole wheat
or other whole grains in making their products. The cereal industry, while not growing in
its traditional segment, is growing in the new-product segment of breakfast bars and
breakfast pastries. Cookie and cracker manufacturing is also considered an adjacent
market to the bakery products industry.

RESEARCH & DEVELOPMENT

The central focus of research and development in the bakery products sector is on product
transformation—changing popular products to make them more nutritious without losing
customers by altering the product's taste and texture. Interstate Brands introduced whole-
wheat versions of its flagship brand, Wonder Bread. The company's aim was to preserve,
as much as possible, the taste and soft texture of Wonder Bread while making the bread
more nutritious by using whole wheat. George Weston created X-Treme Wheat bread
hoping this high-nutrition brand would please children who ate it while assuring parents
who bought it that it was healthy.

R&D efforts in formulating new types of high-nutrition breads by a combination of
selecting ingredients, modifying production methods, and intensely testing prototype
products in so-called sensory panels are, in effect, the continuation of R&D efforts along
lines that have characterized the commercial bakery industry since its emergence in the
1920s and 1930s. These efforts have resulted in highly engineered food products. The
new and modified brands emerging from the lab are similarly formulated.




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La Brea Bakery's innovations in par-baking represent another approach—making use of
modern technologies and transportations systems to deliver traditional bakery products
more efficiently. The combination of baking and freezing supports another trend in the
industry—toward satisfying a public demand for freshness. People in supermarkets
holding a French baguette still warm from the oven little suspect that the product was
partially baked days earlier a thousand miles away. Additional R&D is aimed at
developing products that can be microwaved to produce fresh taste. In these cases
technological innovations to enhance microwave ovens themselves to deliver crispness in
baked goods is part of the R&D thrust.

Much of the advanced R&D effort in this industry is aimed at ingredient formulations to
produce additives that act as fat mimetics, which produce the taste of fats without
actually being fats, such as sweeteners, or flavor enhancers. Routine R&D is devoted to
nutritional analysis, shelf-life studies, process improvements.

CURRENT TRENDS

Significant trends for the bakery products sectors (and equally influential across the entire
spectrum of the food industries) include the growing incidence of obese and overweight
individuals in the population; demographic changes producing an age structure heavily
weighted toward the elderly; and pressures on people's time due to increasing hours of
work, particularly in families where husband and wife both work. These trends, as they
are evolving, sometimes produce paradoxical results: time pressures on dual-earner
couples disrupt meal planning, foster eating out, and lead to snacking. Eating out and
snacking may contribute to weight gain and obesity. Gaining weight impels many people
to diet, which leads to shifts between food groups, and the food industry must react to
satisfy changing demands. Dieting individuals want to lose weight but are reluctant to
give up pleasurable taste sensations. Food producers remove sugar but substitute fats, or
remove fats but substitute sugars to hold their customers.
Since 1963 the Centers for Disease Control and Prevention (CDC) has tracked obesity
and excess weight information via the National Health and Nutrition Examination Survey
(NHANES). In the survey (NHANES II) conducted between 1976 and 1980, 47.1 percent
of the adult population was overweight or obese, with those termed obese representing 15
percent. In the 2003–2004 Survey, 66.2 percent of adults were overweight, with those
deemed obese representing 32.9 percent of the population. In these same two periods,
children with excessive weight increased as well. According to the period from 2003 to
2004, 13.9 percent of children aged 2 to 5, 18.8 percent aged 6 to 11, and 17.4 percent
aged 12 to 19 were overweight, showing 8.9, 12.3, and 12.4 point jumps, respectively,
over the 1976 to 1980 data.

Each survey has shown a growing trend in obesity. Excessive consumption of
carbohydrates, sugars, and fats, and neglect of vigorous physical activity, are the
principal causes of this trend. CDC data on physical activity indicate that only 48 percent




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of people engage in sports or other activities at recommended levels. While feedback
from the healthcare bureaucracies does not seem to curb excessive eating or encourage
people to exercise more, obesity findings sometimes cause people to shift consumption
between food groups. From time to time dieting trends seem to threaten specific food
clusters. The popular low-carbohydrate diets, which promote limiting the amount of
carbohydrates people eat in the form of bread, pasta, and pastries, have caused many in
the baked goods industry to find ways to counter the adverse effects these diets have had.
The American population is getting older. Census Bureau projections to the next
population census year, 2010, show that four of six age groups under age 45 will decline
as a percent of total population by then. The exceptions are the group aged 14 to 17,
which will remain the same as in 2000, and the group aged 18 to 24 which will increase
by a slender 0.5 percent. All of the older age groups, from 45 on up, show projected
increases, with the largest increase occurring in those aged 45 to 64, which is projected to
grow by 26.5 percent by 2010. The 65 and older group is expected to increase by 13.2
percent.

The growth in the group age 45 to 64 has particularly influenced the rapid growth of
retail bakeries catering to the most value-conscious but also the most affluent age group
in the population. The elderly, those aged 65 and older, may be a factor in the growth of
the frozen segments of bread and pastry products in that this age group seeks convenience
and smaller portions. Health-awareness increases with age and may become intense as
people begin to have less energy or begin experiencing mobility challenges. The elderly
generally consume less food, favor lighter foods, and are much more discriminating
students of food labels.

In the early part of the twenty-first century it was commonplace to say that life is more
hectic. The Families and Work Institute (FWI) provided some data to support this
perception. In a 2002 study on changes in the workforce, the Institute reported that the
work hours of couples where both people work increased from 81 to 91 between 1977
and 2002. In that same period, households with children headed by a single parent
increased from 9 million to 17.6 million. All households increased 47 percent in that
period, while single-family households increased by 100 percent. Because people are
working more and are pressed for time, they spend ever more of their food budgets on
meals eaten in fast food outlets and in restaurants. According to data assembled by the
USDA's Economic Research Service, food expenditures away from home have been
climbing. In 1965, 30 percent of a family's food budget was spent on eating out and
steadily increased to 36 percent in 1975, 41 percent in 1985, 46 percent in 1995, and 48
percent in 2005.

Growing fast food consumption is clearly implicated in growing sales of rolls and
tortillas. Pressures on people's time, similarly, favor convenience foods with increasing
demand for frozen goods. At the same time they inhibit the urge to purchase food




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categories that require labor in the kitchen; hence a decline in the sale of flour and flour
mixes.

TARGET MARKETS & SEGMENTATION

Bakery products appear, even in industrial classifications, as well-defined and separate
markets—rolls, bread, cakes, pies, and pastries. Rolls taken as a whole divide into buns,
bagels, breakfast, and dinner rolls all with their characteristic eating situations. In the last
decades of the twentieth and in the first decade of the twenty-first century bread has
divided into very clear market segments: traditional breads, mass-produced packaged
breads, and, within that segment, the refined and whole grain categories. Traditional
breads began to be aimed at the affluent segment of the market but are beginning to be
widely purchased by everyone. Refined bread categories were in sharp decline at the
beginning of the twenty-first century—to the point of driving their largest producer into
bankruptcy. Whole grain breads appear to be the new mass segment aimed at routine,
day-to-day consumption in sandwiches. The frozen segment, which includes bread, rolls,
and sweet products, is growing energetically in response to lifestyle changes that put
pressure on people's time.

RELATED ASSOCIATIONS & ORGANIZATIONS

American Bakers Association, http://www.americanbakers.org
American Institute of Baking, https://www.aibonline.org
Independent Bakers Association, http://www.mindspring.com/independentbaker
International Dairy-Deli-Bakery Association, http://www.iddba.org/default.htm
Retail Bakers of America, http://www.rbanet.com
Tortilla Industry Association, http://www.tortilla-info.com




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Food Processing – Valueline Industry Report30




30
  Valueline. (2009). Valueline Industry Report. Retrieved February 11, 2009, from
http://www.valueline.com/.




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Sector Overview – Cakes31




31
  Mergent. (2009). Cakes – Sector Overview. Retrieved February 19, 2009, from
http://www.mergenthorizon.com/.




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Sector Report – Cakes32




32
  Mergent. (2009). Cakes – Sector Overview. Retrieved February 19, 2009, from
http://www.mergenthorizon.com/




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Competitors33




Industry Ratios34

 SIC:                                       2051
 Line of Business:                      BREAD CAKE & RLTD PRD
 Asset Range:                           All Asset Ranges within SIC Group

 Industry Quartiles                                 2007
                                        Statement Sampling: 20

 Solvency                               Upper       Median      Lower
 Quick Ratio (times)                        1.5           1         0.6
 Current Ratio (times)                      2.9         1.7         1.1
 Current Liabilities / Net Worth (%)         20        35.2        59.3
 Current Liabilities / Inventory (%)      183.9       346.3       538.5
 Total Liabilities / Net Worth (%)         39.1        68.9       156.4
 Fixed Assets / Net Worth (%)              42.2          69       124.3

 Efficiency                             Upper       Median      Lower
 Collection Period (days)                    19        21.9        33.2
 Sales / Inventory (times)                 44.6        39.3        21.3
 Assets / Sales (%)                        24.7        45.1          57
 Sales / Net Working Capital
 (times)                                     25.7        12.1           7
 Accounts Payable / Sales (%)                 3.1         4.2         5.4

 Profitability                          Upper       Median      Lower
 Return on Sales (%)                        4.6         1.2         0.1
 Return on Assets (%)                       9.6         2.3         0.8
 Return on Net Worth (%)                   23.7         7.1         4.4



33
   Mergent. (2009). Tasty Baking Co.: Industry Ratios. Retrieved February 25, 2009, from
http://www.mergentonline.com.libproxy.highpoint.edu/.
34
   Dun and Bradstreet. (2009) Ratios for SIC 2051. Retrieved February 12, 2009, from
http://kbr.dnb.com/KBR_Main.asp.




