content: SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON D.C. 20549
  
                                      FORM 10-Q
  
  (Mark One)
  
  (X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934
  
           For the thirty-nine weeks ended September 26, 1998
  
  ( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
       EXCHANGE ACT OF 1934
  
           For the transition period from __________ to __________
  
                            Commission File Number 1-5084
  
                                TASTY BAKING COMPANY
  
               (Exact name of registrant as specified in its charter)
  
           Pennsylvania                                 23-1145880
     (State of Incorporation)              (IRS Employer Identification Number)
  
  
             2801 Hunting Park Avenue, Philadelphia, Pennsylvania 19129
                 (Address of Principal Executive Offices) (Zip Code)
  
  
                                   (215) 221-8500
                (Registrant's Telephone Number, including area code)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports),  and  (2) has  been  subject  to such  filing
  requirements for the past 90 days.
  
                         Yes X                             No
  
                        APPLICABLE ONLY TO CORPORATE ISSUERS:
  
  Indicate the number of shares  outstanding  of each of the  issuer's  classes of
  common stock, as of the latest practicable date.
  
        Common Stock, par value $.50                        7,822,721
            (Title of Class)                        (No. of Shares Outstanding
                                                      at November 6, 1998)
  
                    INDEX OF EXHIBITS IS LOCATED ON PAGE 9 OF 10.
  
  
  <PAGE>
                        TASTY BAKING COMPANY AND SUBSIDIARIES
  
  
                                        INDEX
  
  
                                                                            Page
  
  
  PART I.       FINANCIAL INFORMATION
  
  Item 1.       Financial Statements
  
                Consolidated Condensed Balance Sheets
                September 26, 1998 and December 27, 1997......................3
  
                Consolidated Statements of Operations
                Thirteen weeks and Thirty-nine weeks
                ended September 26, 1998 and September 27, 1997 ..............4
  
                Consolidated Condensed Statements of Cash Flows
                Thirty-nine Weeks Ended September 26, 1998
                and September 27, 1997........................................5
  
                Notes to Consolidated Condensed Financial Statements..........6
  
  Item 2.       Management's Discussion and Analysis of Financial
                Condition and Results of Operations.........................7-8
  
  
  PART II.      OTHER INFORMATION
  
  Item 4.       Submission of Matters to a Vote of Security Holders...........9
  
  Item 6.       Exhibits and Reports on Form 8-K..............................9
  
  Signature..................................................................10
  
                                      2 of 10
  <PAGE>
   PART I. FINANCIAL INFORMATION
   Item 1. Financial Statements
  
                        TASTY BAKING COMPANY AND SUBSIDIARIES
                        CONSOLIDATED CONDENSED BALANCE SHEETS
                                     (unaudited)
  <TABLE>
  <CAPTION>
  <S>                                                                                       <C>                             <C>      
                                                                                     September 26, 1998              December 27, 1997
   Current assets:
         Cash                                                                               $ 129,675                       $ 748,117
         Accounts and notes receivable, net of
           allowance for doubtful accounts                                                 22,582,705                      18,661,411
         Inventories:
              Raw materials                                                                 1,972,895                       1,940,423
              Work in progress                                                                793,788                         580,362
              Finished goods                                                                1,066,432                         775,417
                                                                                        -------------                    ------------
                                                                                            3,833,115                       3,296,202
         Deferred income taxes, prepayments and other                                       2,846,698                       2,241,587
                                                                                        -------------                    ------------
              Total current assets                                                         29,392,193                      24,947,317
                                                                                        -------------                    ------------
   Property, plant and equipment:                                                         157,015,673                     149,709,346
         Less accumulated depreciation                                                    109,549,671                     105,501,230
                                                                                        -------------                    ------------
                                                                                           47,466,002                      44,208,116
                                                                                        -------------                    ------------
   Long-term receivables                                                                   11,028,255                      11,233,128
                                                                                        -------------                    ------------
   Deferred income taxes                                                                   11,059,696                      11,059,696
                                                                                        -------------                    ------------
   Spare parts inventory and miscellaneous assets                                           3,223,937                       2,871,121
                                                                                        -------------                    ------------
   Total assets                                                                         $ 102,170,083                    $ 94,319,378
                                                                                        =============                    ============
   Current liabilities:
         Current portion of long-term debt                                                   $ 29,354                        $ 29,354
         Current obligations under capital leases                                             380,396                         543,962
         Notes payable, banks                                                               2,000,000                         900,000
         Accounts payable                                                                   4,891,140                       4,345,944
         Accrued liabilities                                                                7,900,092                       8,644,300
                                                                                        -------------                    ------------
            Total current liabilities                                                      15,200,982                      14,463,560
                                                                                        -------------                    ------------
   Long-term debt, less current portion                                                    12,251,259                       7,773,053
                                                                                        -------------                    ------------
   Long-term obligations under capital leases,
         less current portion                                                                 341,376                         587,156
                                                                                        -------------                    ------------
   Accrued pensions and other liabilities                                                  12,673,041                      11,771,540
                                                                                        -------------                    ------------
   Postretirement benefits other than pensions                                             18,734,328                      18,129,226
                                                                                        -------------                    ------------
   Shareholders' equity:
         Common stock                                                                       4,558,243                       4,558,243
         Capital in excess of par value of stock                                           29,414,797                      29,337,938
         Retained earnings                                                                 25,965,554                      24,788,276
                                                                                        -------------                    ------------
                                                                                           59,938,594                      58,684,457
         Less:
         Treasury stock, at cost                                                           16,501,533                      16,738,364
         Management Stock Purchase Plan
              receivables and deferrals                                                       467,964                         351,250
                                                                                        -------------                    ------------
                                                                                           42,969,097                      41,594,843
                                                                                        -------------                    ------------
   Total liabilities and shareholders' equity                                           $ 102,170,083                    $ 94,319,378
                                                                                        =============                    ============
  </TABLE>
  
       See accompanying notes to consolidated condensed financial statements.
  
