Good morning and welcome to the Tasty Baking Company’s third quarter 2008 conference call. Today’s conference is being recorded. To listen to a replay of this conference please dial 888-203-1112 or 719-457-0820 and enter the pass code 8462623. You currently are in a listen-only mode. There will be question-and-answer session following the introductory comments by Tasty Baking’s management. At this time I would like to introduce your host for today’s conference Mr. Chad Ramsey, Vice President of Financial Planning and Investor Relations at Tasty Baking Company. Please go ahead sir.

Good morning everyone. Thank you for joining us for Tasty Baking Company’s conference call to discuss third quarter 2008 results. You should have received the copy of this morning’s release. However, if for some reason you have not received the copy, please call 215-221-8538 and request a copy which will be faxed to you immediately. Today’s call is also being broadcast over the internet at www.tastykake.com in the Investor Section under the Webcast and Presentation subheading. This conference call may contain statements that are forward-looking within the meaning of the applicable federal securities laws and are based on Tasty Baking Company’s current expectations and assumptions which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Factors that could cause actual results to differ from those anticipated are detailed in the company’s press release, annual report to shareholders and Securities and Exchange Commission filings. The company assumes no obligation to publicly update or revise any forward-looking statements. This discussion also includes certain non-GAAP measures as defined by SEC rules. We will provide a reconciliation of those measures to the most directly comparable measures. This is available in our press release which is on our website as well. With us today from Tasty Baking Company are Charles Pizzi, President and Chief Executive Officer; Paul Ridder, Senior Vice President and Chief Financial Officer and Autumn Bayles, Senior Vice President - Strategic Operations. Following introductory comments from management, we will open the call for your questions. Go ahead, Mr. Pizzi.

Thank you and good morning. We appreciate your continued interest in Tasty Baking Company. Today we will be discussing our third quarter results for 2008. As with past quarters, there are several important issues and development affecting Tasty that we will walk through, so that you can better understand the drivers of our year-over-year performance. In the third quarter of ‘08, the company reported a net loss of $0.17 per fully diluted share on an after tax basis. These results include approximately $0.10 per share of accelerated depreciation and $0.13 per share of estimated severance cost related to the company’s planned move to the fall of [inaudible] Total company gross sales increased to $69.1 million driven by a 1.6% increase in root gross sales when compared to the same period a year ago. Total net sales increased 0.7% compared to the prior year driven by a 1.3% growth in root net sales. Root gross and net sales benefited from continued strength in single served product sales combined with the impact of the increased selling pricing for both family pack and single serve products. Non-root net sales declined 1.2% year-over-year due to our planned product rationalization in the direct sales channel. During the third quarter of ’08 Tasty Baking Company continued to experience a sharp rise in commodity prices. For the quarter the company experience a $2.3 million increase in ingredient and packaging costs compared to the prior year, resulting primarily from higher oil, egg and grain prices. Our efforts to come back these increases are being executed through a multi-pronged strategy that focuses on mitigating risk, containing cost and improving operating efficiencies. In addition we are carefully managing the balance between product pricing and promotion. Our cost containment and efficiency improvement programs have continued to yield favorable results. During the…

Thank you, Charlie. With regards to pricing in August of 2008, we raised prices on Family Pack Cake products by 3%. When compared to the same period last year total Family Pack list prices are up about 7%. In addition, in the latter half of the third quarter, we made changes to our promotional strategy. These changes were made to create more balance between the depth and frequency of promotions and are allowing the company to more effectively deal with the impact of the current economic environment. While we will closely monitor the ongoing effects of these changes, based upon recent results, we believe that this was the appropriate decision for both the company and our customers. We also continued to see strong results from our Single Serve products. The other Single Serve products have been driven by continual improvement in merchandising, consumer promotions and product innovations as well by the price increases. In early September 2008, we had a fire in our Philadelphia bakery, which damaged certain of our bakery equipment. Due to the dedication of our talented bakery personnel, normal operations were restored by the end of the quarter and we recorded receivable under our insurance policies approximately equal to the loss. These costs associated with the fire as well as the benefit associated with the insurance recovery were recorded in cost of sales. In the third quarter of 2008, gross margin declined 3.1 percentage points to 25.6% of net sales when compared to the prior year. The biggest driver of the change in margin compared to the same period a year ago was a $2.3 million increase in ingredient and packaging costs, which accounted for 5.3 percentage points of the decline. With approximately 75% of the change attributable to higher oil, egg and grain costs. As we…

Now we’ll open up the call for questions.