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Industry Leaders35




35
  NAICS 31182M - Cookie, Cracker, and Pasta Manufacturing. (2009). In Arsen Darnay & Joyce
Simkin (Eds.), Manufacturing & Distribution USA: Industry Analyses, Statistics and Leading
Companies, Vol. 1. (5th ed., 123-129). Detroit: Gale. Retrieved February 25, 2009, from Gale Virtual
Reference Library via Gale:
<http://find.galegroup.com/gvrl/infomark.do?&contentSet=EBKS&type=retrieve&tabID=T001&prodId=G
VRL&docId=CX3027900032&source=gale&userGroupName=gree35277&version=1.0>




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Select Industry Publications36

Food Manufacture: Articles and review articles of the latest products for the food
manufacturing industry.

Brandweek: A weekly publication of articles, interviews, business profiles, licensing, new
products and new campaigns aimed at professionals in marketing in agencies and client
companies.

Prepared Foods: Feature articles on the food business, food development, manufacturing
and packaging and food plant ideas, product reviews and news of note for food
processors and suppliers to food processors.

Food Engineering: This magazine that covers packaging & processing technology &
issues facing the domestic food & beverage industry for manufacturing teams.

Snack Food and Wholesale Bakery: Covers management methods, marketing, production
and packaging in the snack food industry.




36
   This list of publications was compiled from a search that was performed on Business Source Premier on
March 25, 2009. The keywords used in this search were ―commercial bakeries‖ and Tasty Baking Co.‖ The
trade publication descriptions also came from Business Source Premier.




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Articles about the Industry
Prepared Foods37




37
  Polatsky, Alexander. (2008). Baked Goods: A Natural Shift. Prepared Foods. 177(3): 15-23. Retrieved
from Ebsco Academic Search Premier.




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Snack Food and Wholesale Bakery38




38
  Formulation/R&D. (2007). New Products. Snack Food and Wholesale Bakery. 96(11): 38. Retrieved
from Ebsco MasterFILE Premier.




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                                          Associations39

American Bakers Association (ABA)40
1300 I St. NW, Ste. 700 W
Washington, DC 20005 USA
Phone: (202) 789-0300
Fax: (202) 898-1164
Email: info@americanbakers.org
URL: http://www.americanbakers.org

Primary Contact: Robb MacKie, President/CEO

FOUNDED: 1897.
MEMBERS: 300.



39
   Gale Group. (2009). Tasty Baking Co. [associations]. Retrieved March 17, 2009, from the Business &
Company Resource Center database.
40
   Tasty Baking Co. is a member of this association. I learned this through e-mail correspondence with Jon
Silvon who is the Director of Marketing for Tasty Baking Co.




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MEMBERSHIP DUES: baker (dues are based on gross sales), $227,500 annual; allied
(dues are based on gross sales), $1,690-$3,250 annual.
STAFF: 14.
BUDGET: $3,000,000.
DESCRIPTION: Manufacturers and wholesale distributors of bread, rolls, and pastry
products; suppliers of goods and services to bakers. Conducts seminars and expositions.
PUBLICATIONS: ABA Bulletin, biweekly. CONVENTIONS/MEETINGS: annual
convention.

SIC Codes: 2051 - Bread, Cake & Related Products; 5149 - Groceries & Related
Products Nec; 8611 - Business Associations

NAICS Codes: 311812 - Commercial Bakeries; 424490 - Other Grocery and Related
Products Merchant Wholesalers


Grocery Manufacturers Association (GMA)41
1350 I Street, NW, Ste. 330
Washington, D.C. 20005
Phone: (202) 639-5900
Fax: (202) 639-5932
Email: info@gmaonline.org
URL: http://www.gmaonline.org/

Primary Contact: Pamela G. Bailey, President/CEO

FOUNDED: 1908. MEMBERS: 129. MEMBERSHIP DUES: associate (partner), $25,000
annual; associate (affiliate), $10,000 annual. STAFF: 50. BUDGET: $12,000,000.
DESCRIPTION: Global manufacturers of food and nonfood products sold in the United
States. COMMITTEES: Consumer Affairs; Coupon Advisory; Distribution; International
Affairs; Legal; Political Action; Tax; Technical; Washington Representatives.
ABSORBED: (2003) Association of Sales and Marketing Companies. FORMED BY
MERGER OF: (2007) Grocery Manufacturers of America and Food Products
Association.

PUBLICATIONS: GMA Executive Update, weekly. Newsletter. ALTERNATE
FORMATS: online. * State Legislative Report, weekly. * Washington Report, monthly.
Newsletter.




41
  Tasty Baking Co. is a member of this association. I learned this through e-mail correspondence with Jon
Silvon who is the Director of Marketing for Tasty Baking Co.




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CONVENTIONS/MEETINGS: annual Executive Conference, for top industry executives
and retail partners.

SIC Codes: 5141 - Groceries--General Line; 8611 - Business Associations

NAICS Codes: 424410 - General Line Grocery Merchant Wholesalers


Snack Food Association (SFA)42
1600 Wilson Blvd., Ste. 650
Arlington, VA 22209 USA
Phone: (703) 836-4500
Toll-Free: 800-628-1334
Fax: (703) 836-8262
Email: sfa@sfa.org
URL: http://www.sfa.org

Primary Contact: James A. McCarthy, Pres./CEO

FOUNDED: 1937. MEMBERS: 800. STAFF: 13. BUDGET: $3,000,000. DESCRIPTION:
Manufacturers of potato chips, pretzels, corn chips, tortilla chips, popcorn, cheese snacks,
pork rinds, cookies, crackers, nuts, meat snacks, fruit snacks, and grain-based snacks;
associate members are suppliers and distributors of fats and oils, packaging supplies,
machinery, seasonings, and potato and corn growers. TELECOMMUNICATION
SERVICES: electronic mail, jmccarthy@sfa.org. COMMITTEES: Legislative; Marketing;
Production; Sales and Merchandising; Snack Pac; Technical. FORMERLY: National
Potato Chip Institute; (1975) Potato Chip Institute, International; (1986) Potato
Chip/Snack Food Association.
PUBLICATIONS: Snack Food and Wholesale Bakery, monthly. Magazine. Features
information on the latest industry news, marketing updates, technical advances and
international developments in the snack food industry. * The Snack Report, weekly.
Newsletter. Contains up-to-date information on association activities while also
highlighting snack food industry news and events. PRICE: included in membership dues.
ALTERNATE FORMATS: online. * State of the Industry Report, annual. Examines
domestic sales of snack food by category. * Who's Who in the International Snack Food
Industry, annual. Directory. Provides information on all SFA member companies
including key contacts, brands, products produced, number of employees and distribution
methods.


42
  I feel that the Snack Food Association is the association that would be most useful to Tasty Baking Co. I
was able to find several articles about Tasty Baking Co. in the publication Snack Food and Wholesale
Bakery. However, Tasty Baking Co. is not a member of this association. I learned this through e-mail
correspondence with Jon Silvon who is the Director of Marketing for Tasty Baking Co.




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CONVENTIONS/MEETINGS: annual SNAXPO - trade show, for the snack food industry
(exhibits) - 2009 Mar. 29 - Apr. 1, Orlando, Florida, United States.

SIC Codes: 2096 - Potato Chips & Similar Snacks; 8611 - Business Associations
NAICS Codes: 311919 - Other Snack Food Manufacturing


                           Government Information/Statistics

Regulating Agency

Food and Drug Administration (FDA)43
www.fda.gov

FDA is an agency within the Department of Health and Human Services and consists of
nine centers/offices. The center that regulates food is the Center for Food Safety and
Applied Nutrition (CFSAN).