                                      3 of 10
  <PAGE>
                        TASTY BAKING COMPANY AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                     (unaudited)
  
  <TABLE>
  <CAPTION>
                                              For the Thirteen Weeks Ended      For the Thirty-nine Weeks Ended
                                         Sept. 26, 1998     Sept. 27, 1997     Sept. 26, 1998     Sept. 27, 1997
  <S>                                    <C>                <C>                <C>                <C>          
  Gross Sales                            $  57,265,322      $  53,651,996      $ 171,359,482      $ 166,937,578
  Less discounts and allowances            (20,441,486)       (17,607,128)       (57,850,544)       (54,463,859)
                                         -------------      -------------      -------------      -------------
  Net Sales                                 36,823,836         36,044,868        113,508,938        112,473,719
                                         -------------      -------------      -------------      -------------
  Costs and expenses:
       Cost of sales                        22,790,068         22,478,742         70,922,137         69,261,592
  
       Depreciation                          1,656,291          1,847,134          4,996,685          5,402,627
  
       Selling, general and
          administrative                    10,520,967         10,077,778         32,162,982         30,637,033
  
       Interest expense                        183,326            131,732            502,877            417,367
  
       Other income, net                      (339,873)          (413,500)        (1,048,593)        (1,225,214)
                                         -------------      -------------      -------------      -------------
                                            34,810,779         34,121,886        107,536,088        104,493,405
                                         -------------      -------------      -------------      -------------
  
  Income before provision for
       income taxes                          2,013,057          1,922,982          5,972,850          7,980,314
  
  Provision for income taxes                   680,540            726,455          1,985,540          3,063,360
                                         -------------      -------------      -------------      -------------
  Net income                             $   1,332,517      $   1,196,527      $   3,987,310      $   4,916,954
                                         -------------      -------------      -------------      -------------
  
  
  Average common shares outstanding:
  
            Basic                            7,812,542          7,784,274          7,803,583          7,762,942
  
            Diluted                          7,925,851          7,902,045          7,958,800          7,851,549
  
  Per share of common stock:
  
       Net income:  Basic                $        0.17      $        0.15      $        0.51      $        0.63
                                         =============      =============      =============      =============
                    Diluted              $        0.17      $        0.15      $        0.50      $        0.63
                                         =============      =============      =============      =============
       Cash dividend                     $        0.12      $       0.112      $        0.36      $       0.336
                                         =============      =============      =============      =============
  </TABLE>
  
  
       See accompanying notes to consolidated condensed financial statements.
  
                                      4 of 10
  <PAGE>
                        TASTY BAKING COMPANY AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                     (unaudited)
  <TABLE>
  <CAPTION>
                                                        For the Thirty-nine Weeks Ended
                                                    September 26, 1998   September 27, 1997
  <S>                                                     <C>              <C>        
  Cash flows from (used for) operating activities
       Net income                                         $ 3,987,310      $ 4,916,954
       Adjustments to reconcile net income to net
        cash provided by operating activities:
           Depreciation                                     4,996,685        5,402,627
           Amortization                                       133,503          107,100
           Other                                            1,535,511        2,080,853
       Changes in assets and liabilities
        affecting operations                               (5,262,330)      (4,425,824)
                                                          -----------      -----------
  
       Net cash from operating activities                   5,390,679        8,081,710
                                                          -----------      -----------
  
  Cash flows from (used for) investing activities
       Purchase of property, plant and equipment           (8,700,286)      (7,769,331)
       Proceeds from owner/operators' loan repayments       2,431,492        2,526,332
       Loans to owner/operators                            (2,223,593)      (3,728,396)
       Other                                                    2,288           46,536
                                                          -----------      -----------
  
       Net cash used for investing activities              (8,490,099)      (8,924,859)
                                                          -----------      -----------
  
  Cash flows from (used for) financing activities
       Additional long-term debt                            5,500,000        2,000,000
       Proceeds from sale of common stock                     122,150          181,181
       Dividends paid                                      (2,810,032)      (2,609,015)
       Payment of long-term debt                           (1,431,140)      (1,490,933)
       Net increase in short-term debt                      1,100,000        2,750,000
                                                          -----------      -----------
  
       Net cash from financing activities                   2,480,978          831,233
                                                          -----------      -----------
  
       Net decrease in cash                                  (618,442)         (11,916)
  
       Cash, beginning of year                                748,117          233,366
                                                          -----------      -----------
  
       Cash, end of period                                $   129,675      $   221,450
                                                          ===========      ===========
  
       Supplemental Cash Flow Information:
       Cash paid during the period for:
           Interest                                       $   565,237      $   348,833
                                                          ===========      ===========
           Income taxes                                   $ 1,512,267      $ 4,727,240
                                                          ===========      ===========
  </TABLE>
  
       See accompanying notes to consolidated condensed financial statements.
  