(Operator Instructions) Your first question comes from Mitchell Pinheiro - Janney Montgomery Scott.

A couple of things I wanted to ask; Paul you talked about this the amended credit facility, but it went by fast. It was for what part of the facility, the minimum EBITDA requirements?

We amended our maximum operating leverage ratio, as of the end of the third quarter of ’08 and we amended the minimum EBITDA and the maximum operating leverage ratio as of the end of 2008.

Okay. So nothing was change for ’09 or beyond?

That’s correct, and the full tax will be filed with our Form 10-Q.

Okay and it amounted to a 50 basis point increase?

Yes, there was a 50 basis point increase at each of the credit levels we are factoring that to interest pricing.

And then a couple of things in the quarter; severance, it’s a non-cash expense at this point, correct?

Correct.

And where do I find that?

You will see that in other income and expense line items.

And where do I find the fire costs?

The fire cost as we said, those are the cost and the benefit of the insurance recovery, which approximately equal the cost, put it in the cost the sales, minimal net impact.

So, if by chance you did not get an insurance recovery you would have to reverse that at some point correct?

That’s correct, if we did not receive the insurance receivable.

And how much have you quantified that?

Its approximately $1.1 million, was the loss, but we’re expecting approximately $1 million.

The depreciation was up about $400,000 more than I was estimating, was that just something new out of that for the Hunting Park facility or how did that happen?

Combination of a number of things, combination of the investments that we’re making along the way combined with depreciation related to some of our order hand held for-sales distributors.

So, it’s mostly technology, is that what that is?

That’s correct

Okay. So, there’s no other hard asset, plan assets.

We are continually investing. As we said we’ve made significant investment in Oxford and others. So, we have normal change of the depreciation from the capital expenditure we made both last year and this year, but the majority of the increase was technology related to our hand helds. I should say our older hand held.

When I look at your sales mix Single Serve units, were they up in the quarter?

We typically do not go through for competitive reason that’s going on, particularly given some of the changes we made to our promotional strategy. We want to be careful from a competitive mix. We disclosed that we’ve seen strong roads in Single Serve sales, but haven’t given the breakout between the pricing and volume niche into that.

Okay. How about sales to Wal-Mart in that business? How is that held up in this environment?

We don’t talk about specific customers. I think that if you look you will see that there has be a movement and customers have been going to mass merchandisers. They’ve been new people and mass merchandisers are in that higher traffic. We have a variety of programs with our mass merchandisers that we don’t want to get into specifically and I think we did comment that overall sales on the non-business were down approximately 1.2 percentage points, so that is because of plan rationalization.

Okay, but I guess one thing I was interested in is you’ve been expanding the distribution Tastykake, the branded side through third party distributors and I wanted to understand whether they were declines on that end to the business or whether this production rationalization was on the other side, on the non branded piece of the business?

The product rationalization was on the non-branded side.

So, the third party distributor sales are moving forward in that piece of the business or has that?

As we said in other calls, we don’t want to hit into the door. We remain comfortable and very confident with the work that we’re doing and the growth that we’re seeing in our third party distributors and in our non-core market.

What about the product returns in the quarter?

With regard to product returns, as we had mentioned we saw a decline in our returns. Once we instituted around a strategy on products and promotion, our pricing and promotion in product, we were able to adjust the two-way decline in our product returns.

And we said that that change happened in the latter half of the third quarter. There you have a little bit of the mix bag in terms of the overall cost returns on a year-over-year basis.

I think the point is as we discussed upon our last call, this was an issue and we have managed that issue and brought it in with our result.

Volumes were down about 4% in the quarter and obviously there is an elasticity issue here that you’re managing with your price increases, but at what point did the volume declines cease? I mean are we approaching that or is it just one of the major unknowns in your business at this point?