Center for Food Safety and Applied Nutrition (CFSAN)44
http://www.cfsan.fda.gov/list.html




43
     FDA. (2009). FDA. Retrieved March 26, 2009, from http://www.fda.gov/opacom/7org.html.
44
     CFSAN. (2009). CFSAN. Retrieved March 26, 2009, from http://www.cfsan.fda.gov/list.html.




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FDA-Affiliated Organizations

Joint Institute for Food Safety and Applied Nutrition (JIFSAN)45
http://www.jifsan.umd.edu/

The Joint Institute for Food Safety and Applied Nutrition was established between the
United States Food and Drug Administration and the University of Maryland in April
1996. The Institute is a jointly administered, multidisciplinary research and education
program and includes research components from the FDA Centers for Food Safety and
Applied Nutrition and Veterinary Medicine, and the University of Maryland.

National Center for Food Safety and Technology46



45
  JIFSAN. (2009). Joint Institute for Food Safety and Applied Nutrition. Retrieved March 26, 2009, from
http://www.jifsan.umd.edu/.




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http://www.ncfst.iit.edu/main/home.html

The National Center for Food Safety and Technology (NCFST) in Chicago, Illinois, is a
research consortium among the FDA Center for Food Safety and Applied Nutrition
(CFSAN), Illinois Institute of Technology (IIT) and the food industry. Established 17
years ago, the NCFST incorporates the FDA Division of Food Processing Science and
Technology and was set up by FDA to form a link with industry for its expertise in food
technology.

The NCFST is the only center where industry can work collaboratively on projects with
FDA scientists on food safety and technology research. Membership in the NCFST
allows companies to gain an early insight into emerging food safety issues from the
CFSAN perspective to assess the safety of new technologies, which may be important for
innovation. This early collaboration with FDA may also facilitate speed to market
through the regulatory process.




46
  National Center for Food Safety and Technology. (2009). National Center for Food Safety and
Technology. Retrieved March 26, 2009, from http://www.ncfst.iit.edu/main/home.html.




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FDA Food Protection Plan47




47
  FDA. (2007). Food Protection Plan. Retrieved April 6, 2009, from
http://www.fda.gov/oc/initiatives/advance/food/plan.pdf.




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                                        The Economy
Economic Indicators – Gross Domestic Product48

GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2008 (FINAL)
CORPORATE PROFITS: FOURTH QUARTER 2008 (FINAL)

Real gross domestic product -- the output of goods and services produced by labor and
property located in the United States -- decreased at an annual rate of 6.3 percent in the
fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to
final estimates released by the Bureau of Economic Analysis. In the third quarter, real
GDP decreased 0.5 percent.

The GDP estimates released today are based on more complete source data than were
available for the preliminary estimates issued last month. In the preliminary estimates, the
decrease in real GDP was 6.2 percent (see "Revisions" on page 3).

The decrease in real GDP in the fourth quarter primarily reflected negative contributions
from exports, personal consumption expenditures, equipment and software, and
residential fixed investment that were partly offset by a positive contribution from federal
government spending. Imports, which are a subtraction in the calculation of GDP,
decreased.

Most of the major components contributed to the much larger decrease in real GDP in the
fourth quarter than in the third. The largest contributors were a downturn in exports and a
much larger decrease in equipment and software. The most notable offset was a much
larger decrease in imports.

Final sales of computers subtracted 0.02 percentage point from the fourth-quarter change
in real GDP after subtracting 0.01 percentage point from the third-quarter change. Motor
vehicle output subtracted 2.01 percentage points from the fourth-quarter change in real
GDP after adding 0.16 percentage point to the third-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S.
residents, decreased 3.9 percent in the fourth quarter, 0.2 percentage point less of a
decrease than the preliminary estimate; this index increased 4.5 percent in the third
quarter. Excluding food and energy prices, the price index for gross domestic purchases
increased 1.2 percent in the fourth quarter, compared with an increase of 2.8 percent in
the third.


48
  Economic Indicators. (2009). Gross Domestic Product. Retrieved March 30, 2009, from
http://www.economicindicators.gov/.




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Real personal consumption expenditures decreased 4.3 percent in the fourth quarter,
compared with a decrease of 3.8 percent in the third. Real nonresidential fixed investment
decreased 21.7 percent, compared with a decrease of 1.7 percent. Nonresidential
structures decreased 9.4 percent, in contrast to an increase of 9.7 percent. Equipment and
software decreased 28.1 percent, compared with a decrease of 7.5 percent. Real
residential fixed investment decreased 22.8 percent, compared with a decrease of
16.0 percent.

Real exports of goods and services decreased 23.6 percent in the fourth quarter, in
contrast to an increase of 3.0 percent in the third. Real imports of goods and services
decreased 17.5 percent, compared with a decrease of 3.5 percent.

Real federal government consumption expenditures and gross investment increased 7.0
percent in the fourth quarter, compared with an increase of 13.8 percent in the third.
National defense increased 3.4 percent, compared with an increase of 18.0 percent.
Nondefense increased 15.3 percent, compared with an increase of 5.1 percent. Real state
and local government consumption expenditures and gross investment decreased 2.0
percent, in contrast to an increase of 1.3 percent.

The real change in private inventories subtracted 0.11 percentage point from the fourth-
quarter change in real GDP, after adding 0.84 percentage point to the third-quarter
change. Private businesses decreased inventories $25.8 billion in the fourth quarter,
following a decrease of $29.6 billion in the third quarter and a decrease of $50.6 billion in
the second.

Real final sales of domestic product -- GDP less change in private inventories --
decreased 6.2 percent in the fourth quarter, compared with a decrease of 1.3 percent in
the third.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services
wherever produced -- decreased 5.9 percent in the fourth quarter, compared with a
decrease of 1.5 percent in the third.

Gross national product

Real gross national product -- the goods and services produced by the labor and property
supplied by U.S. residents -- decreased 5.6 percent in the fourth quarter, compared with a
decrease of 0.2 percent in the third. GNP includes, and GDP excludes, net receipts of
income from the rest of the world, which increased $21.3 billion in the fourth quarter




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after increasing $9.9 billion in the third; in the fourth quarter, receipts decreased $77.2
billion, and payments decreased $98.5 billion.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services –
decreased 5.8 percent, or $212.5 billion, in the fourth quarter to a level of $14,200.3
billion. In the third quarter, current-dollar GDP increased 3.4 percent, or $118.3 billion.

Revisions

The final estimate of the fourth-quarter change in real GDP is 0.1 percentage point, or
$2.9 billion, lower than the preliminary estimate issued last month. The downward
revision to the percent change in real GDP primarily reflected downward revisions to
private inventory investment, to exports of services, and to nonresidential structures that
were partly offset by a downward revision to imports of services and an upward revision
to exports of goods.

                                               Advance       Preliminary         Final
                                                (Percent change from preceding quarter)
Real GDP                                         -3.8             -6.2           -6.3
Current-dollar GDP                               -4.1             -5.8           -5.8
Goss domestic purchases price index              -4.6             -4.1           -3.9

2008 GDP

Real GDP increased 1.1 percent in 2008 (that is, from the 2007 annual level to the 2008
annual level), compared with an increase of 2.0 percent in 2007.

The major contributors to the increase in real GDP in 2008 were exports, personal
consumption expenditures (PCE) for services, federal government spending,
nonresidential structures, and state and local government spending. These were partly
offset by negative contributions from residential fixed investment, PCE for goods, private
inventory investment, and equipment and software. Imports, which are a subtraction in
the calculation of GDP, decreased.

The slowdown in real GDP in 2008 primarily reflected a sharp deceleration in PCE, a
downturn in equipment and software, and decelerations in exports and in state and local
government spending that were partly offset by a sharp downturn in imports, an
acceleration in federal government spending, and a smaller decrease in private inventory
investment.




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The price index for gross domestic purchases increased 3.2 percent in 2008, compared
with an increase of 2.8 percent in 2007.

Current-dollar GDP increased 3.3 percent, or $457.1 billion, in 2008. Current-dollar GDP
increased 4.8 percent, or $629.1 billion, in 2007.

During 2008 (that is, measured from the fourth quarter of 2007 to the fourth quarter
2008), real GDP decreased 0.8 percent. Real GDP increased 2.3 percent during 2007. The
price index for gross domestic purchases increased 2.0 percent during 2008, compared
with an increase of 3.3 percent during 2007.

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) decreased $250.3 billion in the fourth quarter, compared with
a decrease of $18.5 billion in the third quarter. Current-production cash flow (net cash
flow with inventory valuation and capital consumption adjustments) -- the internal funds
available to corporations for investment -- decreased $97.0 billion in the fourth quarter, in
contrast to an increase of $43.1 billion in the third.