                                      5 of 10
  <PAGE>
                        TASTY BAKING COMPANY AND SUBSIDIARIES
                NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
  
  1.     Interim Financial Information
         In the opinion of management,  the  accompanying  unaudited  consolidated
         condensed  financial  statements  contain all adjustments  (consisting of
         only normal recurring accruals) necessary to present fairly the financial
         position of the company as of  September  26, 1998 and  December 27, 1997
         and the results of its operations for the thirteen and thirty-nine  weeks
         ended  September  26, 1998 and  September 27, 1997 and cash flows for the
         thirty-nine  weeks ended September 26, 1998 and September 27, 1997. These
         unaudited  consolidated  condensed financial statements should be read in
         conjunction  with the  consolidated  financial  statements  and footnotes
         thereto in the company's 1997 Annual Report to Shareholders. In addition,
         the results of operations for the  thirty-nine  weeks ended September 26,
         1998 are not necessarily indicative of the results to be expected for the
         full year.
  
         Certain  expense items are charged to  operations  in the year  incurred.
         However,  for interim  reporting  purposes  the  expenses  are charged to
         operations on a pro-rata basis over the company's accounting periods. For
         the  thirty-nine  weeks ended  September 26, 1998 and September 27, 1997,
         the  difference  between the actual  expenses  incurred  and the expenses
         charged to operations was not significant.
  
  2.     Net Income Per Common Share
         Net income per common share is  calculated  according to the Statement of
         Financial  Accounting  Standards  No. 128 -  "Earnings  Per Share"  which
         requires  companies to present basic and diluted  earnings per share. Net
         income per common share - Basic is based on the weighted  average  number
         of common shares outstanding during the year. Net income per common share
         - Diluted is based on the weighted  average  number of common  shares and
         dilutive  potential  common  shares  outstanding  during  the  year.  The
         company's  dilutive  potential common shares  outstanding during the year
         result entirely from dilutive stock options.
  
                                      6 of 10
  <PAGE>
                        TASTY BAKING COMPANY AND SUBSIDIARIES
  
  Item 2.       Management's Discussion and Analysis of Financial Condition
                and Results of Operations
  
  Results of Operations
  
  For the third  quarter of 1998,  the company  realized net income of  $1,332,517
  versus  $1,196,527 for the third quarter of 1997. Net income per share increased
  to $.17 from $.15 per share for the  comparable  quarter of 1997.  These results
  represent increases of 11.4% and 13.3%, respectively.
  
  For the  thirty-nine  weeks ended  September 26, 1998, the company  realized net
  income of $3,987,310 versus $4,916,954 for the thirty-nine weeks ended September
  27,  1997.  Net income per share  decreased  to $.50 from $.63 per share for the
  comparable period in 1997.
  
  For the third quarter,  gross sales increased 6.7% to  $57,265,322,  compared to
  $53,651,996 last year. Gross sales, less discounts and allowances  resulted in a
  net sales increase of 2.2% to $36,823,836  compared to $36,044,868 reported last
  year.  The  increase in gross sales  resulted  from an increase in volume due to
  geographic  expansion  through new distribution  agreements in addition to price
  increases  instituted  during the third  quarter.  The  difference  between  the
  increases of 6.7% in gross sales and 2.2% in net sales resulted primarily from a
  substantial  increase  in  promotional  activity  during the  quarter to support
  market development efforts as well as the August price increase.
  
  Cost of sales, as a percentage of gross sales, was 39.8% and 41.9% for the third
  quarters of 1998 and 1997,  respectively.  This decrease in the current  quarter
  was due to the  effect of the  August  price  increase  as well as  efficiencies
  generated from the increase in sales volume.
  
  Selling,  general  and  administrative  expenses  for the third  quarter of 1998
  increased by $443,189 or 4.4% over the comparable  period in 1997. This increase
  resulted  primarily  from an increase in selling  expenses  associated  with the
  expansion into new geographic regions.  Administrative costs also increased as a
  result  of   payroll   taxes   generated   from  the  IRS   ruling   classifying
  owner/operators   as  statutory   employees  and  costs   associated   with  the
  installation of a new computer system.
  
  Interest  expense  increased  for the third  quarter  of 1998  versus  the third
  quarter of 1997 as a result of increased average borrowing levels.  The decrease
  in other income,  net for the third quarter of 1998 was the result of a decrease
  in rental income.
  
  The effective  tax rate was 33.8% for the quarter  ended  September 26, 1998 and
  37.8% for the  quarter  ended  September  27,  1997 which  compares to a federal
  statutory  rate of 34%.  The  difference  between  the  effective  rate  and the
  statutory  rate in the  third  quarter  of 1998 is the  result  of tax  benefits
  arising from passive income and state tax credits.  The principal reason for the
  difference  between  the  effective  rate and the  statutory  rate in the  third
  quarter of 1997 was the effect of state income taxes.
  
  Year 2000 Issue
  
  The company has been engaged in an ongoing  process to determine the effect that
  the change to the year 2000 (Y2K) will have on operations.
  
