PHILADELPHIA — Strong sales and volume growth combined with the onset of pie production at a new facility at the Philadelphia Navy Yard contributed to improved earnings at Tasty Baking Co.

Tasty Baking Co., in the third quarter ended Sept. 26, sustained a loss of $531,000, which compared with a loss of $1,352,000 in the third quarter last year.

The loss in the third quarter reflected a $400,000 reduction in accrued postemployment after-tax costs associated with the transition to the company’s new manufacturing facility at the Philadelphia Navy Yard. The most recent quarter, as well as the third quarter of fiscal 2008, also included after-tax accelerated depreciation of $800,000.

Adjusted EBITDA, meanwhile, fell 24% to $2,521,000 from $3,299,000.

Net sales were $43,584,000, up 2% from $42,805,000 in the comparable period in 2008. Route sales rose 3.1% after benefiting from increased sales volume, particularly for the company’s Family Pack products, and the net benefits of higher selling prices. Non-route sales decreased 2.2%. The decline was attributed to lower sales within the vending channel.

"During the third quarter of 2009 we continued to grow sales volumes, expanded our market share in our route market, and improved gross margin compared to the prior-year period," said Charles P. Pizzi, president and chief executive officer. "We were also pleased to see further improvement in key ingredients and packaging costs in the third quarter of 2009 versus the third quarter last year."

Tasty Baking said total cost of sales, excluding depreciation, rose 1.1%, or $300,000, on a unit volume increase of 2.3% in the third quarter of fiscal 2009. Also rising was selling, general and administrative expense, which climbed 4.3% versus the same quarter last year.

For the nine months ended Sept. 26, net income was $1,743,000, equal to 21c per share on the common stock, which compared with a loss of $2,236,000 in the same period a year earlier. Net sales were $136,704,000, up 5% from $130,219,000. Adjusted EBITDA in the most recent nine months was $13,385,000, up 49% from $8,975,000 in the first nine months of fiscal 2008.

In a separate announcement, Tasty Baking said it has launched the initial baking operations at its bakery within the Philadelphia Navy Yard. The first product to be transitioned into the facility is the company’s fruit and custard-filling pies.

"By commissioning our first product line in the new bakery, we take a significant step toward the completion of this transformative capital project and we reaffirm our commitment to providing Tastykake’s loyal customers with delicious, wholesome baked snacks ‘just like mother used to make,’" Mr. Pizzi said. "The decision to begin this transition with Tastykake’s beloved pie portfolio was purposeful in that the new packaging consumers will enjoy not only enhances freshness but more importantly, reflects the immense opportunities for innovation and efficiencies that we anticipate with the grand opening of the new Tastykake Bakery in 2010."

Mr. Pizzi said the new bakery will be making the company’s other products, including Krimpets, Kandy Kakes and Juniors, by the summer of 2010.