Taxes on corporate income decreased $130.3 billion in the fourth quarter, compared with
a decrease of $13.3 billion in the third. Profits after tax with inventory valuation and
capital consumption adjustments decreased $120.1 billion, compared with a decrease of
$5.2 billion. Dividends decreased $32.8 billion, compared with a decrease of $5.3 billion;
current-production undistributed profits decreased $87.4 billion, in contrast to an increase
of $0.3 billion.

Domestic profits of financial corporations decreased $178.7 billion in the fourth quarter,
compared with a decrease of $75.5 billion in the third. Domestic profits of nonfinancial
corporations decreased $89.1 billion in the fourth quarter, in contrast to an increase of
$52.1 billion in the third. In the fourth quarter, real gross value added of nonfinancial
corporations decreased, and profits per unit of real product decreased. The decrease in
unit profits reflected an increase in unit prices that was more than offset by increases in
both the unit labor and nonlabor costs corporations incurred.

The rest-of-the-world component of profits increased $17.5 billion in the fourth quarter,
compared with an increase of $4.9 billion in the third. This measure is calculated as (1)
receipts by U.S. residents of earnings from their foreign affiliates plus dividends received
by U.S. residents from unaffiliated foreign corporations minus (2) payments by U.S.
affiliates of earnings to their foreign parents plus dividends paid by U.S. corporations to
unaffiliated foreign residents. The fourth-quarter increase was accounted for by a larger
decrease in payments than in receipts.




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Profits before tax with inventory valuation adjustment is the best available measure of
industry profits because estimates of the capital consumption adjustment by industry do
not exist. This measure reflects depreciation-accounting practices used for federal income
tax returns. According to this measure, domestic profits of financial and nonfinancial
corporations decreased. The decrease in nonfinancial corporations reflected decreases in
all the aggregate industries shown except wholesale trade; the largest decrease was in
manufacturing. Within manufacturing, the largest decreases were in petroleum and coal
products, ―other‖ durable goods, and chemical products.

Profits before tax decreased $499.2 billion in the fourth quarter, compared with a
decrease of $56.3 billion in the third. The before-tax measure of profits does not reflect,
as does profits from current production, the capital consumption and inventory valuation
adjustments. These adjustments convert depreciation of fixed assets and inventory
withdrawals reported on a tax-return, historical-cost basis to the current-cost measures
used in the national income and product accounts. The capital consumption adjustment
decreased $0.1 billion in the fourth quarter (from -$88.0 billion to -$88.1 billion),
compared with a decrease of $25.3 billion in the third. The inventory valuation
adjustment increased $249.0 billion (from -$90.9 billion to $158.1 billion), compared
with an increase of $63.1 billion.

Corporate profits in 2008

Profits from current production decreased 10.1 percent in 2008, compared with a
decrease of 1.6 percent in 2007. Domestic profits decreased 16.0 percent, compared with
a decrease of 7.4 percent. The rest-of-the-world component of profits increased 12.2
percent, compared with an increase of 28.9 percent.

Taxes on corporate income decreased 18.6 percent in 2008, compared with a decrease of
4.0 percent in 2007. Profits after tax with inventory valuation and capital consumption
adjustments decreased 6.9 percent, compared with a decrease of 0.6 percent. Dividends
increased 5.5 percent, compared with an increase of 12.3 percent; current-production
undistributed profits decreased 31.1 percent, compared with a decrease of 18.9 percent.

According to the measure of profits before tax with inventory valuation adjustment,
domestic profits of financial and nonfinancial corporations decreased in 2008. The
decrease in nonfinancial corporations reflected decreases in all industries shown. The
largest decrease was in manufacturing, and within manufacturing, the largest decreases
were in ―other‖ durable goods and in motor vehicles.




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Current Economic Conditions49

THIRD DISTRICT – PHILADELPHIA

Business conditions in the Third District remained weak in February. Manufacturers, on
balance, reported declines in shipments and new orders. Retailers indicated that sales
were nearly steady but below the level of a year ago. Motor vehicle dealers reported
continued declines in sales. Bank loan volume has risen very slightly in recent weeks, but
credit quality has continued to deteriorate. Residential real estate sales and construction
remained low but appeared to be close to steady. Commercial real estate investment and
construction activity have been moving down. Service-sector activity has generally
declined in recent weeks. Business firms in the region reported decreases in most input
costs and output prices in February.

The outlook among Third District businesses is generally not bright, although there has
been some improvement since the last Beige Book. Manufacturers forecast increases in
shipments and orders during the next six months. Retailers expect sales to remain slow
while consumers remain concerned about job security. Auto dealers see no indications of
improvement in sales. Bankers expect lending to move up slowly during the year.
Residential real estate agents and home builders expect sales to remain slow through


49
  Federal Reserve Board. (2009, March 4). Current Economic Conditions. Retrieved March 30, 2009, from
http://www.federalreserve.gov/FOMC/BeigeBook/2009/.




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most of the year. Contacts in commercial real estate expect leasing and purchase activity
to fall further this year, and they expect vacancies to rise. Service-sector firms expect
activity to be slow through most of the year.

Manufacturing

Third District manufacturers reported continuing declines in shipments and new orders,
on balance, from January to February. Around one-half of the manufacturers surveyed
noted decreases in those measures, and around one-fifth reported increases. The balance
of negative over positive reports increased from January to February. However, much of
the recent worsening in the region’s manufacturing sector has been among producers of
primary metals and electrical equipment. Demand for industrial equipment and materials
has been especially weak because, as one manufacturing contact said, ―customer
purchasing for capital projects is on hold.‖ In contrast, demand has increased for food
products, chemicals, some finished products, and testing and measuring instruments.

Despite poor current conditions, the outlook among Third District manufacturers has
improved since the last Beige Book. Among firms polled in February, nearly one-half
expect new orders and shipments to increase during the next six months, and one-quarter
expect decreases. However, capital spending among area manufacturers is being reduced,
on balance, as the number of firms planning to cut outlays for new plant and equipment
continues to exceed the number planning increases.

Retail

Third District retailers generally reported nearly steady sales during February, although
the year-to-year comparison remained negative for most. Merchants said sales of basic
apparel and household items have been steady or rising, but sales of most other lines of
merchandise have been weak. Reflecting the comments of most area retailers, one store
executive said, ―The consumer is focused on the basics, and sales of big ticket items are
still falling.‖ Merchants indicated that sales of big ticket appliance and electronics items
and jewelry have been falling steeply. In contrast, sales of some apparel items were up.
The outlook among the region’s retailers is not positive, but some contacts believe
consumer spending could gather strength if employment conditions show signs of
stabilizing.

Third District auto dealers reported further slowing in sales in February. Demand has
fallen for all makes and models. Dealers said the availability of financing for car
purchases continued to limit sales, as well. Dealers also reported continued difficulty in
obtaining inventory financing. Looking ahead, dealers see no signs of an upturn, and they
expect the financial difficulties of domestic manufacturers to negatively affect demand
for those companies’ vehicles and the business operations of dealers selling them.




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Finance

Total outstanding loan volume at Third District banks has edged up slowly in recent
weeks, according to bankers contacted for this report. The gain has been mostly the result
of modest growth in commercial and industrial lending. Residential real estate loan
volume outstanding has been practically flat, and consumer loan volume has declined.
Commercial bank lending officers attributed the slowness in lending to falling demand
for credit. ―The weakness in lending is on the demand side,‖ one banker noted, and
another said, ―The news coverage has the public convinced the banks aren’t lending, but
we’re looking for business.‖ However, other bankers said that an ongoing process of
consolidation among large banks with branches in the region continued to divert those
institutions from major loan marketing efforts. Several contacts also noted that lending
and investing by financial companies other than banks have been limited, especially in
certain sectors, such as construction, real estate, and retail trade. Most of the banks
contacted for this report said that credit quality continued to decline for all categories of
credit. Looking ahead, bankers expect slow expansion in lending this year, and they are
becoming increasingly concerned that a prolonged economic slowdown will result in
further weakening in the creditworthiness of both business and individual borrowers.

Real Estate and Construction

Residential real estate activity in the Third District remained weak in February.
Residential real estate agents and builders reported that sales have been nearly steady, but
at a very slow pace. One builder said that ―sales have been anemic,‖ and another said the
rate has been ―the lowest we have ever seen.‖ Inventories of both new and existing homes
for sale have been practically unchanged since the beginning of the year. Builders
continued to offer substantial incentives to purchasers, but real estate agents said an
increasing number of sellers of existing homes have preferred to offer them for rent rather
than accept low offers. Builders and agents expect sales to remain slow through most of
this year, although some said that government programs to stimulate home buying could
provide a lift to sales.