                                      7 of 10
  <PAGE>
  The company has completed an  assessment  of its internal  hardware and software
  information  technology  systems and has determined that the systems will be Y2K
  compliant.  During 1998,  all new, Y2K compliant,  hardware was  installed.  New
  business system software is currently being  installed,  the  implementation  of
  which will be completed during the second quarter of 1999. The software supplier
  has warranted that this system is Y2K compliant, which will be verified when the
  system is in place.  The decisions to replace these systems were primarily based
  on the ongoing and expected  future  company and industry  requirements  and the
  inability of the current  applications to meet these  expectations.  The company
  has not accelerated the plans to replace these systems because of the Y2K issue.
  The company  utilizes  an  automated  hand-held  sales  order  system  which is,
  however,  not currently Y2K  compliant.  The vendor offers a "patch" to fix this
  Y2K  problem,  the cost of which  is  immaterial  and  would  be  expensed  when
  incurred.  Alternatively,  the company may decide to  accelerate  the upgrade of
  this system,  given its age and limited capacity,  which will also solve the Y2K
  problem.  If this system were to be upgraded,  the company  estimates  the total
  cost to be $3.7 million which would be capitalized in 1999.
  
  A committee  has been formed that  completed an  inventory of all  manufacturing
  systems to determine Y2K compliance. The cost to update certain systems in order
  to avoid any Y2K complications is immaterial and updates have been scheduled for
  1999.
  
  During the fourth  quarter of 1998,  a  questionnaire  will be sent to all major
  vendors and customers,  that have not already been confirmed, to determine their
  level  of Y2K  compliance.  The  company  plans to have an  evaluation  of major
  vendors  and  customers  by the end of the year.  Some  uncertainties  may exist
  regarding  the  responses  from these  vendors and  customers and there may be a
  certain amount of risk associated with these  uncertainties.  In any event,  the
  company will make alternative plans as necessary.
  
  To date,  the company has not  incurred  any  significant  costs  related to the
  assessment of, and preliminary efforts in connection with, its Y2K issues. Based
  on the  evaluations to date,  the company does not  anticipate  any  significant
  complications   related  to  Y2K  or  any  significant   costs  to  avoid  those
  complications.  The company also feels that all Y2K problems  will be identified
  and resolved in a timely manner.
  
  Financial Condition
  
  The company has consistently  demonstrated the ability to generate positive cash
  flow  from  operations.   Bank   borrowings,   under  various  lines  of  credit
  arrangements, are used to supplement cash flow from operations during periods of
  cyclical shortages.
  
  For the  thirty-nine  weeks ended  September 26, 1998,  net cash from  operating
  activities  decreased by $2,691,031 to $5,390,679  from  $8,081,710 for the same
  period  in  1997.  The  decrease  in net  cash  from  operating  activities  was
  principally  due to a decrease in net income and the payment  made to the IRS as
  settlement  of  the  dispute   concerning  payroll  taxes  for  the  independent
  owner/operators, which was accrued in 1997.
  
  Net cash used for investing activities for the thirty-nine weeks ended September
  26, 1998 decreased by $434,760  relative to the same period in 1997  principally
  due to a decrease  in the funds  needed to finance the net  owner/operator  loan
  activity.  This decrease was partially  offset by an increase in expenditures on
  equipment to upgrade the computer system and production facilities.
  
  Net cash from financing activities for the thirty-nine weeks ended September 26,
  1998 increased by $1,649,745 relative to the same thirty-nine weeks in 1997. The
  increase is primarily the result of a net increase in long-term  debt  partially
  offset by a decrease in short-term debt relative to the prior year.
  
  For  the  remainder  of  1998  the  company  anticipates  that  cash  flow  from
  operations,  along with the continued  availability of bank lines of credit, the
  revolving  credit  agreement  and  other  long-term   financing,   will  provide
  sufficient cash to meet operating and financing requirements.
  
                                      8 of 10
  <PAGE>
                        TASTY BAKING COMPANY AND SUBSIDIARIES
  
  PART II.      OTHER INFORMATION
  
  Item 4. Submission of Matters to a Vote of Security Holders
  
       No matters were  submitted to a vote of security  holders  during the third
  quarter of the fiscal year covered by this report.
  
  Item 5. Other Information
  
       Shareholders  of the company are  entitled to submit  proposals  on matters
  appropriate for shareholder action consistent with regulations of the Securities
  and Exchange  Commission  (SEC) and the company's  bylaws.  Should a shareholder
  wish to have a proposal  considered for inclusion in the proxy statement for the
  company's 1999 annual meeting,  under Rule 14a-8 of the Securities  Exchange Act
  of 1934,  as amended (the Exchange  Act),  such proposal must be received by the
  company on or before December 1, 1998.
  
       In  connection  with the  company's  1999 annual  meeting  and  pursuant to
  recently amended Rule 14a-4 under the Exchange Act, if the shareholder's  notice
  is not  received  by the  company on or before  February  9, 1999,  the  company
  (through management proxy holders) may exercise  discretionary  voting authority
  when the proposal is raised at the annual  meeting  without any reference to the
  matter in the proxy statement.
  
       The above  summary,  which sets forth only the procedures by which business
  may be properly  brought before and voted upon at the company's  annual meeting,
  is qualified in its entirety by reference to the company's bylaws.
  
       All shareholder proposals and notices should be directed to the Secretary
  of the company at 2801 Hunting Park Avenue, Philadelphia, Pennsylvania, 19129.
  
  Item 6. Exhibits and Reports on Form 8-K
  
       (a)      Exhibits:  Exhibit 27 - Financial Data Schedule
  
       (b)      Reports on Form 8-K
  
       The registrant did not file a report on Form 8-K during the thirty-nine
  weeks ended September 26, 1998.
  