I would also say and mention it goes back or one of the questions we had in prior quarters. We changed the promotional strategy in latter half of the third quarter. We are pleased with the results. If we look that yields and data, we can see that we were up versus the category in the most recent period that we saw, which will be post that promotional strategy change. So, we feel good about those changes and we monitor what you said in terms of the volumes and prices go [inaudible] very carefully.

Has the category held up, initial data?

Yes, it has.

So, we’re like what were flat maybe down a little bit?

Yes, right where you said. It is up a little bit.

Okay and you guys are outperforming a little bit?

In the last four weeks we were.

Last question; going to your new bakery, I guess you said at on time, within budget; just remind me when does the first line start to be installed?

We have planned as what we have announced in the past that it would take place during the third quarter or fourth quarter of ’09.

Okay and that’s still the plan?

We are on time and on budget according to our plan.

Okay. When do you anticipate moving Donuts out of Hunting Park to Oxford? Because that could happen I guess at almost any times, I would assume?

Yes, I mean right now, we don’t want to comment on that at the moment, but everything that we are stating in our plan, we are moving forward on, but we do not have a precise time that I’m going to talk about.

Okay, the only reason I mentioned this is because you would think that, it would add efficiencies to the Oxford facility and might have a benefit in ’09 for you as opposed to 2010.

Yes, I think you’re absolutely correct.

(Operator Instructions) Your next question comes from Scott Blumenthal - Emerald Advisers.

Charlie, I guess we’ve seen a lot the Eagle brand and packaging; you got any Phyllis brand and packaging?

We actually, we had a program for Phillies and what we’re doing is we do have certain promotional and sponsorship partnerships planned for ’09. So, we want to continue what we’ve started and we feel very good about our Eagles partnerships at this point and how it has affected our top line sales.

Paul, I think you mentioned that the equipment for the new plant has been ordered, have you made a down payment or is that partially paid for at this point?

Yes, we did comment that all the major equipment has been ordered and if you look at the capital expenditure numbers that we walk through, those were primarily for equipment and those would be for down payments or progress payments related to those pieces of equipment.

And how much is left?

We expect anything about $43 million related to the project in 2009 and 2010, which is the largest piece of it. We spent $22 million at this year on the projects and we said we expect to set $26 million for the total year on the project. So, we’ll have about $4 million in the fourth quarter and then $43 million through 2009 and 2010.

Can you talk about some of the things that you’ve been able to do to reduce manufacturing costs and the possibility or other arrows you might have in your quiver from this point on?

So, a couple of things that we have done is we have looked at our labor hours and our overtime and looked at areas where we can sort of trim those hours and we’ve also utilized some of our data from our technology platform to show us where maybe we have some efficiencies and waste and we’ve been able to sort of a address those areas, in all of those manufacturing facilities.

Okay. I mean what’s been different now as opposed to maybe a year or two ago; as to how you’ve approached that understanding for well that a couple of years ago you really didn’t have such good information?

Yes, and I think we put in place a coal project clarity, which really was based on becoming much more of a data driven process oriented, decision making process and all of them sort of really tied us to our resource planning efforts and then drove down that culture throughout our manufacturing and supply chain and Autumn, if you want to make a comment?

Scott, you can imagine with types of volumes that we run, there’s a lot of materials that run through the plan. So, really the people who are able to make the most difference, so there’s people actually working on the line and it’s just getting that information down to the right parties, making sure they understand it and then getting them to see how decisions they make everyday can really make an impact when it flows all the way up and gets summarize and that’s really where we’ve been able to make most of the difference.

The key has been the continual improvement that we have in our technology platform to get better and better information, to allow us to focus more and more, so you’re not looking at the whole facility, Autumn mentioned; we’re able to look at the exact places that are causing bad variances or causing loss as opposed to having to try and be safer for themselves.

And then besides that Scott, beyond then I should say we also have been focusing on SG&A and so what we wanted to do was start our efficiencies and not wait till we move into the new facilities. So, really every position that comes up is evaluated “Do we need that position filled or can the process be done in a different way” and that’s why we have really made a major hit on our SG&A expenses over the last couple of years in sort of very significant ways and percentages to our operating costs.