Commercial real estate firms indicated that construction, leasing, and purchase activity
have remained on a downward trend since the last Beige Book. Contacts said a sharp
reduction in financing for commercial real estate has put commercial properties of all
types under downward price pressure, and that falling employment has reduced the
demand for space, resulting in declining rents. Contacts expect commercial real estate
investment and construction activity to remain weak through the year, and they expect
vacancy rates to rise and rents to decline until overall economic conditions begin to
improve.




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Services

Service-sector firms generally reported a drop in activity since the last Beige Book.
Business and professional services firms indicated that the reduction in activity has
prompted layoffs and other cost-cutting measures. Firms providing services to the
construction, real estate, and finance sectors reported particularly sharp pullbacks in
demand. One such firm said that ―we are living hand to mouth‖ and trimming every
possible budget item. Many of the region’s educational institutions have also been
limiting expenditures. Endowment values have declined for most, and some have seen
reductions in applications and enrollments. The outlook among area service firms
remains negative, and several contacts say they have pushed out their expectations for a
rebound to later in the year or into next year.

Prices and Wages

Reports on input costs and output prices largely reflect further declines since the last
Beige Book. Manufacturing firms continued to note decreases in prices for most of the
materials they use. Most also reported reducing their own prices, although food
processors have raised prices recently. Retailers have reduced prices for some apparel
and many large appliances and furniture, mainly in an effort to work down inventories in
preparation for new spring merchandise. Prices of other goods were said to be mostly
steady.

Firms in a wide range of industries reported they were implementing salary freezes or
reductions and cutting back on fringe benefits, including 401-K matching contributions.
A growing number of employers in the region have announced hiring freezes as well as
immediate and prospective layoffs. Several firms that reported they intended to maintain
staffing levels noted that they were reducing hours, imposing unpaid furloughs, or
scheduling temporary plant shutdowns in order to reduce wage bills.




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Consumer Confidence50




50
  The Conference Board. (2009, March 31). Consumer Confidence. Retrieved April 1, 2009, from
http://www.conference-board.org/economics/ConsumerConfidence.cfm.




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Recession Update51




51
     IBIS. (2009, March 26.) Recession Update. Retrieved April 1, 2009, from http://www.ibisworld.com/.




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Leading and Lagging Economic Indicators52




52
  The Conference Board. (2009). The Conference Board Leading Economic Index (LEI) for the United
States. Retrieved March 31, 2009, from http://www.conference-
board.org/economics/bci/pressRelease_output.cfm?cid=1.




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                                         Marketing
Demographics53


                                                                        Number               Percent
                            Subject



            Total population                                                    10,748              100

                        SEX AND AGE
 Male                                                                            4,854              45.2
 Female                                                                          5,894              54.8



53
  American FactFinder. (2000). 19129 Fact Sheet. Retrieved April 15, 2009, from
http://factfinder.census.gov/servlet/SAFFFacts?_event=Search&geo_id=&_geoContext=&_street=&_count
y=19129&_cityTown=19129&_state=&_zip=19129&_lang=en&_sse=on&pctxt=fph&pgsl=010&show_20
03_tab=&redirect=Y.




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Under 5 years                                  521             4.8
5 to 9 years                                   597             5.6
10 to 14 years                                 695             6.5
15 to 19 years                               1,147            10.7
20 to 24 years                               1,306            12.2
25 to 34 years                               1,833            17.1
35 to 44 years                               1,365            12.7
45 to 54 years                               1,331            12.4
55 to 59 years                                 486             4.5
60 to 64 years                                 347             3.2
65 to 74 years                                 619             5.8
75 to 84 years                                 410             3.8
85 years and over                               91             0.8


Median age (years)                            30.4             (X)


18 years and over                            8,586            79.9
    Male                                     3,802            35.4
    Female                                   4,784            44.5
21 years and over                            7,448            69.3
62 years and over                            1,331            12.4
65 years and over                            1,120            10.4
    Male                                       434              4
    Female                                     686             6.4

                          RACE
One race                                    10,591            98.5
    White                                    6,056            56.3
    Black or African American                4,180            38.9
    American Indian and Alaska Native           38             0.4
    Asian                                      255             2.4
         Asian Indian                           77             0.7
         Chinese                                74             0.7
         Filipino                               19             0.2
         Japanese                                8             0.1
         Korean                                 21             0.2
         Vietnamese                             22             0.2
         Other Asian 1                          34             0.3




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    Native Hawaiian and Other Pacific Islander                 3              0
         Native Hawaiian                                       0              0
         Guamanian or Chamorro                                 1              0
         Samoan                                                0              0
         Other Pacific Islander 2                              2              0
    Some other race                                           59             0.5
Two or more races                                            157             1.5

Race alone or in combination with one or more other
races 3
White                                                      6,158            57.3
Black or African American                                  4,277            39.8
American Indian and Alaska Native                             86             0.8
Asian                                                        297             2.8
Native Hawaiian and Other Pacific Islander                    14             0.1
Some other race                                               83             0.8

              HISPANIC OR LATINO AND RACE
            Total population                              10,748            100
Hispanic or Latino (of any race)                             226             2.1
    Mexican                                                   28             0.3
    Puerto Rican                                             111              1
    Cuban                                                     18             0.2
    Other Hispanic or Latino                                  69             0.6
Not Hispanic or Latino                                    10,522            97.9
    White alone                                            5,936            55.2

                         RELATIONSHIP
            Total population                              10,748            100
In households                                              9,609            89.4
    Householder                                            4,131            38.4
    Spouse                                                 1,190            11.1
    Child                                                  2,535            23.6
         Own child under 18 years                          1,662            15.5
    Other relatives                                          877             8.2
         Under 18 years                                      451             4.2
    Nonrelatives                                             876             8.2
         Unmarried partner                                   268             2.5
In group quarters                                          1,139            10.6




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    Institutionalized population                            23             0.2
    Noninstitutionalized population                      1,116            10.4

                  HOUSEHOLDS BY TYPE
           Total households                              4,131            100
Family households (families)                             2,231             54
        With own children under 18 years                   932            22.6
    Married-couple family                                1,190            28.8
        With own children under 18 years                   458            11.1
    Female householder, no husband present                 872            21.1
        With own children under 18 years                   421            10.2
Nonfamily households                                     1,900             46
    Householder living alone                             1,399            33.9
        Householder 65 years and over                      356             8.6


Households with individuals under 18 years               1,176            28.5
Households with individuals 65 years and over              906            21.9


Average household size                                    2.33             (X)
Average family size                                       3.06             (X)

                  HOUSING OCCUPANCY
           Total housing units                           4,797            100
Occupied housing units                                   4,131            86.1
Vacant housing units                                       666            13.9
    For seasonal, recreational, or occasional use           13             0.3


Homeowner vacancy rate (percent)                           2.5             (X)
Rental vacancy rate (percent)                             14.2             (X)

                       HOUSING TENURE
           Occupied housing units                        4,131            100
Owner-occupied housing units                             2,342            56.7
Renter-occupied housing units                            1,789            43.3


Average household size of owner-occupied unit             2.36             (X)
Average household size of renter-occupied unit            2.28             (X)




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(X) Not applicable

1 Other Asian alone, or two or more Asian categories.

2 Other Pacific Islander alone, or two or more Native Hawaiian and Other Pacific Islander categories.

3 In combination with one or more other races listed. The six numbers may add to more than the total
population and the six percentages may add to more than 100 percent because individuals may report
more than one race.

Source: U.S. Census Bureau, Census 2000 Summary File 1, Matrices P1, P3, P4, P8, P9, P12, P13,
P,17, P18, P19, P20, P23, P27, P28, P33, PCT5, PCT8, PCT11, PCT15, H1, H3, H4, H5, H11, and H12.