                                    Exhibit Index
  
                        Exhibit 27 - Financial Data Schedule
  
  
                                      9 of 10
  <PAGE>
  
                        TASTY BAKING COMPANY AND SUBSIDIARIES
  
                                      SIGNATURE
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
  
  
                                               TASTY BAKING COMPANY
                                                   (Registrant)
  
  
        November 9, 1998                        /S/ John M. Pettine
           (Date)                                  JOHN M. PETTINE
                                                  VICE PRESIDENT AND
                                               CHIEF FINANCIAL OFFICER
                                     (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
  
  
  
                                      10 of 10
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text: SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON D.C. 20549
  
                                      FORM 10-Q
  
  (Mark One)
  
  (X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934
  
           For the thirty-nine weeks ended September 26, 1998
  
  ( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
       EXCHANGE ACT OF 1934
  
           For the transition period from __________ to __________
  
                            Commission File Number 1-5084
  
                                TASTY BAKING COMPANY
  
               (Exact name of registrant as specified in its charter)
  
           Pennsylvania                                 23-1145880
     (State of Incorporation)              (IRS Employer Identification Number)
  
             2801 Hunting Park Avenue, Philadelphia, Pennsylvania 19129
                 (Address of Principal Executive Offices) (Zip Code)
  
                                   (215) 221-8500
                (Registrant's Telephone Number, including area code)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports),  and  (2) has  been  subject  to such  filing
  requirements for the past 90 days.
  
                         Yes X                             No
  
                        APPLICABLE ONLY TO CORPORATE ISSUERS:
  
  Indicate the number of shares  outstanding  of each of the  issuer's  classes of
  common stock, as of the latest practicable date.
  
        Common Stock, par value $.50                        7,822,721
            (Title of Class)                        (No. of Shares Outstanding
                                                      at November 6, 1998)
  
                    INDEX OF EXHIBITS IS LOCATED ON PAGE 9 OF 10.
  TASTY BAKING COMPANY AND SUBSIDIARIES
  
                                        INDEX
  
                                                                            Page
  
  PART I.       FINANCIAL INFORMATION
  
  Item 1.       Financial Statements
  
                Consolidated Condensed Balance Sheets
                September 26, 1998 and December 27, 1997......................3
  
                Consolidated Statements of Operations
                Thirteen weeks and Thirty-nine weeks
                ended September 26, 1998 and September 27, 1997 ..............4
  
                Consolidated Condensed Statements of Cash Flows
                Thirty-nine Weeks Ended September 26, 1998
                and September 27, 1997........................................5
  
                Notes to Consolidated Condensed Financial Statements..........6
  
  Item 2.       Management's Discussion and Analysis of Financial
                Condition and Results of Operations.........................7-8
  
  PART II.      OTHER INFORMATION
  
  Item 4.       Submission of Matters to a Vote of Security Holders...........9
  
  Item 6.       Exhibits and Reports on Form 8-K..............................9
  
  Signature..................................................................10
  
                                      2 of 10
  PART I. FINANCIAL INFORMATION
   Item 1. Financial Statements
  
                        TASTY BAKING COMPANY AND SUBSIDIARIES
                        CONSOLIDATED CONDENSED BALANCE SHEETS
                                     (unaudited)
  September 26, 1998              December 27, 1997
   Current assets:
         Cash                                                                               $ 129,675                       $ 748,117
         Accounts and notes receivable, net of
           allowance for doubtful accounts                                                 22,582,705                      18,661,411
         Inventories:
              Raw materials                                                                 1,972,895                       1,940,423
              Work in progress                                                                793,788                         580,362
              Finished goods                                                                1,066,432                         775,417
                                                                                        -------------                    ------------
                                                                                            3,833,115                       3,296,202
         Deferred income taxes, prepayments and other                                       2,846,698                       2,241,587
                                                                                        -------------                    ------------
              Total current assets                                                         29,392,193                      24,947,317
                                                                                        -------------                    ------------
   Property, plant and equipment:                                                         157,015,673                     149,709,346
         Less accumulated depreciation                                                    109,549,671                     105,501,230
                                                                                        -------------                    ------------
                                                                                           47,466,002                      44,208,116
                                                                                        -------------                    ------------
   Long-term receivables                                                                   11,028,255                      11,233,128
                                                                                        -------------                    ------------
   Deferred income taxes                                                                   11,059,696                      11,059,696
                                                                                        -------------                    ------------
   Spare parts inventory and miscellaneous assets                                           3,223,937                       2,871,121
                                                                                        -------------                    ------------
   Total assets                                                                         $ 102,170,083                    $ 94,319,378
                                                                                        =============                    ============
   Current liabilities:
         Current portion of long-term debt                                                   $ 29,354                        $ 29,354
         Current obligations under capital leases                                             380,396                         543,962
         Notes payable, banks                                                               2,000,000                         900,000
         Accounts payable                                                                   4,891,140                       4,345,944
         Accrued liabilities                                                                7,900,092                       8,644,300
                                                                                        -------------                    ------------
            Total current liabilities                                                      15,200,982                      14,463,560
                                                                                        -------------                    ------------
   Long-term debt, less current portion                                                    12,251,259                       7,773,053
                                                                                        -------------                    ------------
   Long-term obligations under capital leases,
         less current portion                                                                 341,376                         587,156
                                                                                        -------------                    ------------
   Accrued pensions and other liabilities                                                  12,673,041                      11,771,540
                                                                                        -------------                    ------------
   Postretirement benefits other than pensions                                             18,734,328                      18,129,226
                                                                                        -------------                    ------------
   Shareholders' equity:
         Common stock                                                                       4,558,243                       4,558,243
         Capital in excess of par value of stock                                           29,414,797                      29,337,938
         Retained earnings                                                                 25,965,554                      24,788,276
                                                                                        -------------                    ------------
                                                                                           59,938,594                      58,684,457
         Less:
         Treasury stock, at cost                                                           16,501,533                      16,738,364
         Management Stock Purchase Plan
              receivables and deferrals                                                       467,964                         351,250
                                                                                        -------------                    ------------
                                                                                           42,969,097                      41,594,843
                                                                                        -------------                    ------------
   Total liabilities and shareholders' equity                                           $ 102,170,083                    $ 94,319,378
                                                                                        =============                    ============
  See accompanying notes to consolidated condensed financial statements.
  
