In today’s round-up of fiscal news, Daily Austerity Watch will examine developments in the U.K., and Spain. But first up, let’s talk about Tasty Kakes.
The snack treats are as much a part of Philadelphia as cheese steaks, the Liberty Bell and the Philadelphia Art Museums. Tasty Baking, the company’s parent, used to have a slogan “nobody bakes a cake as tasty as a Tasty Kake.” Well, the problem is that lots of people did.
Philadelphia — Net sales at the Philadelphia-based company have been lackluster for years. Last year, they were $59.5 million, little changed from $59.6 million in 2009 and down from $61.9 million in 2008. It lost about $45 million in the fiscal year ended December 25, 2010o. The net loss for fiscal 2009 was $3.4 million.
Tasty Baking’s roots in Philadelphia run deep. The company was founded in 1914 and its logo is ubiquitous in the City of Brotherly Love. CEO Charles Pizzi is the former head of the Greater Philadelphia Chamber of Commerce, which is why when the company threatened to move to the suburbs, local officials paid attention. They helped wrestle up some $31 million in taxpayer funds to help Tasty Baking move to a state of the art facilty at the former Philadelphia Navy Yard. It turned out to be a spectacularly bad idea.
“We had originally anticipated that we would achieve $13 to $15 million in annualized pre-tax cash savings, net of facility leases but before debt service, at our new bakery at the Philadelphia Navy Yard,” the company says in its latest SEC filing. “However, by the end of 2010, the Company had achieved annualized pre-tax cash savings of approximately $10 million. If this facility does not consistently achieve at least this level of annualized pre-tax cash savings, this could have a material adverse impact on our profitability and our ability to continue as a going concern.”
No kidding.
The Philadelphia Inquirer reports that Tasty Baking had until the end of June to find a new buyer or refinance its debt, which would have been unlikely. The paper notes that Tasty still owes about $25 million to Pennsylvania, including a $3 million emergency loan in January. The status of these loans under Tasty’s perspective owner, Flowers Foods Inc., is unclear.
U.K. — The government of Prime Minister David Cameron got some good news today from the better-than-expected inflation report, which may help avert an interest rate increase
from the Bank of England.
Inflation fell to 4.4 percent in March, the first decline since last summer, down from 4 percent in February, according to the Office for National Statistics. Many pundits, though, expect rates to hit 5% before the end of the summer. The figure topped expectations of economists polled by
Bloomberg News.“The Bank of England has kept its nerve and they deserve credit for that,” U.K. Business Secretary Vince Cable is quoted by Bloomberg as telling Sky News. “They’ve kept interest rates low and that’s what the economy needs.”
The U.K. has managed to convince investors that its problems are nowhere near as bad as the rest of Europe. Still, a 1.7% growth rate is nothing to brag about.
Spain — Things are so bad in Portugal that its closest neighbor Spain is working hard to convince investors that it is — relatively speaking — doing ok.
France’s Finance Minister made the point at the recent EU Finance Ministers meeting as did her German counterpart. As the Wall Street Journal notes, “In a closely watched auction on Thursday—the day after news broke that Portugal would seek a bailout package—the Spanish government successfully sold €4.13 billion ($5.97 billion) of three-year bonds, a reflection of market confidence.
Spain, though, remains a mess. Unemployment remains above 20%. GDP growth is forecasted at 1.3%, an improvement from a contraction last year.
–Jonathan Berr
In today’s round-up of fiscal news, Daily Austerity Watch will examine developments in the U.K., and Spain. But first up, let’s talk about Tasty Kakes.
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