                                                                               Number               Percent
                                 Subject



                       SCHOOL ENROLLMENT
                       Population 3 years and over enrolled in
school                                                                                  4,131             100
Nursery school, preschool                                                                 124                  3
Kindergarten                                                                              103                 2.5
Elementary school (grades 1-8)                                                          1,047             25.3
High school (grades 9-12)                                                                 568             13.7
College or graduate school                                                              2,289             55.4

                     EDUCATIONAL ATTAINMENT
                       Population 25 years and over                                     6,546             100
Less than 9th grade                                                                       300                 4.6
9th to 12th grade, no diploma                                                           1,090             16.7
High school graduate (includes equivalency)                                             1,644             25.1
Some college, no degree                                                                   948             14.5
Associate degree                                                                          279                 4.3
Bachelor's degree                                                                       1,262             19.3
Graduate or professional degree                                                         1,023             15.6


Percent high school graduate or higher                                                    78.8                (X)
Percent bachelor's degree or higher                                                       34.9                (X)

                          MARITAL STATUS




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                        Population 15 years and over                         8,913     100
Never married                                                                4,760     53.4
Now married, except separated                                                2,531     28.4
Separated                                                                      234      2.6
Widowed                                                                        684      7.7
           Female                                                              554      6.2
Divorced                                                                       704      7.9
           Female                                                              444       5

             GRANDPARENTS AS CAREGIVERS
                   Grandparent living in household with one or
more own grandchildren under 18 years                                          343     100
Grandparent responsible for grandchildren                                      130     37.9

                              VETERAN STATUS
                        Civilian population 18 years and over                8,530     100
Civilian veterans                                                              929     10.9

DISABILITY STATUS OF THE CIVILIAN NONINSTITUTIONALIZED
                     POPULATION
                        Population 5 to 20 years                             2,806     100
With a disability                                                              203      7.2


                        Population 21 to 64 years                            6,273     100
With a disability                                                            1,502     23.9
           Percent employed                                                   55.1      (X)
No disability                                                                4,771     76.1
           Percent employed                                                   69.5      (X)


                        Population 65 years and over                         1,135     100
With a disability                                                              524     46.2

                          RESIDENCE IN 1995
                        Population 5 years and over                         10,240     100
Same house in 1995                                                           6,368     62.2
Different house in the U.S. in 1995                                          3,734     36.5
       Same county                                                           1,625     15.9
           Different county                                                  2,109     20.6
                    Same state                                               1,034     10.1




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                    Different state                                   1,075     10.5
Elsewhere in 1995                                                       138      1.3

                    NATIVITY AND PLACE OF BIRTH
                          Total population                           10,713     100
Native                                                               10,206     95.3
          Born in United States                                      10,167     94.9
                    State of residence                                7,430     69.4
                    Different state                                   2,737     25.5
          Born outside United States                                     39      0.4
Foreign born                                                            507      4.7
                    Entered 1990 to March 2000                          149      1.4
          Naturalized citizen                                           273      2.5
          Not a citizen                                                 234      2.2

                REGION OF BIRTH OF FOREIGN BORN
                          Total (excluding born at sea)                 507     100
Europe                                                                  180     35.5
Asia                                                                    229     45.2
Africa                                                                   38      7.5
Oceania                                                                   0       0
Latin America                                                            23      4.5
Northern America                                                         37      7.3

                    LANGUAGE SPOKEN AT HOME
                          Population 5 years and over                10,240     100
English only                                                          9,453     92.3
Language other than English                                             787      7.7
                    Speak English less than 'very well                  219      2.1
          Spanish                                                       196      1.9
                    Speak English less than "very well"                  76      0.7
          Other Indo-European languages                                 312       3
                    Speak English less than "very well"                  43      0.4
          Asian and Pacific Island languages                            188      1.8
                    Speak English less than "very well"                  68      0.7

                    ANCESTRY (single or multiple)
                          Total population                           10,713     100




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                     Total ancestries reported              11,779     110
Arab                                                            80      0.7
Czech1                                                          13      0.1
Danish                                                           9      0.1
Dutch                                                           55      0.5
English                                                        479      4.5
French (except Basque)1                                        190      1.8
French Canadian1                                                84      0.8
German                                                       1,208     11.3
Greek                                                           37      0.3
Hungarian                                                       26      0.2
Irish1                                                       2,140      20
Italian                                                      1,308     12.2
Lithuanian                                                      50      0.5
Norwegian                                                       67      0.6
Polish                                                         516      4.8
Portuguese                                                       0       0
Russian                                                         69      0.6
Scotch-Irish                                                   109       1
Scottish                                                       110       1
Slovak                                                          42      0.4
Subsaharan African                                             168      1.6
Swedish                                                         52      0.5
Swiss                                                            0       0
Ukrainian                                                      108       1
United States or American                                      164      1.5
Welsh                                                           77      0.7
West Indian (excluding Hispanic groups)                         41      0.4
Other ancestries                                             4,577     42.7




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(X) Not applicable.

1 The data represent a combination of two ancestries shown separately in Summary File 3. Czech includes
Czechoslovakian. French includes Alsatian. French Canadian includes Acadian/Cajun. Irish includes Celtic.

Ancestry Code List (PDF 35KB)

Place of Birth Code List (PDF 74KB)

Language Code List (PDF 17KB)

Source: U.S. Census Bureau, Census 2000 Summary File 3, Matrices P18, P19, P21, P22, P24, P36, P37, P39,
P42, PCT8, PCT16, PCT17, and PCT19




                                                                            Number                 Percent
                                  Subject



                       EMPLOYMENT STATUS
                        Population 16 years and over                                 8,851               100
In labor force                                                                       5,247               59.3
         Civilian labor force                                                        5,247               59.3
                     Employed                                                        4,870                   55
                     Unemployed                                                       377                    4.3
                             Percent of civilian labor force                           7.2                   (X)
         Armed Forces                                                                    0                    0
Not in labor force                                                                   3,604               40.7


                        Females 16 years and over                                    4,857               100
In labor force                                                                       2,690               55.4
         Civilian labor force                                                        2,690               55.4
                     Employed                                                        2,508               51.6


                        Own children under 6 years                                    572                100
All parents in family in labor force                                                  250                43.7

                       COMMUTING TO WORK
                        Workers 16 years and over                                    4,744               100
Car, truck, or van -- drove alone                                                    2,399               50.6
Car, truck, or van -- carpooled                                                       548                11.6
Public transportation (including taxicab)                                            1,052               22.2




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Walked                                                                          564         11.9
Other means                                                                      81          1.7
Worked at home                                                                  100          2.1
Mean travel time to work (minutes)                                             27.3          (X)


                        Employed civilian population 16 years and
over                                                                          4,870         100
                           OCCUPATION
Management, professional, and related occupations                             1,779         36.5
Service occupations                                                             889         18.3
Sales and office occupations                                                  1,566         32.2
Farming, fishing, and forestry occupations                                        0           0
Construction, extraction, and maintenance occupations                           205          4.2
Production, transportation, and material moving occupations                     431          8.9

                             INDUSTRY
Agriculture, forestry, fishing and hunting, and mining                            0           0
Construction                                                                    146           3
Manufacturing                                                                   239          4.9
Wholesale trade                                                                 121          2.5
Retail trade                                                                    462          9.5
Transportation and warehousing, and utilities                                   244           5
Information                                                                     159          3.3
Finance, insurance, real estate, and rental and leasing                         424          8.7
Professional, scientific, management, administrative, and waste
management services                                                             504         10.3
Educational, health and social services                                       1,649         33.9
Arts, entertainment, recreation, accommodation and food services                475          9.8
Other services (except public administration)                                   171          3.5
Public administration                                                           276          5.7

                        CLASS OF WORKER
Private wage and salary workers                                               3,879         79.7
Government workers                                                              727         14.9
Self-employed workers in own not incorporated business                          264          5.4
Unpaid family workers                                                             0           0

                          INCOME IN 1999
                        Households                                            4,119         100




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Less than $10,000                                                  674         16.4
$10,000 to $14,999                                                 308          7.5
$15,000 to $24,999                                                 525         12.7
$25,000 to $34,999                                                 474         11.5
$35,000 to $49,999                                                 737         17.9
$50,000 to $74,999                                                 664         16.1
$75,000 to $99,999                                                 381          9.2
$100,000 to $149,999                                               261          6.3
$150,000 to $199,999                                                53          1.3
$200,000 or more                                                    42           1
Median household income (dollars)                               36,465          (X)


With earnings                                                    3,163         76.8
         Mean earnings (dollars)                                48,818          (X)
With Social Security income                                        950         23.1
         Mean Social Security income (dollars)                  10,956          (X)
With Supplemental Security Income                                  255          6.2
         Mean Supplemental Security Income (dollars)             6,662          (X)
With public assistance income                                      240          5.8
         Mean public assistance income (dollars)                 2,429          (X)
With retirement income                                             690         16.8
         Mean retirement income (dollars)                       13,936          (X)


                       Families                                  2,257         100
Less than $10,000                                                  241         10.7
$10,000 to $14,999                                                 130          5.8
$15,000 to $24,999                                                 241         10.7
$25,000 to $34,999                                                 231         10.2
$35,000 to $49,999                                                 456         20.2
$50,000 to $74,999                                                 383          17
$75,000 to $99,999                                                 278         12.3
$100,000 to $149,999                                               207          9.2
$150,000 to $199,999                                                53          2.3
$200,000 or more                                                    37          1.6
Median family income (dollars)                                  43,050          (X)