                                      3 of 10
  TASTY BAKING COMPANY AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                     (unaudited)
  For the Thirteen Weeks Ended      For the Thirty-nine Weeks Ended
                                         Sept. 26, 1998     Sept. 27, 1997     Sept. 26, 1998     Sept. 27, 1997
  Gross Sales                            $  57,265,322      $  53,651,996      $ 171,359,482      $ 166,937,578
  Less discounts and allowances            (20,441,486)       (17,607,128)       (57,850,544)       (54,463,859)
                                         -------------      -------------      -------------      -------------
  Net Sales                                 36,823,836         36,044,868        113,508,938        112,473,719
                                         -------------      -------------      -------------      -------------
  Costs and expenses:
       Cost of sales                        22,790,068         22,478,742         70,922,137         69,261,592
  
       Depreciation                          1,656,291          1,847,134          4,996,685          5,402,627
  
       Selling, general and
          administrative                    10,520,967         10,077,778         32,162,982         30,637,033
  
       Interest expense                        183,326            131,732            502,877            417,367
  
       Other income, net                      (339,873)          (413,500)        (1,048,593)        (1,225,214)
                                         -------------      -------------      -------------      -------------
                                            34,810,779         34,121,886        107,536,088        104,493,405
                                         -------------      -------------      -------------      -------------
  
  Income before provision for
       income taxes                          2,013,057          1,922,982          5,972,850          7,980,314
  
  Provision for income taxes                   680,540            726,455          1,985,540          3,063,360
                                         -------------      -------------      -------------      -------------
  Net income                             $   1,332,517      $   1,196,527      $   3,987,310      $   4,916,954
                                         -------------      -------------      -------------      -------------
  
  Average common shares outstanding:
  
            Basic                            7,812,542          7,784,274          7,803,583          7,762,942
  
            Diluted                          7,925,851          7,902,045          7,958,800          7,851,549
  
  Per share of common stock:
  
       Net income:  Basic                $        0.17      $        0.15      $        0.51      $        0.63
                                         =============      =============      =============      =============
                    Diluted              $        0.17      $        0.15      $        0.50      $        0.63
                                         =============      =============      =============      =============
       Cash dividend                     $        0.12      $       0.112      $        0.36      $       0.336
                                         =============      =============      =============      =============
  See accompanying notes to consolidated condensed financial statements.
  
                                      4 of 10
  TASTY BAKING COMPANY AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                     (unaudited)
  For the Thirty-nine Weeks Ended
                                                    September 26, 1998   September 27, 1997
  Cash flows from (used for) operating activities
       Net income                                         $ 3,987,310      $ 4,916,954
       Adjustments to reconcile net income to net
        cash provided by operating activities:
           Depreciation                                     4,996,685        5,402,627
           Amortization                                       133,503          107,100
           Other                                            1,535,511        2,080,853
       Changes in assets and liabilities
        affecting operations                               (5,262,330)      (4,425,824)
                                                          -----------      -----------
  
       Net cash from operating activities                   5,390,679        8,081,710
                                                          -----------      -----------
  
  Cash flows from (used for) investing activities
       Purchase of property, plant and equipment           (8,700,286)      (7,769,331)
       Proceeds from owner/operators' loan repayments       2,431,492        2,526,332
       Loans to owner/operators                            (2,223,593)      (3,728,396)
       Other                                                    2,288           46,536
                                                          -----------      -----------
  
       Net cash used for investing activities              (8,490,099)      (8,924,859)
                                                          -----------      -----------
  
  Cash flows from (used for) financing activities
       Additional long-term debt                            5,500,000        2,000,000
       Proceeds from sale of common stock                     122,150          181,181
       Dividends paid                                      (2,810,032)      (2,609,015)
       Payment of long-term debt                           (1,431,140)      (1,490,933)
       Net increase in short-term debt                      1,100,000        2,750,000
                                                          -----------      -----------
  
       Net cash from financing activities                   2,480,978          831,233
                                                          -----------      -----------
  
       Net decrease in cash                                  (618,442)         (11,916)
  
       Cash, beginning of year                                748,117          233,366
                                                          -----------      -----------
  
       Cash, end of period                                $   129,675      $   221,450
                                                          ===========      ===========
  
       Supplemental Cash Flow Information:
       Cash paid during the period for:
           Interest                                       $   565,237      $   348,833
                                                          ===========      ===========
           Income taxes                                   $ 1,512,267      $ 4,727,240
                                                          ===========      ===========
  See accompanying notes to consolidated condensed financial statements.
  