That’s really helpful. I guess Charlie, you have to evaluate things based upon the new footprint of the new facility rather than I guess your current paradigm?

Absolutely, I mean and the thing for us is to sort of move in that direction and we have been I guess since last year and every quarter we put additional more emphasis on this. Now as we said in our prepared statement, we don’t know if we can continue results quarter-after-quarter going forward, but we are. This is a major focus for our management team and Paul, did you want to add?

Yes I want to make sure we balance it; while we focus on cost containment and efficiency improvement, there is only two legs to the stool. We are still very focused on growing the top line, growing it both in our core markets and our non-core markets and balancing pricing and promotion to help with that, it really is a multi prong strategy, it’s not just any one piece by itself.

Okay great and Paul since I’ve got you here, can you talk about, if any tale end you might get from the fact that fuel costs have comedown considerably over the last quarter and I guess if some of your packaging costs that resin and you are operating a manufacturing facility so?

It’s a great question and I think it’s appropriately timed. There is a lot of confusion out in the marketplace. So, one thing that we try to put in our prepared remarks and I want to make sure its very clear, while have seen significant moderation in commodities costs like others in the industry, those cost levels are still well above the 2007 levels. So, they are going in the right direction which creates headwind, but we are still above the 2007 models. Obviously, anytime prices moderate. It helps and it creates some benefits for us, but we’ve got to balance through that. We look at opportunities created by volatility in the market, to take advantage of that by entering into contracts and the key for us as we’ve said both in this call and the past; it’s not always about obtaining the absolute lowest prices, its about appropriately balancing and managing risk and we make sure we take that into account as well.

How about the product rationalization that you mentioned? Are you planning on or do you have plans to actually eliminate some of the lesser performing products and then I guess if you flip the coin over we haven’t heard that much about new product development. Can you make a comment about that?

Sure Scott, it’s autumn again. We definitely look to have new and innovative products out in the marketplace as frequently as we can and where it make sense and we can make money. That the new facility gives us some flexibility where we can even expand on that, but even in our current environment, we’re looking to takeout under performing products with our skew rationalization procedures and then slide in limited edition better performing products and we’ve had a lot of success on the limited addition side, because we reduced any risk associated with extraneous inventory or ingredients if a product doesn’t perform well.

That’s actually one of the reasons why we’ve seeing such success as well on our Single Serve products; is because of a new product, limited edition varieties that we brought out.

Yes, just a lot more excitement.

And I guess my last question is Charlie, as you looked back in the history of Tasty Baking and I know that’s something that we all enjoy; can you talk a little bit about the company’s performance in past recessionary environments and I know that my family, we’ll tend to eat at home a little bit more when times are not as good, which means that we won’t probably consume more Tastykake’s then we do even now.

I think, what makes this a little bit different is I think first of all, this is a totally different environment than we’ve seen in the past because not only are we dealing with the recessionary economy and you’re right, more people are eating in home, more people are bringing their lunches to work, you’ll get higher unemployment. So, I think Tasty has sort of weathered the kind of storms, but what’s different here is we haven’t had the inflationary pressures on ingredients, which is a new sort of aspect to this sort of market conditions, but I think where we’re different and because we’re technology based company; from an operating standpoint we have the ability to adjust and be agile to the changes in the marketplace that we see, so that we can run efficiently. However, at the same time what we want to do is make sure we have the right strategy and then execute on that strategy to grow top line as well.

You think you can grow the top line through a bit of downturn.

I think there are opportunities for us within our strategy to continue to grow top line.

Okay, thank you.

Okay, thank you very much. I wish everybody a good Halloween. I’ll be given out Tastykake as I always do, so I hope you will too and for those of you here in Philadelphia, enjoy the parade. Thanks very much.

Ladies and gentlemen that does conclude today’s conference. We thank you for your participation and hope you have a great day. To listen to a replay of this conference, please dial 888-203-1112 or 719-457-0820 and enter the pass code 8462623.