Per capita income (dollars)                                     17,949          (X)
Median earnings (dollars):




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Male full-time, year-round workers                                    35,748                 (X)
Female full-time, year-round workers                                  30,533                 (X)

        POVERTY STATUS IN 1999 (below poverty level)
                      Families                                           303          (X)
                               Percent below poverty level                (X)               13.4
With related children under 18 years                                     215                 (X)
                               Percent below poverty level                (X)                19
        With related children under 5 years                               86                 (X)
                               Percent below poverty level                (X)               24.9


                      Families with female householder, no                            (X)
husband present                                                          240
                               Percent below poverty level                (X)               25.6
With related children under 18 years                                     195                 (X)
                               Percent below poverty level                (X)               34.9
        With related children under 5 years                               78                 (X)
                               Percent below poverty level                (X)               53.1


                      Individuals                                      1,881          (X)
                               Percent below poverty level                (X)               19.6
18 years and over                                                      1,317                 (X)
                               Percent below poverty level                (X)               17.8
        65 years and over                                                169                 (X)
                               Percent below poverty level                (X)               14.9
Related children under 18 years                                          541                 (X)
                               Percent below poverty level                (X)               25.2
        Related children 5 to 17 years                                   401                 (X)
                               Percent below poverty level                (X)                24
Unrelated individuals 15 years and over                                  829                 (X)
                               Percent below poverty level                (X)               31.7




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(X) Not applicable.

Detailed Occupation Code List (PDF 42KB)

Detailed Industry Code List (PDF 44KB)

User note on employment status data (PDF 63KB)

Source: U.S. Census Bureau, Census 2000 Summary File 3, Matrices P30, P32, P33, P43, P46, P49, P50,
P51, P52, P53, P58, P62, P63, P64, P65, P67, P71, P72, P73, P74, P76, P77, P82, P87, P90, PCT47,
PCT52, and PCT53




                                                                Number             Percent
                           Subject



                       Total housing units                               4,800             100
                    UNITS IN STRUCTURE
1-unit, detached                                                          363                7.6
1-unit, attached                                                         3,435             71.6
2 units                                                                   241                 5
3 or 4 units                                                              327                6.8
5 to 9 units                                                               64                1.3
10 to 19 units                                                            166                3.5
20 or more units                                                          204                4.3
Mobile home                                                                 0                 0
Boat, RV, van, etc.                                                         0                 0

                   YEAR STRUCTURE BUILT
1999 to March 2000                                                          0                 0
1995 to 1998                                                               54                1.1
1990 to 1994                                                              106                2.2
1980 to 1989                                                               27                0.6
1970 to 1979                                                              154                3.2
1960 to 1969                                                              208                4.3
1940 to 1959                                                             1,594             33.2
1939 or earlier                                                          2,657             55.4

                          ROOMS




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1 room                                            32               0.7
2 rooms                                          143                3
3 rooms                                          355               7.4
4 rooms                                          869              18.1
5 rooms                                          867              18.1
6 rooms                                        1,474              30.7
7 rooms                                          602              12.5
8 rooms                                          193                4
9 or more rooms                                  265               5.5
Median (rooms)                                   5.6               (X)


                   Occupied Housing Units      4,142              100
         YEAR HOUSEHOLDER MOVED INTO UNIT
1999 to March 2000                               735              17.7
1995 to 1998                                     853              20.6
1990 to 1994                                     512              12.4
1980 to 1989                                     699              16.9
1970 to 1979                                     618              14.9
1969 or earlier                                  725              17.5

                   VEHICLES AVAILABLE
None                                             985              23.8
1                                              2,084              50.3
2                                                830               20
3 or more                                        243               5.9

                  HOUSE HEATING FUEL
Utility gas                                    3,565              86.1
Bottled, tank, or LP gas                          15               0.4
Electricity                                      277               6.7
Fuel oil, kerosene, etc.                         258               6.2
Coal or coke                                       0                0
Wood                                               0                0
Solar energy                                       0                0
Other fuel                                        21               0.5
No fuel used                                       6               0.1

               SELECTED CHARACTERISTICS




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Lacking complete plumbing facilities                           21               0.5
Lacking complete kitchen facilities                            28               0.7
No telephone service                                           27               0.7

                   OCCUPANTS PER ROOM
                        Occupied housing units              4,142              100
1.00 or less                                                4,022              97.1
1.01 to 1.50                                                   95               2.3
1.51 or more                                                   25               0.6


                        Specified owner-occupied units      2,230              100
                           VALUE
Less than $50,000                                             758               34
$50,000 to $99,999                                            981               44
$100,000 to $149,999                                          213               9.6
$150,000 to $199,999                                          129               5.8
$200,000 to $299,999                                           84               3.8
$300,000 to $499,999                                           47               2.1
$500,000 to $999,999                                           11               0.5
$1,000,000 or more                                              7               0.3
Median (dollars)                                           66,300               (X)

    MORTGAGE STATUS AND SELECTED MONTHLY
                OWNER COSTS
With a mortgage                                             1,211              54.3
         Less than $300                                        22                1
         $300 to $499                                         105               4.7
         $500 to $699                                         198               8.9
         $700 to $999                                         361              16.2
         $1,000 to $1,499                                     405              18.2
         $1,500 to $1,999                                      62               2.8
         $2,000 or more                                        58               2.6
         Median (dollars)                                     931               (X)
Not mortgaged                                               1,019              45.7
         Median (dollars)                                     304               (X)

      SELECTED MONTHLY OWNER COSTS AS A
                 PERCENTAGE
           OF HOUSEHOLD INCOME IN 1999
Less than 15 percent                                        1,026               46




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15 to 19 percent                                                          280              12.6
20 to 24 percent                                                          285              12.8
25 to 29 percent                                                          191               8.6
30 to 34 percent                                                          114               5.1
35 percent or more                                                        293              13.1
Not computed                                                               41               1.8


                       Specified renter-occupied units                  1,748              100
                       GROSS RENT
Less than $200                                                            198              11.3
$200 to $299                                                               94               5.4
$300 to $499                                                              307              17.6
$500 to $749                                                              531              30.4
$750 to $999                                                              437               25
$1,000 to $1,499                                                          125               7.2
$1,500 or more                                                             12               0.7
No cash rent                                                               44               2.5
Median (dollars)                                                          607               (X)

  GROSS RENT AS A PERCENTAGE OF HOUSEHOLD
                INCOME IN 1999
Less than 15 percent                                                      309              17.7
15 to 19 percent                                                          303              17.3
20 to 24 percent                                                          220              12.6
25 to 29 percent                                                          152               8.7
30 to 34 percent                                                          132               7.6
35 percent or more                                                        517              29.6
Not computed                                                              115               6.6

(X) Not applicable.

Source: U.S. Census Bureau, Census 2000 Summary File 3, Matrices H1, H7, H20, H23, H24, H30,
H34, H38, H40, H43, H44, H48, H51, H62, H63, H69, H74, H76, H90, H91, and H94




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Consumer Expenditure54

                                       19129,
                                       Philadelphia,     Philadelphia
 Variables                             PA                County, PA        ALL OF USA
 Geographic Unit                       Zip Code          County
 Bakery products ($000), 2008
 (Includes bread, crackers and
 cookies, biscuits and rolls,
 cakes, cupcakes, bread and
 cracker products, pies, tarts,
 sweet rolls, coffeecakes,
 doughnuts, and frozen and
 refrigerated bakery products,
 such as cookies, bread and
 cake dough, and batter.)                  $1,185.60      $161,001.80      $37,168,607.10
 Cakes and cupcakes ($000),
 2008                                        $137.80       $18,648.70       $4,288,589.50
 Crackers and cookies ($000),
 2008                                        $597.50       $79,702.20      $21,761,247.80
 Other bakery products ($000),
 2008                                        $447.10       $60,673.10      $14,230,119.50
 Pies, tarts, turnovers ($000),
 2008                                          $52.80        $7,186.30      $1,702,614.00
 Sweet rolls, coffee cakes,
 doughnuts ($000), 2008                        $80.60      $10,949.10       $2,557,027.20




54
  U.S. Department of Labor, Bureau of Labor Statistics, Consumer Expenditure Survey (2005); 2000
Census (SF1, SF3, and SF4 Files); U.S. Census Bureau & Bureau of Labor Statistics Current Population
Survey (Mid March 2007); U.S. Census Bureau, American Community Survey (1/1/2007); U.S. Census
Bureau, Population Division, Population Estimates Branch, 2007 Housing Unit Estimates (7/1/2007); U.S.
Postal Service Data: Mailable Households derived from a ZIP4 Carrier route File & Delivery Statistics
(1/1/2007). EASI's model uses Income Distribution, Age of Head of Household, Marital Status and Tenure
to information modeled against the latest Consumer Expenditures (CEX) study results. This study is based
upon the results of the latest Consumer Expenditure Survey done by the Bureau of Labor Statistics. It is
based upon results as of 1/1/2008. EASI models the national data from the CEX using a disaggregation
technique to estimate all other levels of geography (EASI estimates first Block Groups and then uses those
results to obtain other geography). Retrieved April 9, 2009 from Simply Map.