                                      5 of 10
  TASTY BAKING COMPANY AND SUBSIDIARIES
                NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
  
  1.     Interim Financial Information
         In the opinion of management,  the  accompanying  unaudited  consolidated
         condensed  financial  statements  contain all adjustments  (consisting of
         only normal recurring accruals) necessary to present fairly the financial
         position of the company as of  September  26, 1998 and  December 27, 1997
         and the results of its operations for the thirteen and thirty-nine  weeks
         ended  September  26, 1998 and  September 27, 1997 and cash flows for the
         thirty-nine  weeks ended September 26, 1998 and September 27, 1997. These
         unaudited  consolidated  condensed financial statements should be read in
         conjunction  with the  consolidated  financial  statements  and footnotes
         thereto in the company's 1997 Annual Report to Shareholders. In addition,
         the results of operations for the  thirty-nine  weeks ended September 26,
         1998 are not necessarily indicative of the results to be expected for the
         full year.
  
         Certain  expense items are charged to  operations  in the year  incurred.
         However,  for interim  reporting  purposes  the  expenses  are charged to
         operations on a pro-rata basis over the company's accounting periods. For
         the  thirty-nine  weeks ended  September 26, 1998 and September 27, 1997,
         the  difference  between the actual  expenses  incurred  and the expenses
         charged to operations was not significant.
  
  2.     Net Income Per Common Share
         Net income per common share is  calculated  according to the Statement of
         Financial  Accounting  Standards  No. 128 -  "Earnings  Per Share"  which
         requires  companies to present basic and diluted  earnings per share. Net
         income per common share - Basic is based on the weighted  average  number
         of common shares outstanding during the year. Net income per common share
         - Diluted is based on the weighted  average  number of common  shares and
         dilutive  potential  common  shares  outstanding  during  the  year.  The
         company's  dilutive  potential common shares  outstanding during the year
         result entirely from dilutive stock options.
  
                                      6 of 10
  TASTY BAKING COMPANY AND SUBSIDIARIES
  
  Item 2.       Management's Discussion and Analysis of Financial Condition
                and Results of Operations
  
  Results of Operations
  
  For the third  quarter of 1998,  the company  realized net income of  $1,332,517
  versus  $1,196,527 for the third quarter of 1997. Net income per share increased
  to $.17 from $.15 per share for the  comparable  quarter of 1997.  These results
  represent increases of 11.4% and 13.3%, respectively.
  
  For the  thirty-nine  weeks ended  September 26, 1998, the company  realized net
  income of $3,987,310 versus $4,916,954 for the thirty-nine weeks ended September
  27,  1997.  Net income per share  decreased  to $.50 from $.63 per share for the
  comparable period in 1997.
  
  For the third quarter,  gross sales increased 6.7% to  $57,265,322,  compared to
  $53,651,996 last year. Gross sales, less discounts and allowances  resulted in a
  net sales increase of 2.2% to $36,823,836  compared to $36,044,868 reported last
  year.  The  increase in gross sales  resulted  from an increase in volume due to
  geographic  expansion  through new distribution  agreements in addition to price
  increases  instituted  during the third  quarter.  The  difference  between  the
  increases of 6.7% in gross sales and 2.2% in net sales resulted primarily from a
  substantial  increase  in  promotional  activity  during the  quarter to support
  market development efforts as well as the August price increase.
  
  Cost of sales, as a percentage of gross sales, was 39.8% and 41.9% for the third
  quarters of 1998 and 1997,  respectively.  This decrease in the current  quarter
  was due to the  effect of the  August  price  increase  as well as  efficiencies
  generated from the increase in sales volume.
  
  Selling,  general  and  administrative  expenses  for the third  quarter of 1998
  increased by $443,189 or 4.4% over the comparable  period in 1997. This increase
  resulted  primarily  from an increase in selling  expenses  associated  with the
  expansion into new geographic regions.  Administrative costs also increased as a
  result  of   payroll   taxes   generated   from  the  IRS   ruling   classifying
  owner/operators   as  statutory   employees  and  costs   associated   with  the
  installation of a new computer system.
  
  Interest  expense  increased  for the third  quarter  of 1998  versus  the third
  quarter of 1997 as a result of increased average borrowing levels.  The decrease
  in other income,  net for the third quarter of 1998 was the result of a decrease
  in rental income.
  
  The effective  tax rate was 33.8% for the quarter  ended  September 26, 1998 and
  37.8% for the  quarter  ended  September  27,  1997 which  compares to a federal
  statutory  rate of 34%.  The  difference  between  the  effective  rate  and the
  statutory  rate in the  third  quarter  of 1998 is the  result  of tax  benefits
  arising from passive income and state tax credits.  The principal reason for the
  difference  between  the  effective  rate and the  statutory  rate in the  third
  quarter of 1997 was the effect of state income taxes.
  
  Year 2000 Issue
  
  The company has been engaged in an ongoing  process to determine the effect that
  the change to the year 2000 (Y2K) will have on operations.
  
                                      7 of 10
  The company has completed an  assessment  of its internal  hardware and software
  information  technology  systems and has determined that the systems will be Y2K
  compliant.  During 1998,  all new, Y2K compliant,  hardware was  installed.  New
  business system software is currently being  installed,  the  implementation  of
  which will be completed during the second quarter of 1999. The software supplier
  has warranted that this system is Y2K compliant, which will be verified when the
  system is in place.  The decisions to replace these systems were primarily based
  on the ongoing and expected  future  company and industry  requirements  and the
  inability of the current  applications to meet these  expectations.  The company
  has not accelerated the plans to replace these systems because of the Y2K issue.
  The company  utilizes  an  automated  hand-held  sales  order  system  which is,
  however,  not currently Y2K  compliant.  The vendor offers a "patch" to fix this
  Y2K  problem,  the cost of which  is  immaterial  and  would  be  expensed  when
  incurred.  Alternatively,  the company may decide to  accelerate  the upgrade of
  this system,  given its age and limited capacity,  which will also solve the Y2K
  problem.  If this system were to be upgraded,  the company  estimates  the total
  cost to be $3.7 million which would be capitalized in 1999.
  