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Advertising Expenditure55, 56

Ad Expenditures: $3,320,000
Media Expenditures:
    Business Publications
    Co-op Advertising
    Daily Newspaper
    Exhibits/Trade Shows
    Outdoor (Posters, Transit)
    Point of Purchase
    Premiums, Novelties
    Product Samples
    Special Events Marketing
    Spot Radio
    Spot T.V.
    Weekly Newspaper

Competitors in the Area57




55
   Advertising Red Books. (2009). Tasty Baking Co. [company profile]. Retrieved April 22, 2009, from
http://www.redbooks.com.
56
   I spoke via e-mail with Jon Silvon, Tasty Baking Company’s Director of Marketing, on the subject of the
scope of their marketing campaigns. Mr. Silvon said that the bulk of their advertising was directed toward
billboards and radio spots, and they primarily advertise in Pennsylvania, Delaware and New Jersey.
57
   ReferenceUSA. (2009). Tasty Baking Co. profile. Retrieved April 21, 2009, from
http://www.referenceusa.com/.




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Marketing Articles58, 59




58
   Datamonitor. (2004, September). Tasty Baking Company: a sweet new product. MarketWatch: Global
Round-up 3(9): 61. Retrieved from Business Source Premier database.
59
   Touchdown Tastykake. (2003, November). Promo Magazine 16(12): 13. Retrieved from the Business
Source Premier database.




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                                             International

U.S. Total Exports60

       NAIC - 31181: BREAD AND BAKERY PRODUCTS

                          FAS Value by FAS Value
                            for ALL Countries

                               U.S. Total Exports

                                   Annual Data

                                                         Percent
                            2007          2008           Change
     Country                 In 1,000 Dollars           2007 - 2008
 Canada                   503,950 618,420                      22.70%
 Mexico                    64,301 80,116                       24.60%
 Japan                     37,035 45,083                       21.70%
 Korea                     12,669 17,780                       40.30%
 United                    13,729 14,875                        8.40%
 Kingdom
 Australia                    6,080        8,812                 44.90%
 Taiwan                       5,367        7,020                 30.80%
 Netherlands                  5,615        6,348                 13.00%
 Philippines                  5,056        6,210                 22.80%
 Bermuda                      5,463        6,145                 12.50%
 Saudi Arabia                 4,323        5,633                 30.30%
 United Arab                  2,940        5,042                 71.50%
 Em
 Bahamas                      3,968        4,961                 25.00%
 Singapore                    4,940        4,886                 -1.10%
 Trin & Tobago                3,619        4,806                 32.80%



60
     United States International Trade Commission. (2009). Trade data retrieved
      April 23, 2009, from http://dataweb.usitc.gov/.




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          Subtotal : 679,055 836,138                              23.10%
          All Other: 61,220 81,310                                32.80%
               Total 740,276 917,448                              23.90%

 Sources: Data on this site have been compiled from tariff and trade data
 from the U.S. Department of Commerce and the U.S. International Trade
 Commission.



Top Imports to Canada61




Canadian Statistics62




61
     United Nations Statistical Division. (2009). Data retrieved April 23, 2009, from Comtrade.
62
     German, R.& Taylor, E. (n.d.). Canada. Retrieved April 23, 2009, from
      http://www.europaworld.com/.




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Overview of the Canadian Economy63




63
  German, R.& Taylor, E. (n.d.). Canada – Overview of the Canadian Economy. Retrieved April 23, 2009,
from http://www.europaworld.com/.




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Trade Regulations and International Organizations64

The North American Free-Trade Agreement (NAFTA) of 1994 phased out general tariffs
and other restrictions on trade between Canada, the United States and Mexico. Canada
also has free-trade agreements with Israel, Chile and Costa Rica, and it is seeking to
widen free trade to other countries in South America.

NAFTA has not created a European Union-style common market. Checking of vehicles
and documents at border crossings is required, and delays have lengthened because of
security precautions to deal with terrorist threats to the US. A study released by the
Canadian Chamber of Commerce in January 2008 noted that delays at the Canada-US
border during 2007 were the longest since 2001, with the volume of commercial traffic
down by 4%. (Canadian, US and Mexican authorities are working to develop systems to
reduce border bottlenecks. Expanding capacity of the bridge and tunnel links between
Windsor, Ontario, and Detroit, Michigan, which is vital to car trade, is a priority for
Canada and the US.) Moreover, trade disputes frequently arise between Canada and the
US. The most disruptive trade disputes recently involved forest products and grains but
have now largely been resolved. The August 2006 Softwood Lumber Agreement imposes
export levies on shipments of lumber to the US that exceed certain levels in certain
conditions, replacing duties that the US had imposed on the industry since 2002.

Negotiations began in late 1994 to extend NAFTA to all Latin American countries
(except Cuba) under the Free-Trade Area of the Americas (FTAA) initiative. The original
January 2005 deadline for an agreement came and went, and other trade-related issues
have for now eclipsed the idea. The US is concerned about border and lorry traffic
arrangements with Mexico, as well as broader questions such as its trade dealings with
China. In addition, some South American countries are far from being able to agree on
inclusion and to implement the stringent economic requirements of a free-trade accord. In
particular, Brazil, the biggest potential participant, is concerned that many of its
industries are not productive enough to compete without tariff barriers.

Canada has attempted to rebuild relations with the US, which eroded during the previous
Liberal government, but irritants remain, such as in the softwoodlumber industry. The
London Court of International Arbitration, which makes binding decisions to settle
disagreements under the 2006 Softwood Lumber Agreement (SLA), in March 2008 ruled
largely in Canada’s favour in a complaint over whether Canada was quick enough to
adjust its calculations of US lumber demand, which had plunged in the wake of the US
housing meltdown. The court ruled that softwood producers in British Columbia and


64
     Economist Intelligence Unit. (2008). Country commerce: Canada. Retrieved April
      23, 2009, from EIU Country Commerce database.




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Alberta, which represent more than half of Canada’s softwood lumber exports, did not
violate the SLA, which would have forced them to incur some C$75m in retroactive
export tax charges. But the ruling found that eastern provinces had violated the agreement
by not adjusting and trimming exports in the first six months of 2007, which the SLA
required to compensate for lower-than expected US consumption of lumber. In July 2008
Canada argued in the latter case that the SLA is a ―prospective‖ remedy dispute-
settlement system, akin to the World Trade Organisation, and is not designed to direct
punishment for past actions once procedures are made to comply with the international
law. The lumber agreement states that in the case of a breach by one country, the other is
entitled to take actions to restrict lumber imports until the breach is cured, which Canada
argued it did as from July 1st 2007. The US in a May 29th 2008 submission argued that
Canada should have to levy an export charge on lumber exports as compensation. The
case will likely be settled in late 2008.

Canadian business interests have argued that US border restrictions are damaging trade.
The Canadian government has showed interest in developing hemisphere-wide relations
beyond its ties with the US. The 15-member Caribbean Community (Caricom) is to begin
negotiating a new trade and aid pact with Canada in 2008. The group has been under
pressure from Canada to discuss updates to the Caribbean-Canada agreement, which is
more than a decade old. Stephen Harper, the prime minister, has proposed an aid package
for the region worth US$600m over ten years. In a July 2007 visit to Latin American and
Caribbean countries, he said his government would be interested in developing a free-
trade agreement with Caricom. Canada has estimated investments of more than C$60bn
in Caricom nations, mostly by banks and insurance companies.

Canada’s membership in the World Trade Organisation has altered some of its incentives
and restrictions. As an important exporter, including of agricultural products, the country
has been an advocate of expanded multilateral free trade through the WTO’s Doha round.
But successive talks have achieved very little.

Canada has also participated in economic initiatives in the Pacific. It was a founding
member of the Asia-Pacific Economic Co-operation forum. Japan has long been an
important trade partner, and commerce with China has expanded rapidly in recent years.

In addition to its trade ties, Canada is an active participant in many international
organisations and agencies. It is a member of the United Nations (and its subsidiary
agencies), the International Monetary Fund, the World Bank, the Organisation for
Economic Co-operation and Development, and the North Atlantic Treaty Organisation.
Canada is also a member of the elite Group of Seven assembly of advanced economies.




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