  A committee  has been formed that  completed an  inventory of all  manufacturing
  systems to determine Y2K compliance. The cost to update certain systems in order
  to avoid any Y2K complications is immaterial and updates have been scheduled for
  1999.
  
  During the fourth  quarter of 1998,  a  questionnaire  will be sent to all major
  vendors and customers,  that have not already been confirmed, to determine their
  level  of Y2K  compliance.  The  company  plans to have an  evaluation  of major
  vendors  and  customers  by the end of the year.  Some  uncertainties  may exist
  regarding  the  responses  from these  vendors and  customers and there may be a
  certain amount of risk associated with these  uncertainties.  In any event,  the
  company will make alternative plans as necessary.
  
  To date,  the company has not  incurred  any  significant  costs  related to the
  assessment of, and preliminary efforts in connection with, its Y2K issues. Based
  on the  evaluations to date,  the company does not  anticipate  any  significant
  complications   related  to  Y2K  or  any  significant   costs  to  avoid  those
  complications.  The company also feels that all Y2K problems  will be identified
  and resolved in a timely manner.
  
  Financial Condition
  
  The company has consistently  demonstrated the ability to generate positive cash
  flow  from  operations.   Bank   borrowings,   under  various  lines  of  credit
  arrangements, are used to supplement cash flow from operations during periods of
  cyclical shortages.
  
  For the  thirty-nine  weeks ended  September 26, 1998,  net cash from  operating
  activities  decreased by $2,691,031 to $5,390,679  from  $8,081,710 for the same
  period  in  1997.  The  decrease  in net  cash  from  operating  activities  was
  principally  due to a decrease in net income and the payment  made to the IRS as
  settlement  of  the  dispute   concerning  payroll  taxes  for  the  independent
  owner/operators, which was accrued in 1997.
  
  Net cash used for investing activities for the thirty-nine weeks ended September
  26, 1998 decreased by $434,760  relative to the same period in 1997  principally
  due to a decrease  in the funds  needed to finance the net  owner/operator  loan
  activity.  This decrease was partially  offset by an increase in expenditures on
  equipment to upgrade the computer system and production facilities.
  
  Net cash from financing activities for the thirty-nine weeks ended September 26,
  1998 increased by $1,649,745 relative to the same thirty-nine weeks in 1997. The
  increase is primarily the result of a net increase in long-term  debt  partially
  offset by a decrease in short-term debt relative to the prior year.
  
  For  the  remainder  of  1998  the  company  anticipates  that  cash  flow  from
  operations,  along with the continued  availability of bank lines of credit, the
  revolving  credit  agreement  and  other  long-term   financing,   will  provide
  sufficient cash to meet operating and financing requirements.
  
                                      8 of 10
  TASTY BAKING COMPANY AND SUBSIDIARIES
  
  PART II.      OTHER INFORMATION
  
  Item 4. Submission of Matters to a Vote of Security Holders
  
       No matters were  submitted to a vote of security  holders  during the third
  quarter of the fiscal year covered by this report.
  
  Item 5. Other Information
  
       Shareholders  of the company are  entitled to submit  proposals  on matters
  appropriate for shareholder action consistent with regulations of the Securities
  and Exchange  Commission  (SEC) and the company's  bylaws.  Should a shareholder
  wish to have a proposal  considered for inclusion in the proxy statement for the
  company's 1999 annual meeting,  under Rule 14a-8 of the Securities  Exchange Act
  of 1934,  as amended (the Exchange  Act),  such proposal must be received by the
  company on or before December 1, 1998.
  
       In  connection  with the  company's  1999 annual  meeting  and  pursuant to
  recently amended Rule 14a-4 under the Exchange Act, if the shareholder's  notice
  is not  received  by the  company on or before  February  9, 1999,  the  company
  (through management proxy holders) may exercise  discretionary  voting authority
  when the proposal is raised at the annual  meeting  without any reference to the
  matter in the proxy statement.
  
       The above  summary,  which sets forth only the procedures by which business
  may be properly  brought before and voted upon at the company's  annual meeting,
  is qualified in its entirety by reference to the company's bylaws.
  
       All shareholder proposals and notices should be directed to the Secretary
  of the company at 2801 Hunting Park Avenue, Philadelphia, Pennsylvania, 19129.
  
  Item 6. Exhibits and Reports on Form 8-K
  
       (a)      Exhibits:  Exhibit 27 - Financial Data Schedule
  
       (b)      Reports on Form 8-K
  
       The registrant did not file a report on Form 8-K during the thirty-nine
  weeks ended September 26, 1998.
  
                                    Exhibit Index
  
                        Exhibit 27 - Financial Data Schedule
  
                                      9 of 10
  TASTY BAKING COMPANY AND SUBSIDIARIES
  
                                      SIGNATURE
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
                                               TASTY BAKING COMPANY
                                                   (Registrant)
  
        November 9, 1998                        /S/ John M. Pettine
           (Date)                                  JOHN M. PETTINE
                                                  VICE PRESIDENT AND
                                               CHIEF FINANCIAL OFFICER
                                     (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
  
                                      10 of 10